"It will dramatically reduce the cost of credit," BSP Deputy Governor Nestor A. Espenilla Jr. said in a press briefing yesterday. Once the law is passed, possibly in the second half of the year, the credit bureau will be operational early 2007.

Espenilla explained that the central bank participation in the credit bureau will allow it some credibility and to ensure that borrowers’ information will not be taken advantaged of. "We did not go for a pure private bureau because (borrowers) needed more assurance that information available will not be misused. (The role of the BSP) is to make sure the rights of the consumers will be protected."

On issues of ownership, under the proposed Senate Bill No. 1936, which is now on second reading, the BSP is allowed to hold shares in the bureau of as much as 49 percent while 51 percent are private sector.

Espenilla said the BSP "need not start with 49 percent, we can start with 20 percent just to get it going." He added, :we will be happy to unload shares when the integrity of the bureau has been established. The MB (Monetary Board) is the regulator anyway."

In an interview over the weekend BSP Governor Amando M. Tetangco Jr. said his institution does not promote monopolies, reacting to reports from private credit agencies accusing the central bank of controlling the system.

According to Tetangco, the BSP will initially own half of the proposed credit bureau but there is nothing wrong with this initial set up, he said. "You want the BSP to be there to provide credibility to the system … at least in the initial stages, Later on we’ll have parties interested to take over the share of the central bank."

The Philippine Credit Reporting Alliance Inc. said the proposed Credit Information System Act, which the BSP is pushing, encourages monopoly.

The group said the senate bill containing this proposal goes against provisions in the Constitution, which prohibits or regulates monopolies to protect private interests.

Philcera, which includes five credit information agencies, said the government should create and implement standards in credit reporting and are proposing instead, the implementation of a Fair Credit Reporting Act instead of a centralized credit bureau.

CIBI Information Inc., Asian Credit Consultants and Business Services, Equifacts Information Inc., First Asia Corporate Business Connection and Excellent Credit Information Inc. are all Philcera members. These companies provide credit and mortgage reports, credit investigation services, property appraisal and evaluation, financial statement or credit analysis, fraud prevention and risk management, collection services, check fraud and verification, and tenant and employment screening services.

At the moment the proposed Credit Information System Act is still pending approval in the senate, now on its second reading. Once the bill is approved, it will need only six months and $ 3 million to set up the credit bureau.

The Asian Development Bank and the World Bank’s International Finance Corporation have expressed interests in the credit bureau. IFC, for example, is proposing to provide the technical assistance and set up the credit bureau.