MAKATI CITY, 17 August 2020 – Pursuant to its mandate to provide access to reliable, standardized information on Filipinos’ credit history and financial condition, and to become more inclusive to borrowers of microfinance institutions (MFIs), cooperatives, and rural banks—whose borrowers may not have IDs of TIN, SSS, or GSIS—the state-run Credit Information Corporation (CIC) recently deployed its Primary ID (PID) number tagging system.
The improved tagging system allowed credit data submission covering borrowers who do not have the three major IDs to be loaded to the CIC database beginning July 2020.
The Credit Information System (CIS) now accepts UMID and driver’s license, further expanding the coverage of the CIC database.
“The implementation resulted to the loading of additional six million borrower records in less than one month, which previously would be rejected by our database. This brings the CIC’s data set of unique individuals to 18.2 million as of August,” CIC President and CEO Jaime Casto Jose P. Garchitorena shared.
Regulatory responsibility to be more inclusive
The Implementing Rules and Regulations (IRR) of R. A. No. 9510 or the Credit Information System Act (CISA) provides TIN, SSS, and GSIS numbers as acceptable IDs that form part of basic credit data.
“This is to make sure that the matching of the records are accurate. But as CIC data collection moved towards MFIs, cooperatives, and rural banks that serviced the credit requirements of individuals with no access to any of these IDs, data collections slowed down,” Garchitorena explained.
“This, of course, was unacceptable since the whole point of having a credit registry is to democratize the benefits of having data. This means that moving forward, a farmer borrowing from an MFI—as long as the MFI submits the farmer’s data to the CIC—can now go to any bank to prove his creditworthiness,” he continued.
The development resulted to the expansion of the CIC database which now covers a significant percentage of Filipino borrowers: “Through the PID number tagging system, our unique data subjects reached 18.2 million or almost 26% of the country’s adult population. Given this trend, we will be able to surpass the requirements of World Bank’s Doing Business survey, particularly under the depth of credit information and credit registry index.”
Credit card companies, consumer economy
Following these developments, the CIC engaged with the Credit Cards Association of the Philippines (CCAP) to allow its members—all of which are submitting the data of their credit card users to the CIC— to test the hit rates of the database and determine its impact to their client base after the deployment of the PID number tagging system.
“The CIC recognizes that it is the new player in the credit data space and understands the important role and contribution to the consumer economy of the credit cards industry that essentially gives collateral-free credit. Data-driven risk management is most critical when there’s only a behavioral or reputational asset to back up the credit line,” the CIC PCEO said.
Ms. Ma. Bernadette B. Bautista, Acting Head of the Credit Information Management Systems Group, emphasized how the PID number tagging system resulted to an increase in loading of legacy data of larger financial institutions: “Our records show that these enhancements have led to an initial average decrease of rejection rate of major banks from 35 to 3.5%, and in the case of specialized lenders—such as those who give credit to motorcycle buyers whose main ID was driver’s license—the leap was more dramatic from 90% to 5% rejection rate. When you can load all data from all types of lenders, this leads to a growth of new member submissions from across all sectors in the financial system.”
Accessing CIC database: A competitive advantage
Another development in the credit registry is the publication of its list of accessing entities—the financial institutions authorized by the CIC to access borrowers’ credit reports from its database after complying with requirements such as six months’ worth of credit data submission.
To date, the CIC has 58 accessing entities consist of savings and loan associations, rural banks, cooperatives, thrift banks, and universal and commercial banks such as UnionBank of the Philippines, Philippine Savings (PS) Bank, Equicom Savings Bank, ING Bank N. V. Manila branch, Sterling Bank of Asia Inc., and Philippine National Bank (PNB).
Lending and financing companies such as Home Credit and Toyota Financial Services, and government lending institutions such as the Small Business Corporation, are also accessing credit reports from the CIC.
“This is a testament to the usability of our data at a time when wider data set is needed, and a significant development both on the part of the lender and the borrower. Financial institutions need to improve their visibility of borrowers’ credit behaviors to improve their asset quality while borrowers with good credit history may need to have their credit extended. This is one of those cases where everyone wins,” Garchitorena further stated.
The list of accessing entities is posted on the CIC website and will be updated on a regular basis.
The PCEO likewise shared how the said list will address some of the common inquiries from the general public and educate them on the procedures of collecting, storing, and disseminating their credit information: “These include, but are not limited to, which financial institutions are accessing their credit data and using it for credit investigation or evaluation, and why their applications for loans, credit cards, and other financial services are sometimes being denied.”
Garchitorena therefore enjoined qualified financial institutions to go beyond compliance with CISA and gain access to the CIC database, especially given these significant improvements.
“We hope that they get to see how the CIC database will give them the competitive advantage in the market by promoting inclusive, risk-based lending, especially as we strive to establish a ‘new normal’ in our financial system,” Garchitorena ended.
This press release has been picked up BusinessMirror.