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The current pulse on consumer credit in the Philippines

Understanding the concept of credit or “utang” in the Philippines has yet to reach its maturity as reflected by the stigma surrounding it. The word “utang” is still perceived to be synonymous with financial hardship, mismanagement, and vulnerability. This shouldn’t be the case as credit is a tool for financial upliftment that is essential for daily life.

Based on data, the strongest reason why Filipinos are hesitant to acquire financial products and services is the fear of getting into more debt or losing control of their finances. Despite this mindset, there is still a large dependence on informal loans rather than on formal sources, based on the 2019 Financial Inclusion Survey of the Bangko Sentral ng Pilipinas.

To break this stigma associated with credit and to promote a healthy credit culture in the country, the Credit Information Corp. (CIC) has been promoting information-based and risk-based lending, as well as incentivizing borrowers and lenders to act responsibly for their own best interests through CIC Academy webinars and direct availability of CIC Credit Reports through select financial institutions.

As the agency has the mandate to receive and consolidate basic credit data from financial institutions providing credit facilities, it can provide comprehensive information on the credit history and payment behavior of borrowers. Currently housing 34 million unique data subjects, the CIC database is the largest and most comprehensive credit database in the country with the most diverse set of credit data contributors. With all this data, lenders and borrowers alike can access crucial financial information from the CIC to aid them in their credit decision-making.

CIC’s mandate is quite relevant to lenders who are reluctant to extend loans due to the COVID-19 pandemic which has already caused delays in repayment and even defaults. Borrowers, on the other hand, can use their good credit standing, which is recorded in the CIC database, as their reputational collateral and unlock access to better financial products.

The CIC Credit Report and potential for MSME growth amid the pandemic

Among the business owners who benefitted from the CIC Credit Report during the pandemic are clients from Toyota Financial Services and UnionBank — two of the top Accessing Entities (AEs) who harness the CIC database in assessing the creditworthiness of its borrowers.

Due to the good credit history of these entrepreneurs, their credit application process dispensed with the posting of collateral and the eventual approval was solely based on their healthy financial standing — making it easier for these financial institutions to support the growth of their businesses.

“Needless to say, through the CIC Credit Report System, borrowers with good credit standing have better chances of getting their applications for loans approved. While those with bad credit standing are informed and guided towards improvement,” the CIC President and CEO (PCEO) Ben Joshua Baltazar shared.

Initiatives and plans moving forward

To provide Filipino borrowers with ready and immediate access to credit information, the CIC recently rolled out its “Direct to Consumer through AE (D2C) Program” where borrowers may conveniently access their CIC Credit Report through select Accessing Entities (AEs), such as banks and other lending institutions. This program is also set to be launched through digital channels and mobile applications of participating lenders starting Q3 of this year for added convenience to their borrowing clients.

Credit Information Corp. office

The CIC is also working with its accredited credit bureau, CRIF Philippines, to provide CIC Credit Reports to overseas Filipino workers (OFWs) in Hong Kong through Nova Credit. The CIC Credit Report should improve OFWs’ employment checks and facilitate in applying loans in Hong Kong while assisting financial institutions in credit risk management. The CIC has previously launched similar programs with CRIF in the USA through Nova Credit, the United Arab Emirates through CRIF Gulf, and is currently exploring a partnership through Quad-fi in Canada to improve OFW’s access to their credit information. This helps OFWs with their life in a foreign country by facilitating their applications for loans, credit cards, rent, and insurance among other uses.

Furthermore, the CIC is currently working with the Philippine Statistics Authority on the full compatibility of the National ID into its database, which will further enhance the reliability and accuracy of its credit data.

Alongside this implementation is the issuance mandating all digital banks to submit their basic credit data to the CIC. As emphasized by the PCEO, registration of digital banks with the CIC will be a valuable addition to its database as it has the potential of penetrating the unbanked sectors and spur broad-based financial inclusion with improved access to credit.

The CIC also continuously conducts its nationwide educational program, dubbed as CIC Academy, in an effort to further educate the public on credit and proper handling of their finances. These webinars are held twice monthly and attendance is free of charge.

“Through this financial literacy program of the agency, we strive to promote the benefits of the CIC to the economy, improve the overall availability of credit, and end the stigma against credit so Filipinos can reap the benefits of having access to formal loans and further improve their lives,” PCEO Baltazar ended.

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