Panabo test site for BAP Credit Bureau
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DAVAO CITY - An agreement signed October 3 between the Bankers Association of the Philippines Credit Bureau (BAP-CP) and leading financial institutions in Davao City will boost the microfinance sector and pave the way for the expansion of credit bureau services in Mindanao.
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Under the agreement, six branches of rural banks, commercial banks, government financial institutions, and credit cooperatives in the Panabo area will preliminary test the expansion of the BAP-CB Negative File Information System.
This is being done with support from the Rural Bankers Association of the Philippines' Microenterprise Access to Banking Services (RBAP-MABS) program.
Under this new initiative, rural banks, commercial banks, government funding institutions, and credit cooperatives 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 microenterprise clients because no collateral is involved," said John Owens, MABS program manager.
"In microfinance lending, borrowers' repayment histories, as well as their current debt profiles and cashflow, are used to predict the future ability and willingness to pay back loans," Owens added.
Without shared information, banks cannot know if a borrower has previously failed to pay a loan or has a bad account in another bank. Financial institutions must also contend with "double dippers" - borrowers that have a loan from more than one institution at the same time.
These practices often result in financial institutions offsetting losses by charging higher fees and interest rates. An effective credit reference capability in the area can serve to lower borrowing costs for the majority of responsible borrowers, including many low-income microenterprise clients.
| BAP CREDIT BUREAU EXPANDS SERVICES. Manuel Batallones (seated, 6th from left), Manager of the Bankers Association of the Philippines Credit Bureau (BAP-CB) and Alex Buenaventura (4th from left), Chairman of the Mindanao Technical Working Group, signed an agreement for the preliminary test of the BAP-CB's Negative File Information System with selected financial institutions in Panabo City. The agreement is signed with (seated, left to right) Ferdinand Subido, VP for Operations, TruBANK; Delia Ladao, FVP of Land Bank of the Philippines; Atty.Prosper Dajalos, Chairman, Panabo Multipurpose Cooperative; Leonilo Coronel, Executive Director of the Bankers Association of the Philippines; Armando Yambao, General Manager of Rural Bank of Panabo; Concepcion Bacatan, General Manager, Century Rural Bank; and Oscar Justiniani, Branch Manager, Peninsula Rural Bank. (MABS) |
"The success of the Panabo preliminary test will pave 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," said Leonilo Coronel, Executive Director of the Bankers Association of the Philippines, and President of BAP-CP.
This initiative is in line with the Bangko Sentral's call for the banking community to support the expansion of microfinancial services. More than half of the adult population is involved in some type of microenterprise activity and access to credit and deposit services is important for the growth of this sector.
The BAP-CB system is fully computerized and contains over one million client files containing information from its current commercial bank clients from around the Philippines.
Rural banks and credit cooperatives that have signed up with the credit bureau can e-mail credit reference requests directly to the BAP-CB. Responses arrive by e-mail within a day, costing as little as P11 per request.
The Panabo preliminary test of the joint credit reference system marks the first time that the BAP-CB's system will be established for rural banks and credit cooperatives. Information shared will include improperly handled current accounts, foreclosed loan accounts, items in litigation, and loan accounts written off.
The MABS program, which serves as the secretariat for the preliminary test, provides technical assistance and training to rural banks in microfinance best practices. It is implemented by RBAP with support from the United States Agency for International Development (USAID).
Since the program started, MABS participant banks have disbursed over 65,000 loans to microenterprises totaling more than half a billion pesos. In August 2001 alone, more than P60 million in micro loans were disbursed to over 6,000 borrowers. (MABS)
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