Finance Secretary Cesar V. Purisima on Thursday said private banks should share among themselves and with the government their database on the credit standing of their clients, as part of a consolidated body of information sought under a unified credit-information system for the Philippines.
At the launching of the Financial Infrastructure Development Network (FIDN), Purisima said the establishment of a credit-information system will help cut so-called lending risks on entities that have no credit standing, most of whom need access to capital for expansion, such as micro, small and medium-sized enterprises (MSMEs).
The government-owned and -controlled Credit Information Corp. (CIC), way back in 2008, was mandated to come up with a national credit-information system, but the private banks have not been sharing the credit-information database they have that will give substance to the CIC.
Purisima said the establishment of a credit-information system is crucial to the government’s program for inclusive growth, because the bulk of the economy is made up of MSMEs that typically have no access to credit as the banks are unwilling to take the risk in the absence of a guarantee or acceptable collateral.
The situation is true for most other emerging economies in the Asia-Pacific region, as MSMEs contribute to over 60 percent of total employment, over 40 percent of the GDP, and over 15 percent of total exports among the 21 member-economies of the Asia-Pacific Economic Cooperation (Apec).
“The challenge is to encourage the private banks to share their database with us and among themselves, so that we can all give the lenders the information on MSMEs. In this way, the risks can be minimized and it will be more viable for banks to reach out to them,” Purisima said.
Purisima cited a $840-billion financing gap within Apec countries that could easily be met if MSMEs were given access to capital.
He said the MSMEs own an estimated $9 trillion worth of “dead capital,” or assets they cannot use as capital because these are not accepted as collateral by the banks.
Purisima said the FIDN will come up with measures as the establishment of a more comprehensive property registry so that lenders feel more secure in extending loans even if the collateral consists of personal property instead of real property.
The government push for a credit-information system is supported by the International Finance Corp. (IFC), which is part of the World Bank Group.
“The establishment of comprehensive credit-information system, and modern secured transactions and movable asset-finance system will help MSMEs improve access to finance, and, therefore, contribute to a more competitive and sustainable economy,” said Yuan Xu, IFC Philippines country manager.
The FIDN was established to provide a forum for government and the private sector to discuss and put into place measures that will make financial services more accessible to the Asia-Pacific region, particularly to MSMEs that make up the bulk of the region’s economy.