A World Bank publication in 2017 showed that close to three-fourths of Filipinos borrowed cash from informal sources. Informal sources aren’t easy to police and often get away with charging exorbitant interest and intimidating borrowers when they can’t pay up. This may be why Filipinos get really uncomfortable when talking about borrowing money.

I had the opportunity to discuss this taboo with Aileen L. Amor Bautista (Attorney Ala to her friends), a former CEO of Credit Information Corp. (CiC), our government credit registry. She told me about how her Dad and other Filipinos who had worked overseas were actually proud of being able to borrow money to increase their productivity and profitability. They were empowered by the trust that banks have in them, and felt confident within the formal financial framework.

A credit registry is the key to empowering consumers in this way. The CiC has been tasked with building such a database in the Philippines to give consumers the ability to start a history of “good credit”.

Cash payment in full?

Attorney Ala reassures us that good credit does exist in the Philippines: “It’s paying your bills and long term obligations consistently over time.” She further explains that it’s not making “one-time, big-time” payments for everything in cash immediately. Actually, paying in cash fully every time results in a blank credit report, giving the person reading it no indication of your behavior at all. They would therefore have no evidence of your fantastic reputation, and no reason to trust you.

Good credit is already saving Filipinos money on large purchases that bring them closer to their life goals. Julie, a freelance sales representative for Converge internet, tells us about living in Subic Freeport without reliable transport, and how the bank’s help to finance her car purchase allowed her to pay less up-front and save money on monthly payments, too. She’s now earning five times as much in commissions – something that wouldn’t have been possible without a car of her own.

Another example is my old friend Mike, a dad of two who used a Pag-Ibig loan to buy his family’s first home. As their family has now grown into a larger space, that first apartment is a source of rental revenue, and it’s supplementing their income!

Reputational collateral

Pag-Ibig has a record of consistent payments and therefore grants loans to almost all of their members who apply, regardless of whether there is any property to use as collateral. The CiC’s credit history database allows other financial institutions to provide consumers with loans at low interest rates and better terms and conditions, evaluating the risk purely on the borrower’s previous payment behavior. Good credit gives you this reputational collateral so that other collateral requirements are reduced or eliminated.

It’s a good idea to establish good credit early so that when it’s time to make a large purchase, you are able to leverage this tool in the formal financial environment where you’re protected from expensive and risky informal options.

I’m really proud to be a contributor to Attorney Ala’s financial revolution through my work at SAVii Asia, a salary finance fin tech. We contribute to the CiC database regularly in order to establish a good credit history for our customers. I share Attorney Ala’s dream of a future where consumers have an option for lower interest rates and can enjoy better customer service as banks compete with each other for our business, instead of rejecting over 50% of loan applications as they do today.

In case you’re curious about whether you have good credit, you can download your credit report for a small fee from creditinfo.gov or their mobile app.

(Jenn Simons manages branding for a top funded “tech-for-good” startup and produces the employee wellness podcast “Level Up.” She is a mental health advocate, connector and communications coach. Connect with her at  https://www.linkedin.com/in/jennsimonscastillo/)

(This column first appeared in OpinYon weekly.)