From BusinessWorld Philippines
January 10, 2012
Microfinance firms set up credit bureau
Seven of the country’s top microfinance firms signed yesterday an agreement to create the Microfinance Data Sharing System (MIDAS).
“Among the seven of them, they will share borrower information. They pilot-tested [the system] in Panay [last year] and the test was very successful,” Pia Roman-Tayag, chief of the central bank’s Inclusive Finance Advocacy Staff told reporters yesterday.
“[MIDAS’] purpose is to know who among their clients have multiple borrowings and are over-indebted,” she added.
The Bangko Sentral ng Pilipinas (BSP) and the country’s microfinance players launched yesterday the MIDAS and the Paeng Buenaventura Microfinance Awards, named after the late central bank governor Rafael B. Buenaventura, who championed microfinance as a tool to alleviate poverty in the country. The awards will recognize outstanding microfinance institutions.
The microfinance institutions that will create the MIDAS are Taytay Sa Kauswagan, Inc., Opportunity Kauswagan Bank, Inc., CARD Bank, Inc., CARD NGO, Negros Women For Tomorrow Foundation, Inc., Ahon sa Hirap, Inc. and ASA Philippines Foundation, Inc.
Ms. Roman-Tayag said the seven account for around 70% of four million microfinance clients in the country.
“We do not want what happened in India and Bangladesh [to happen here]. The trend is, as the industry matures, people borrow more from many sources,” Jaime Aristotle B. Alip, managing director of the Laguna-based CARD Mutually Reinforcing Institutions (MRI), said in an interview.
Multiple borrowings in India and Bangladesh led to widespread defaults, as microfinance clients borrowed to repay old loans instead of generate fresh cash to settle loans. Microfinance institutions in these countries did not have the benefit of a credit information bureau.
Multiple borrowings have been observed among Philippine microfinance borrowers as well.
“Now that the Philippine microfinance industry has become a multibillion-peso undertaking, we have to manage the potential downsides,” BSP Governor Amando M. Tetangco, Jr. said in his speech during the event yesterday.
According to a BSP statement, MIDAS has a special feature that “allows for baranggay-level search for borrowers at risk.”
The database can be accessed online 24/7 and will use automated processing and a world-class name search and matching algorithm system to trace and detect erring borrowers.
Ms. Roman-Tayag added MIDAS will also create a rehabilitation company.
“When borrowers are at risk [of default], they will be helped by the rehabilitation company,” she said.
“We will not have this blacklisting of clients. Instead, we want to create the rehabilitation company,” Mr. Alip said.
Around P38 billion in loans have been given out by microfinance institutions since 2001. —N. J. C. Morales