Credit Information in The Philippines

Chapter 4: Organization for Finance
Credit Information
Uses of Credit Information in the Philippines
Our financial system now operates on the basis of huge amounts of information concerning
large and medium scale business units, governmental units, domestic arid foreign, and many
other institutions that are actual or potential participants
in financial markets. The basic data come from many sources published balance sheets and
profit and loss statements, reports to the Securities and Exchange Commission and other
regulatory government agencies, reports to stock exchanges, special investigations and so on.
Such data are collected and compared, analyzed and disseminated over wide areas by
newspapers, specialized financial publications, investment advisory services, brokers and
dealers and others. Similarly, investors are kept informed about interest rates and other
financial conditions in the various region in the country and abroad.
What is Credit Information?
Information about a person's or company's ability to pay debt, examined especially by banks
before they decide to lend money.
The Philippines is building a national credit information system that will expand the availability
of credit to individuals and corporations based on their credit rating.
The Credit Information Corporation (CIC) mandated by law will aggregate information from
financial and government institutions so a credit history can be created for individuals.
The CIC is tasked to collect credit related data (positive and negative credit data) from all
financial institutions, as well as other potential sources of credit information such as retail,
trade, utilities, and other service and product providers that may constitute a form of credit.
What is Credit Rating?
A credit report is a summary of your financial transactions submitted to the Credit Information
Corporation (CIC). The CIC has the authority to gather and collate these reports under Republic
Act 9510.
Information Sources: On financing opportunities
1. Short Term Borrowing
Most important source, and possibly on loans up to 10 years
Is the company’s bankers. It is from the person or from the more sophisticated bankers to
whom the company’s own banker will introduce the financing officer that the officer can learn
with one exception, what short term financing are available. The exception is that a company
for which commercial paper is a viable alternative will have to turn for practical advice on the
subject to broker which are prepared to act as intermediaries in selling the paper to the
investing public.
2. Useful, up to date information on long term borrowing may be obtained from the corporate
finance department of a money center, bank, or from a similar department in the office of a
major or regional broker. Sound companies with substantial needs may find it practical to talk
directly with institutional
investors, such as insurance companies.
3. Advice on the placement of equity is available from members of the

underwriting fraternity.
4. In the area of background reading, excellent practical and occasional papers are
disseminated by Leading banks and underwriters.
5. Explain fully the difference, between stock, and bonds the reason why one and not the other
is issued, and how issue as regulated.
Bonds vs. Stocks
Bonds are debts while stocks are stakes of ownership in a company. Because of the nature of
the stock market, stocks are often riskier short term, given the amount of money the investor
could lose virtually overnight. However, long term, stocks have historically proved to be very
valuable.
On the other hand, bonds often operate off of fixed interest rates that the entity buys from the
investor, which will frequently pay out annual interest rates to investors while repaying the
amount in full at a given time. For this reason, bonds are generally considered a safer
investment in the short term or for new investors.
Additionally, stocks and bonds are sold differently.
Stocks are sold internationally on different exchanges, but in the United States, stocks are sold
at one of the premier stock exchanges like Nasdaq, New York Stock Exchange (NYSE), or the
American Stock Exchange (AMEX). All of these markets are regulated and kept in check by the
Securities and Exchange Commission (SEC).
Bonds, on the other hand, are generally not sold in central exchanges like stocks are - but are
typically sold over the counter (OTC).
What Is a Stock?
Boiled down, a stock is a stake of ownership in a company that is sold off in exchange for cash.
A stock is a security in that company that can also be referred to as equity or a share.
Pros and Cons of Stocks
The biggest pro of investing in stocks over bonds is that, history shows, stocks tend to earn
more than bonds - especially long term. Additionally, stocks can offer better returns if the
company growth is exponential, earning the investor potentially millions on an originally
miniscule investment. For investors willing to take the risk, stocks can pay more than bonds in
returns as the company's stock could continue rising.
Still, stocks are not always the best option.
As a con, stocks make no promises of future returns on initial investments. Because the stock
market is unpredictable, it is very easy to lose money by investing in the wrong stocks. For this
reason, stocks are often considered higher risk than bonds.
What Is a Bond?
While stocks are a stake of ownership in a company, a bond is a debt that the company or
entity enters into with the investor that pays the investor interest on that debt. Essentially,
bonds are IOU's that companies enter into with investors on the pretense that they will repay
the money lent in full with regular interest payments.
However, bonds can be issued by a company, a city, or a government (in the case of
government bonds), and are generally considered a lower-risk option compared to stocks.
Bonds are created when a company, government, or other entity wishes to raise money to
finance a project, growth, or development and wish to use investors instead of a bank to create
loans.
Pros and Cons of Bonds
In contrast with stocks, as a pro, bonds are often lower risk due to how they have fixed coupon
(or interest) rates on their loans.
Additionally, fixed-rate bonds can be resilient to changes in interest rate fluctuations in the
economy, making them a desirable asset to own in uncertain times.
However, as a con, bonds don't have as much income potential as stocks - the latter of which
can multiply in value overnight (conceivably).
THE DIFFERENCE, STOCK BETWEEN, AND BONDS

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Chapter 4: Organization for Finance

3. Advice on the placement of equity is available from members of the

Bonds vs. Stocks

Additionally, stocks and bonds are sold differently.

Pros and Cons of Stocks

Still, stocks are not always the best option.

THE DIFFERENCE, STOCK BETWEEN, AND BONDS

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