Credit Information Law Signed By PGMA

President Arroyo signed into law yesterday the Credit Information Act which would pool credit information of borrowers to make it easier for banks to assess the risks of lending money to small businesses.


The President said the new Credit Information Act will help decrease the risks of banks in lending to small and medium businesses, and consequently decrease the premiums on loans given to small and medium businesses.

Mrs. Arroyo said it would also give entrepreneurs access to loans to expand their businesses.

"A credible and comprehensive credit information system run by the Credit Information Corporation will cut credit processing times and, therefore, lower transaction costs. It will reduce the risk of defaults with better credit information. It will reduce the credit premium charged by lenders and increase lending volumes. It will help expand the reach of credit to small and medium enterprises," she said.

"Let us continue to endeavor to help the ordinary Filipino stretch his paycheck," she added.

Sen. Edgardo Angara, principal author of the Credit Information Act, said the measure will make it easier for small and medium businesses to borrow money from banks even with little collateral.

"The main hurdle facing small businesses is that the banks don’t know them or their capacity to pay for the loans," Angara said.

Under the new law, the Credit Information Corporation will be established to receive and consolidate credit data and to act as a central registry of credit information that is vital in assessing the credit history and financial condition of borrowers.

Angara said the new law will lessen the reliance on collaterals in applying for loans from banks because banks would have access to the credit information and financial conditions of prospective borrowers.

The chairman of the Securities and Exchange Commission (SEC) will serve as ex-officio chairman of the new Central Credit Corporation, and the other members of its board of directors would be appointed by the President.