Press Release
March 10, 2008

FACILITATE LENDING THROUGH CREDIT INFO -ANGARA

Senator Edgardo J. Angara called for easier access to credit by small businesses, as well as better risk assessment for lenders, through the establishment of a Credit Information System, which will set the standards for credit reporting operations that will improve not only the ability of creditors to assess risk and allocate credit more efficiently, but will also promote the protection of the rights of consumers against irresponsible use or erroneous reporting of credit information.

"This is a major step towards unlocking money because lenders will now be more comfortable to assess their risk of lending; while banks will know beforehand the credit history of their borrowers," said Angara who chairs the Senate Committee on Banks, Financial Institutions and Currencies.

Speaking at the national convention of the Chamber of Thrift Banks in Dusit Hotel, Angara said, "Part of the shyness of some banks to lend is the scarcity of credible, complete and comprehensive information about borrowers and users. Reality is, our ability to borrow money from banks is largely affected by one's perceived creditworthiness."

Angara lamented that while there are hundreds of billions of money available for micro-lending, only P43 billion has been actually lent out.

"At present, there is a lack of comprehensive and credible credit-related information. In order to assess a person's creditworthiness, lenders have to gather vast amounts of information. This is both difficult and costly. Worse, information gathered may either be incomplete or erroneous," he said.

"Lenders, as a result are constantly exposed to excessive and unnecessary credit risk. Credit becomes costly, if not completely inaccessible to small borrowers who are required to present valuable physical collateral first," he added. "And even after a long and tedious credit application, borrowers are charged with high interest rates. This often leaves small borrowers - the masses, starting entrepreneurs and small-scale businessmen - at the mercy of unscrupulous loan sharks."

"With the credit information system--where all the financial institutions will contribute their information and centralize them -anybody can access it. There will be wider information on credit disseminated", he continued.

Angara reiterated that this centralized credit information system would benefit the lenders as well as borrowers, as it will reduce the cost of 'credit check' on the borrower, which is in practice added to the cost of borrowing.

"This is a win-win system. Through this centralized credit information system, we can open the gates for more people to access credit. And at the same time, banks have their whole credit battalion to scrutinize the credit worthiness of the borrower," he continued.

Angara noted that CISA has covered consumer protection and confidentiality stating that CIC will only release information to duly accredited "accessing entities".

"Accessing entities, of course, are prohibited to release credit information they received from CIC other than the concerned borrower," Angara explained.

The Credit Information System Act (CISA) has been passed in the Senate and is being scheduled for a bicameral conference meeting.

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