The dominant telecommunications players now share data with rural lenders under a scheme called Shared Services, which allows the Rural Bankers Association of the Philippines to crunch the numbers and help RBAP manage so-called credit risks.
RBAP President Antonio O. Pasia said the Shared Services is designed to complement the credit scoring conducted by private analytics and telecommunications companies on potential or existing borrowers based on their cell-phone usage and bills-payment history.
The information will be integrated into the Shared Services system from where the Bangko Sentral ng Pilipinas (BSP) and rural banks can draw relevant data on the borrowers.
“Through Shared Services, rural banks will be able to compete with larger financial institutions because they will have access to information on the borrowers, such as the activities of the farmers and their loan histories,” explained Dennis Emmanuel C. Peña, RBAP executive director.
Pasia said Globe Telecom Inc. shares subscriber information with such credit-scoring and analytics institutions as Cibi Information Inc., Fico and CSS Corp.
“Cibi, Fico or CSS Corp. will do the analytics from the data given by its carrier, [which is] Globe, then you [rural bank] pay Cibi or the other to do the credit scoring,” Pasia elaborated.
“If the BSP asks for a credit scoring of a certain type of borrowers, [like] onion farmers, the system will provide a model data collected and encoded by the rural banks on such individuals,” Peña said.
With the organized and transferable information among rural banks, they can then extend credit faster to relocated farmers with good credit standing from the rural bank in their previous addresses.
The Shared Services scheme effectively addresses a practical problem concerning rural borrowers whose credit scores are nonexistent. With it, RBAP may begin to lend to countryside clients without fear of breaching regulatory risk levels tolerated by the BSP.
Thus, the RBAP anticipates developing its own communication and information technology consistent with standards set under the National Retail Payment System (NRSP) launched in December 2015 by the BSP.
The NRPS digitizes payments through electronic systems, ease transfer of transactions from one account to another and allow the public to carry around less cash. BSP Governor Amando M. Tetangco Jr. said such speeds up payments, reduces costs, enhanced security, improves transparency and expands access to financial services in the country by 2020.
With the NPRS, RBAP executives hope rural banks should accurately identify more potential borrowers and evaluate their cash flow, which are major determinants in granting loans.
Peña hoped these will, likewise, resolve the income-tax mandate of the BSP under Circular 855, dated October 29, 2014, or the guidelines on sound credit-risk management practices of banks.
Apart from the absence of proof of cash flow, the lack of identification documents certified by the government disqualifies most farmers from obtaining a loan from banks.
“Let’s face it. Not all farmers pay their taxes, possess a tax identification number [TIN], as well as register with the Social Security System or own a driver’s license,” Pasia said.
Peña added the 12-sheet-long 1701 form could be a reason discouraging farmers from filing their income-tax return (ITR).
“However, those farmers with TIN but without a family member who knows how to fill out and file the complicated 1701 form required by the BIR [Bureau of Internal Revenue] just opt not to submit the ITR,” Peña said.
On the other hand, Gi Estrada, media officer of Unyon ng mga Manggagawa sa Agrikultura, or the Federation of Agricultural Workers, said the 30-year amortization required of farmers under the Comprehensive Agrarian Reform (CARP) on land distribution is another burden.
While Pasia approved of the law requiring the Department of Agrarian Reform to submit 500 names of farmers holding certificates of land ownership award (CLOAs) as guarantee for a loan, Estrada noted two loopholes.
“First, the land, especially the sugarcane fields and the agrarian-reform communities by the DAR, tend to fall in the hands of the arriendador [or a private individual leasing and dictating the price of the land], diverting the loan payment from rural banks,” Estrada said.
Thus, Estrada recommended faster provision of financial and material support from government agencies as he recognized the public funds allocated to farmers in acquiring tractors, postharvest facilities and water pumps.
“Second, CLOAs are not accepted by bank as collateral,” the UMA spokesman said.
According to BSP Memorandum M-2009-041, dated November 4, 2009, promissory notes secured by CLOA are not eligible for refinancing or advancing loans by rural banks in converting assets into cash.
“Last the DAR forecloses the land if the farmer is unable to pay the amortization for three consecutive years, leaving the agricultural worker landless again,” Estrada said.
Thus, Estrada concluded this forces farmers back to the arriendador, if not to usereros, or 5-6 informal lenders imposing 20-percent interest rates, and obliges the government to develop genuine land reform for farmers needing capital for their livelihood.
Under the CARP, the Land Bank of the Philippines (LBP) can award the land to another agrarian-reform beneficiary if the title holder fails to pay the annual amortization thrice with a 6-percent interest after the 10- or 30-year hold-on-transfer or amortization period, respectively.
According to the LBP, it has accumulated P4.3-billion unpaid interest with only 10 percent of the title holders fully paid.
Thus, Estrada concluded this forces farmers back to the arriendador, if not to usereros, or 5-6 informal lenders imposing a 20-percent interest rates, and obliges the government to develop genuine land reform for farmers.
On the part of the rural banks, Pasia said while the banks have their own programs and policies for credit management, the shared services scheme is one that should help meet the mandate to lend to farmers.