Banks urged to reveal credit history of debtors

Banks urged to reveal credit history of debtors

Urip Hudiono, The Jakarta Post/Jakarta

Bank Indonesia (BI) should require all financial institutions to
participate in its plan of setting up a credit information
bureau, to ensure that its goal of creating a more solvent
lending environment in the country is achieved, analysts said.

"There has to be a strong commitment from all banks to make
the plan successful," analyst Aviliani from the Institute for the
Development of Economics and Finance (Indef) said.

"BI could ensure this by making it compulsory for all lending
institutions to submit their customers' credit histories to the
bureau."

In line with the Indonesian Banking Architecture (API)
blueprint, BI has made plans to establish a credit information
bureau by next year, which would have the function to collect the
credit histories of corporate and individual debtors from
participating lenders.

This database would be helpful for lenders to obtain more
comprehensive information about the debtors, and encourage more
lending if they knew the exact risks when considering future
loans for the debtors.

According to the plan, BI will extend its existing debtor
information system (SID) and pass it on to the planned bureau. It
will start by collecting credit histories from commercial banks,
and later on from other financial institutions, such as insurance
companies, pension planners and credit card issuers.

Aviliani explained that if not all lending institutions were
included, then debtors with bad credit history could simply
submit their credit applications to lenders that do not have
access to the bureau's database, which would cause too many
loopholes in the system for it to be effective.

Aviliani also warned that the banking secrecy code might
become a major hurdle in the establishment of the credit bureau.

"BI should consult with the government about whether an
amendment of the (banking) law is needed so that the bureau can
collect the information about debtors that it needs," she said.

Analyst Ryan Kiryanto of Bank BNI, however, said that the law
would not be a problem.

"The law only forbids lenders from disclosing information of
their customers' savings accounts, not about their credit
history," he said.

Nevertheless, Ryan agreed with Aviliani that the central bank
should incorporate as many lending institutions as possible. Ryan
even suggested that BI make it compulsory for publicly listed
firms to submit their credit reports to the bureau as well.

"That way, stock market authorities can simply inquire with
the bureau when a company plans to issue more shares or bonds,"
he said.

Ryan explained that a company which has reached its credit
limit with lenders would usually resort to issuing shares or
bonds at the market to raise more capital. Stock market
authorities, however, must be assured that such a corporate plan
was not done just to avert bad credit history.

Both Aviliani and Ryan also agreed that the establishment of
such a bureau would surely benefit the country's lending
industry, particularly in further reducing non-performing loans
(NPL).

"It will also prevent individual debtors from trying to commit
credit card fraud," Ryan said.

Data from BI shows that bank credit volume had reached Rp
555.1 trillion (US$61 billion) as of the end of September. NPL
stood at around 2 percent, below the maximum 5 percent allowed by
the central bank.

Data from the Indonesian Association of Credit Card Issuers,
meanwhile, shows some five million credit card users making
between 10 to 20 million transactions worth some Rp 30 trillion
in October this year.