ANGARA PAVES WAY TO ACCESS TO LENDING

Senator Edgardo J. Angara today announced the Credit Information System Act (CISA) is ready for submission to both Houses for adoption after the two versions of said bill have been reconciled and approved at the Bicameral Conference Committee Meeting last Thursday.

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

CISA will create the Credit Information Corporation (CIC) 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.

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 ones perceived creditworthiness, Angara said.

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 persons 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.

Angara said that CISA will be adopted in the Senate before session ends on January 9.