MANILA – A House of Representatives lawmaker lobbied on Wednesday for small borrowers, such as microenterprises and farmers, to have access to more formal bank financing, making lending standards fairer and more inclusive.
In filing Bill 7863, Albay Representative Joey Salceda said alternative credit scoring mechanisms should be introduced to ensure borrowers without a history of borrowing or conventional proof of financial capability can access bank financing.
“The problem with formal credit scoring is that it excludes those who don’t have a history of borrowing, or those who don’t have the usual assets or sales to show off. This means that farmers, small businesses and small borrowers have to resort to expensive options such as payday loans that charge interest rates of up to 20% per month, ”Salceda said.
Salceda said small borrowers also have the ability to pay.
“After all, they support loan sharks. But because the banks have no other means of measuring their capacity to pay, they do not have access to bank financing, ”he added.
The bill, also known as the Fair and Inclusive Credit Information and Scoring Act, requires a credit inclusion study to determine whether conventional credit scoring techniques exclude specific segments of Philippine society.
It aims to give Bangko Sentral ng Pilipinas (BSP) clear regulatory oversight of credit rating methods.
The BSP may prohibit credit scoring models that are considered to be unduly proprietary.
Regular review of credit scoring models is necessary to assess their inclusiveness.
Salceda said the bill responds to the urgent need to translate more liquidity from the financial system into credit in the real economy, which could help the country recover from the economic fallout from the coronavirus disease pandemic (Covid -19).
“By allowing more people to access loans on fairer and more inclusive terms, this bill will help stimulate more productive economic activity in the most vulnerable segments of society,” a- he declared. “With a fair and more inclusive credit rating, more small businesses, farmers, informal sector workers and other vulnerable groups will be able to access more affordable credit that could improve their economic conditions and enable them to survive. engage in more productive economic activities. ” (ANP)