MAKATI CITY, 23 December 2019 – Most recent data from the state-run Credit Information Corporation (CIC) revealed that installment transactions—a series of payments instead of a lump sum made for afforded goods, usually with corresponding interest rates—dominate the Filipino borrowers’ credit reports.
Out of the 56,481,088 contract data in the country’s sole public credit registry as of 16 December this year, 36,833,166 or 65 percent are installment transactions.
This is followed by credit card transactions with 18,816,821, and non-installment contracts with only 633,192.
“Installment transactions being the bulk of CIC data is significant. Until now, most transactions captured by other credit bureaus were credit card transactions which may not necessarily reflect an accurate picture of the broader type of lending that is happening in the Philippines,” CIC President and CEO Jaime Casto Jose P. Garchitorena stated.
Installment transactions cover everything from microfinance institution (MFI) loans to vehicle and housing loans.
Being the Philippines’ foremost repository of credit information, the CIC prides itself with having the largest credit database with the most diverse set of contributors—rural banks, thrift banks, cooperatives, financing/leasing corporations, universal and commercial banks, thrift banks, insurance companies, lending corporations, credit card issuers, microfinance institutions, cooperative banks, savings and loans associations, and government-owned and controlled corporations (GOCCs) with credit facilities including the Government Service Insurance System (GSIS) which has already started submitting data.
Competitiveness beyond compliance
As of 16 December 2019, the CIC database contains 9,021,803 unique data subjects and 81,364 companies/corporations.
While access to this database is not a requirement under the law, the CIC PCEO underscored how going beyond compliance is a valuable tool for financial institutions to become more competitive in the market.
“In the case of the CIC database, salary loans, housing loans, car loans, and other more typical credit type transactions offer CIC data users a better view of true credit behaviors versus a predominantly credit cards-based database. In the case of the CIC, the ratio is nearly double in favor of non-card data,” Garchitorena explained.
“Statistically, if a lender wants to get a relevant view of credit and lending in the Philippines, the sampling has to be broader — not just credit cards,“ he continued.
The CIC added that the corporation’s data continues to be relevant in promoting inclusive, risk-based lending, as well as in democratizing and making credit and credit data accessible to Filipinos.
“We know that credit card penetration is still quite low in the Philippines and therefore may be less relevant to lenders who want to see behaviors of borrowers across a wider range of loan products. To the individual borrower, having access to their own credit records in the CIC database means they now have a way of proving their creditworthiness. This is one of the most—if not the most—important feature of CIC data, being sourced from across more lending institutions and from more loan types, not just credit cards,” the PCEO added.
The CIC statistics further show that approximately 25% of all borrowers have sole proprietorships, either as sources of income or for purposes of loan applications.
“The exact nature of the loan and its relationship to the business are yet to be established; however, the gathering of this data point is in line with the CIC’s mandate of improving access to credit for micro, small, and medium enterprises (MSMEs),” he continued.
Finally, he explained how the CIC database can help lenders to lend to more people by expansion: “So if you already have existing borrowers, you can expand your market, lend more to those you thought you couldn’t lend to, or in geographies that you don’t necessarily reach right now, and lend to them properly, profitably, and safely.”