[Brief] Consolidated credit database likely to improve lending and boost economic growth in the Philippines in 2018

The Philippines will launch a credit consumer database in 2018 in a bid to bolster retail lending.

Editorial

The Philippines will launch a credit consumer database in 2018 in a bid to bolster retail lending.

Bulk of lending in the Philippines have been corporate loan, forming more than 80% of loan books. Consumer lending business have been secondary to corporate lending – analysts explained that the lack of consumer level data can explain this.

Source: Landbank

The gap between corporate and retail lending is the lack of a credible database. Without consumer credit information, it is not possible for banks to extend loans, conduct KYC and make full assessment of credit risks. In emerging markets, the lack of reliable income tax, salary slips mean that most individuals are in the informal economy. From a broader perspective, these individuals are a better fit for Fintech disruptors like those in P2P lending.

Tax collected in 2016 was about 15% of Philippines’ GDP, only ahead of Indonesia before their tax amnesty programme. There are now talks of Philippines’ own tax programme, mirrored after Indonesia’s success.

The government’s Credit Information Corporate collects data from banks in the Philippines. This will be extended to rural financial institutions to build a credible database by 2018.

This database is crucial for the expansion of Philippines’ economy. TransUnion, one of the largest credit agencies partnered with BPI, Banco de Oro, Metrobank, HSBC, and Citibank. But the cost to access this database is prohibitive. Only member banks can use the data. This resulted in silos of databases in the nation.

Hopefully, this will change for the better in 2018 when all banks and financial institution can access a uniform database conveniently. By then, we can imagine credit products extended to more in the Philippines for education, housing and business growth.

Source: World Bank