OSFIs should assess borrowers in a “holistic and prudent manner”

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MANILA – Obtaining a loan is difficult for small borrowers due to the lack of necessary documentary requirements, but the Bangko Sentral ng Pilipinas (BSP) said its regulated institutions should assess borrowers “holistically and prudently”.

“This involves a proper examination of the potential borrower’s other debts and repayment history and an assessment of whether the loan can be repaid from the borrower’s own resources without causing undue hardship or over-indebtedness, ”BSP said in an email response. questions from the Philippine News Agency.

Normally, borrowers are required to submit, among other things, records of employment as proof of their monthly cash inflows.

However, the central bank said financial institutions supervised by the BSP (BSFI) “can perform adequate checks on loan applications and borrower repayment records.”

The Philippines currently does not have a centralized credit risk database (CRD) that will help lenders easily check borrowers’ credit risk levels.

But this will be settled once the BSP, with the help of CRD Japan, completes the establishment of the country’s CRD.

The BSP and CRD Japan aim to complete by December of this year the data collection necessary for the CRD and the development of the credit scoring model from the end of this year.

“This is supposed to address the lack of collateral of SME borrowers or poor credit histories, and support the credit rating of banks,” BSP said.

Without the CRD, the central bank said some banks are currently working with several private credit bureaus like TransUnion, CIBI, CRIF and Compuscan to collect credit data.

Banks that do not have access to these credit bureaus can tap into other sources of credit data, the BSP said.

“The BSP supports the use of alternative sources of credit data as (a) basis for credit assessment to ensure that borrowers, including micro, small and medium enterprises (MSMEs), who do not have credit profile based on credit records, are not significantly disadvantaged in obtaining credit, ”he said.

The central bank said that BSFI “must clearly articulate and document the process to achieve such (a) provision and an assessment of the trust or value attached to the financial information used”.

Microcredit borrowers are exempt from submitting financial statements if the request meets the criteria prescribed by current regulations, he added.

Other exemptions authorized by the BSP include the submission of income tax documents on certain credit exposures such as Barangay Registered Microenterprise Loans (BMBEs), loans to individuals who are not required to produce tax returns under Bureau of Internal Revenue (BIR) regulations or for loans not exceeding PHP 3 million, and loans to startups during the first three years of their operations or banking relationship.

Jerome Eger, CEO of Smile API, earlier revealed the results of a survey they conducted earlier, showing that on average for every 100 employees in a company there are around three to five requests for work certificates. per week.

While this request is part of the job of human resources staff, Eger said it “takes time for the company which can be better used for other business matters.”

“Although they need to do it, this process has no value for employers,” he said in a recent virtual briefing.

Smile API is a digital platform using an Application Programming Interface (API) that speeds up loan application processes in seconds by providing borrower data.

Individuals must first register through the Smile API app using the companies they deal with on a regular basis.

They must agree to have their encrypted employment data transmitted from their employer via the Smile API to the company for which they are requesting a loan from a bank or supplier.

Eger said that Smile API will not keep this data once it is submitted to the loan company, so individuals do not have to worry about data security.

“Smile is not a data company. We are an infrastructure company that provides access to this information, ”he said.

Eger said his company is supporting the government’s financial inclusion offer by providing borrowers with access to finance despite the lack of credit rating data lenders need.

“The employment information is generated automatically and provides very valuable information and Smile API provides this valuable information to providers of innovative technologies that target the unbanked, underbanked or who do not have access to these financing services. “, he added. (ANP)

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