upgrading the philippine credit information system
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UpgradingthePhilippineCreditInformationSystem
Nov24,2020
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AboutUs
PERCisanon-profit,non-partisanpolicyresearchanddevelopmentinstitutiondedicatingtoincreasingfinancialinclusionthrough
informationsolutions
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PERCSupporters
Foundations NGOs International U.S.G. Associations Industry
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WhereWeWork
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2015CebuActionPlan
Pillar1:PromotingFinancialIntegration1.APromoteanenablingfinancingenvironmentfor
MSMEs,includingtrade,supplychain&alternativefinancingmechanisms.• Establishlegalframeworksforcreditinformationsystems(CIS)basedonWorldBank’sGeneralPrinciplesofCreditReporting.
PatrickChuaisLeadStafferfortheAPECBusinessAdvisoryCouncil(ABAC)Philippines&Programs/ProjectsatMakatiBusinessClub
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CISisVitalFinancialInfrastructure
• Creditinformationsharing:• Reducesinformationasymmetries• Avoidscreditrationing• Allowsrisk-basedpricing
• Djankov,McLiesh,Shliefer (2007)foundthatPCRswerenotstatisticallycorrelatedtoincreasedprivatesectorlending• PERCresearchfoundthatevery10%riseincoverageofanation’spopulationinafull-filePCBisassociatedwitha6%increaseinprivatesectorlendingasashareofGDP
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PhilippineContext
CreditInformationSharingAct
• Passedin2008• Legitimategovernmentinterventiontomarketfailure• Previouslawpermitted(butdidnotrequire)entitiestoreportcreditdata,whichcreatedsilos• CreatedCICtobecentralrepositoryofcreditinformationinPhilippines
PerformancetoDateofCIC• 534SubmittingEntities• Increaseinquantityofdata• UseofCICdatagrowing• Directaccessconsumerportal• Challenges:• CICindualroleasregulator&competitor• Dataquality• Enforcingcompliance• ConflictofinterestwithCRIF
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KeyFindings
CIC’s“identitycrisis”mustbefixed
GovernmentshouldboostfundingforCIC
BSPmaybebetterregulatorofCIC
CICdataqualitymustbeimproved
CICaddingvaluedespiterealconstraints
CICbestastraditionalPCR
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KeyFindings
CIC’s“identitycrisis”mustbefixed
• JustwhatistheCIC?• Publiccreditbureau?
• Offerscreditreportstoconsumers• Positionedtoofferothervalue-addedservices• ViewedbySAEsas“effective”competitor
• Publiccreditregistry?• Datausefulforbankingsupervision• Datausefulforeconomicpolicy
• Regulator?• AuthorityoverSAEs(licensing)• EnforceprovisionsofCISA(reportingmandate)
Inmarkets,perceptionineverything.GreatuncertaintyaroundroleofCICcreatesconfusionandunderperformanceinmarkets.Clarificationofrole
ofCICwillincreasebusinesscertaintyandmarketperformance.
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KeyFindings
CICbestastraditionalPCR
• CISAwasresponsetomarketfailure,butroleshouldberedirected• Consumercreditdataunder-reportedinfaceofstrongdemand• Mandatoryreportingwas/isessentialinCIS• Othermodelsformandatoryreporting
• ConsiderableliftfromCICastraditionalPCR• GranulardatausefulforBSPforprudentialregulation• Datausefulfordescriptivestatistics(predictive)• Datausefulforeconomicpolicy
• Regulatoryauthoritymadeclearer• BSPhasstatusasregulatorwithSEs
Needforpro-active,robustPCRheightenedby2008FinancialCrisis/GreatRecession.PCRsaroundglobebeingenhancedasresult.
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KeyFindings
GovernmentshouldboostfundingforCIC
BSPmaybebetterregulatorofCIC
• OverwhelmingmajorityoftraditionalPCRshousedwithincentralbank
• FunctionsoftraditionalPCRprimarilybenefitscentralbank
• ICCRofIFC/IMFprimarilycomprisedofcentralbanksfor90%ofglobe
• NeedtogeneraterevenuedirectlylinkedtoperceivedcompetitionwithSAEs
• SystemicunderperformancedirectlylinkedtobusinessuncertaintyaroundroleofCIC
• FunctionsoftraditionalPCRevidentlyunder-developedwithinPhilippines—greatboosttoCISecosystemandfinancialsectorfromCICasPCR
• CISiscriticalfinancialinfrastructure—valuetoeconomysignificantandwarrantssecurefunding
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KeyFindings
CICdataqualitymustbeimproved
CICaddingvaluedespiterealconstraints
• Reportedconcernsoverdataqualitycomplex• Affectinguptakeanduseofcreditdata• CICnottotallytoblame
• SEsmaybeunder-reporting• CICcannotreallyenforcemandate
• Otheroptions• MandatereportingtolicensedSAEs• CICunderBSPmayenhanceenforcement
• Mustrememberbaselineofpre-CICPhilippineCIS• Dramaticimprovementsinbothquantityofdatareportedandqualityofdatareported
• IncrementaluptakeinuseofCICdatabylenders• Tier3lendersnowaconsideration(e.g.MIDAS)• Increasedpublicawarenessofimportanceofcreditreportforaccesstofinance
• CICdesigninCISAallbutensuredsuboptimaloutcome(couldnotbeforeseen).
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PolicyImplications
CISAmustbereformedCISsystemcannotbeallowedtocontinueunderperformingFilipinos,MSMEs,entirefinancialsectorisaffected
ReformmustbecomprehensiveIssuesinCISareinter-related&interactwitheachotherPiecemealapproachtofixingsystemunlikelytosucceed
ReformnowPhilippineslosingoutonmillionsinGDPRecoveryfrompandemicisjeopardized