Credit Investigation/ Background Investigation PDF

Credit Investigation/ Background Investigation : An Important Tool in Client Selection By: Ms. Jenine S. Marasigan Were you ever tempted not to pay a loan or a credit card bill? You probably thought you can get away with it and you can just a...

Credit Investigation/ Background Investigation : An Important Tool in Client Selection By: Ms. Jenine S. Marasigan Were you ever tempted not to pay a loan or a credit card bill? You probably thought you can get away with it and you can just apply for another loan after a few years. If that’s the case, this Credit Information Corporation (CIC) primer will convince you otherwise. In a nutshell, that’s the primary function of a credit registry it to monitor loan transactions by every individual and financial institution with credit facilities. In the Philippines, the CIC does exactly that and more. Mandate, Vision, Mission and Core Values | Credit Information Corporation  The Republic Act No. 9510, also known as the Credit Information System Act (CISA), established the Credit Information Corporation to act as a central credit registry of Filipinos’ credit information. The CIC is tasked to receive and collect basic credit data from financial institutions and provide access to standardized information on every borrower’s credit history and financial condition.  The CIC is supervised by the Governance Commission for GOCCs (GCG) that regularly reviews its policies, operations, and major decisions. The GCG was created under Republic Act 10149, otherwise known as the GOCC Governance Act of 2011. Under the supervision of the Governance Commission for Government- Owned and Controlled Corporations (GCG), the CIC is composed of a 15- member Board of Directors. The government owns 60% shares of the corporation, while the following associations own 40% of shares: Rural Bankers Association of the Philippines (RBAP) Bankers Association of the Philippines (BAP) Chamber of Thrift Banks (CTB) Philippine Cooperative Center (PCC) Credit Cards Associations of the Philippines (CCAP) CREDIT REGISTRY Credit Registry (worldbank.org) The World Bank defines the function of a credit registry as the following: Credit registries are generally developed to support the state’s role as a supervisor of financial institutions. Where credit registries exist, loans above a certain amount must, by law, be registered in the national credit registry. In some cases, credit registries have relatively high thresholds for loans that are included in their databases. Credit registries tend to monitor loans made by regulated financial institutions.”  Basically, a credit registry makes sure all loan transactions are accounted for. Banks and loan providers can’t just loan large amounts of money to anyone. Likewise, an individual can’t just avoid paying credit card balances and apply for another loan instead. From the date of application down to the amount of loan transactions, credit registries will keep track of every detail of everyone’s credit records—loans, credit cards, installment plans, and even utility bills. They will then use the data to provide you a better look on your financial health in the form of credit reports.  WHAT IS CIBI? CIBI is a tool used by the bank to gather relevant information to determine whether an applicant will qualify for a loan or not. The CIBI is a very important step in the lending process as this helps the bank determine high-risk loan applicants or the potentially bad borrowers from getting loans.  THE IMPORTANCE OF CIBI · A thorough CIBI can prevent loan delinquency problems and ensure profits. · A poorly done CIBI can lead to loss of income due to non-collection of loan installments suspension of loan operations due to slow rotation of loanable funds. serious loan delinquency which can end up in legal proceedings.  SO, WHY SHOULD WE CONDUCT A CIBI? WE SHOULD CONDUCT A CIBI BECAUSE WE WANT TO: Verify if information provided by client in the loan application are true. Determine character of the applicant, particularly reputation as a borrower. Determine the applicant’s capacity to pay. THE CIBI STEPS: THE FOLLOWING STEPS ARE UNDERTAKEN WHEN DOING THE CIBI: Loan Application Character/Risk Analysis Cash Flow Preparation/Analysis Prepare/Finalize CIBI Report  STEP 1: LOAN APPLICATION · The AO interviews the applicant and helps fill out the Loan Application form. · Based on the loan application, the Account Officer establishes if the applicant meets the bank’s client eligibility criteria.  STEP 2: CHARACTER/RISK ANALYSIS · AO gathers information from references to assess character /reputation using the four indicators of: o Stability o Entrepreneurship o Reputation o Repayment Behavior  STEP 2: CHARACTER/RISK ANALYSIS The AO gathers information by interviewing: o Other microfinance institutions o Suppliers o Co-makers o Landlords o Business & residential neighbors o Barangay officials  STEP 2: CHARACTER/RISK ANALYSIS The Account Officer decides on the client’s loan application – whether the applicant qualifies for a loan or not. The CI/BI is discontinued, and the loan application rejected, if at any point in the CI/BI process it is validated that the applicant does not meet the minimum loan criteria.  STEP 3: REPAYMENT CAPACITY ANALYSIS AO uses the Cash Flow Analysis to determine the maximum loan entitlement an applicant can afford to pay. Check business and household bills. CHECK BUSINESS AND HOUSEHOLD BILLS  STEP 4: PREPARE / FINALIZE CI/BI REPORT AO uses the Cash Flow Analysis to determine the maximum loan entitlement an applicant can afford to pay. Check business and household bills. What is a Credit Report? A Credit Education for Filipinos by CIBI Information Inc.  Thank you QUESTIONS AND CLARIFICATION?