BAP Credit Bureau Expands Outreach in Mindanao
|
|
|
Deputy Governor Alberto V. Reyes joined the Executive Director of the Bankers Association of the Philippines (BAP), Mr. Leonilo G. Coronel in witnessing the signing of the Manifesto of Support to expand the BAP Credit Bureau’s Negative Information System (NFIS) in Davao City last September 10, 2002. The Manifesto of Support serves to support the expansion of the BAP credit bureau NFIS services to selected financial institutions in Mindanao. The effort, which is supported by the Rural Bankers Association of the Philippines’ Microenterprise Access to Banking Services (MABS) Program, will continue to expand credit bureau services in Mindanao. The aim of this effort is to foster the exchange and sharing of credit information among rural banks, credit cooperatives, commercial banks, and other selected financial institutions.
|
Under this expanded initiative, rural banks, credit cooperatives, thrift banks and commercial banks located in Davao will submit and share negative client information in an effort to improve loan portfolio quality.
Shared credit reference systems are especially critical for financial institutions to successfully offer services to all clients but especially to microenterprise clients and consumer credit operations. Borrowers’ repayment histories, as well as their current debt profiles, are used along with a background check and the clients’ cashflow, to predict future ability and willingness to pay back loans.
Without shared information, banks currently cannot know if a borrower has previously failed to pay a loan or whether he has a bad account in another bank. At the present time, financial institutions must also contend with “double dippers” – borrowers that have a loan from more than one institution at the same time. Such clients often borrow more than they can pay back, and one or both loans may go into default.
These practices often result in financial institutions offsetting losses by charging higher fees and interest rates. An effective credit reference capability can serve to lower borrowing costs for the majority of responsible borrowers. These savings can be especially important to the many low-income microenterprise clients of rural banks and credit cooperatives and consumer credit clients of commercial banks.
The BAP-CB partnership will prove to be a strong step forward in further improving the image and quality of financial services, especially to microenterprises and other consumer credit borrowers. The success of the pilot phase has paved the way for expanding the credit bureau services to other rural banks and credit cooperatives involved in microfinance in Mindanao and the rest of the Philippines.
This initiative is directly in line with Bangko Sentral ng Pilipinas (BSP) call for the banking community to work together to improve the quality of loan portfolios. This is especially important for rural banks and credit cooperatives that are actively expanding their microfinance loan services and commercial banks that are expanding their consumer credit operations. More than half of the adult population in the Philippines is involved in some type of microenterprise activity and access to credit and deposit services is important for the growth of this sector.
High Tech at a Low Cost
The BAP-CB system is fully computerized and contains over 1.5 million client files. Utilizing a database and client-server technology, the system is fully accessible by e-mail.
As part of this initiative, rural banks and credit cooperatives that have signed up with the credit bureau can e-mail credit reference requests directly to the BAP-CB. E-mail responses to credit inquiries are returned by BAP-CB within one day, and banks are charged as little as P11 per request.
The Panabo pilot test of the joint credit reference system marked the first time that BAP-CB’s NFIS was established for rural banks and credit cooperatives. Information shared will include canceled credit cards, improperly handled current accounts, foreclosed loan accounts, items in litigation, and loan accounts written off.
The MABS Approach: A Microfinance Approach That Works
The BAP-CB partnership with rural banks to cover microenterprise clients is an initiative supported by the MABS program, which serves as the Secretariat for the expansion effort.
The MABS program provides technical assistance and training to rural banks in microfinance best practices. It is implemented by the Rural Bankers Association of the Philippines (RBAP) with support from the United States Agency for International Development (USAID).
Since the program started, MABS participant banks have disbursed over 155,000 loans to microenterprises totaling more than 1.4 billion pesos. The number of active loan clients from MABS participant banks at the end of August totaled more than 30,000 with an outstanding portfolio of more than P200 million.
The manifesto was signed by (seated l-r) Marechiel Santos, Deputy Chief of Party of Credit Union Empowerment and Strengthening (CUES) Program.; Roselle Solis, President of the Davao Federation of Rural Banks; Jaime Rodriguez, President of the Davao City Bankers Association. Also witnessing the signing are John Owens, MABS Chief of party; and Teresita Espenilla, USAID Program Officer.
|
|
|
|
Events / Announcements |
|
|
| |
Downloads |
|
|
|
|
