MANILA--Philippine President Gloria Arroyo has signed a new law that will establish a central authority responsible for compiling data from financial institutions, to facilitate easier verification of a borrower's creditworthiness.
Under the newly approved Credit Information System Law (CISA), or Republic Act (RA) 9510, a new legal entity called Central Credit Information Corp. (CCIC) will be created to provide information on the credit standing of persons and corporations.
Local industry group, the Philippine Internet Commerce Society (PICS), welcomed the new legislation, noting that it could give e-commerce a much-needed shot-in-the-arm for this market to finally take off in the country.
"This is a landmark decision that will strengthen the credit infrastructure of the country," Mary Ann Tolentino, the PICS's president, told ZDNet Asia in a text message. "We had always lobbied and endorsed this bill before as it may jumpstart e-commerce."
Tolentino noted that the industry group had pushed strongly for the approval of the CISA as early as last year, when it held a "networking night" during its national congress to raise awareness of the need to enact a law to create a database for credit information. The event featured Amado Tetangco, governor of the Bangko Sentral ng Pilipinas (BSP)--central bank of the Philippines--as the speaker because the proposed law then stipulated that the BSP should be the lead agency to enforce and implement the law.
Under the approved law, however, the Securities and Exchange Commission (SEC)--not the BSP--has been appointed head the credit information bureau. The SEC chief will sit as chairman of the 15-member board of directors who will be appointed by President Arroyo.
Tolentino said while the PICS is unhappy over the appointment of the SEC as the lead agency, the industry group is nonetheless satisfied that a law on credit database has been enacted. "I just hope it's implemented correctly because the final form was different from the original suggestion of the BSP," she said.
While the law was deliberated in Congress, the PICS had argued that the absence of a centralized credit information system will not only hinder the development of the financial system, but also impede the expansion of small businesses and progress of e-commerce in the country.
The industry body noted that the Philippines is currently not included in the list of countries accredited by most online payment gateways such as PayPal, because of its high level of fraud and unconsummated transactions.
After being certified as a priority bill by the administration, the legislation was passed by the bicameral committee from both Houses of Congress last September, before it was formally announced by President Arroyo on Oct. 30.
In her statement before the signing ceremonies, Arroyo said a credible and comprehensive credit information system will cut credit processing time and lower transaction costs, as well as reduce the risk of default payments.
She added that the new law will also broaden credit access for under-serviced sectors such as small and midsize businesses (SMBs), as it will reduce reliance on collaterals and credit facilities.
Cerge Remonde, director at the Presidential Management Staff (PMS), said in a statement: "In view of the current financial crunch, the measure is very relevant as, if there is credit information, there would be transparency and banks would know the financial standing of an institution." The PMS is a government agency responsible for developing and managing projects and policies for the Philippine president's office.
Under the new legislation, the CICC must have an authorized capital stock of 500 million pesos (US$10.2 million), divided into common and preferred shares. The national government will own 60 percent of the common shares, while the remaining 40 percent can be owned by associations of banks, quasi-banks, and other credit-related associations. The law also requires the government to spend 75 million pesos (US$1.5 million) from the national budget to pay for its share, while private investors must shell out 50 million pesos (US$1 million).
Melvin G. Calimag is a freelance IT writer based in the Philippines.