C

redit-rating agency PT Pemeringkat Efek Indonesia (Pefindo) is set to launch a credit bureau, the Credit Information Management Bureau (LPIP), in the fourth quarter of next year.

The new bureau, the first of its kind in the country, will provide credit-rating information about individuals to lenders and other financing bodies.

Pefindo president director Ronald Andi Kasim said on Tuesday that the new bureau would become Pefindo'€™s subsidiary under the name PT Pefindo Biro Kredit.

'€œThe bureau will be similar to those in countries like Japan, Malaysia, Singapore, South Korea and the US, which provide credit-risk profiles of people,'€ Ronald said.

He said that Pefindo Biro Kredit would assist banks and financing institutions by providing them with credit-risk profiles of their potential debtors to avoid non-performing loans.

Ronald added that Pefindo Biro Kredit would determine people'€™s credit ratings based on data obtained from the Financial Services Authority (OJK) and several other financial institutions. The scale ranges between 0 and 1,000, with a higher score reflecting a better track record.

'€œWe will provide '€˜credit scores'€™ of prospective borrowers so that banks and financing institutions can grant lower interest rates to those with higher credit scores and higher interest rates to those with lower credit scores,'€ he said.

The information provided to the financial institutions would also help to prevent any fraud or scams, as each piece of information would be matched with a prospective borrower'€™s profile identity and debt track record, he added.

In its preparation to establish and operate Pefindo Biro Kredit, Ronald said, Pefindo would be working with a number of financial institutions and associations, which would also become the bureau'€™s shareholders.

Pefindo Biro Kredit would ensure its independence in accordance with Bank Indonesia (BI) Regulation No. 15/1/PBI/2013 on credit bureaus, he said.

The regulation includes a number of requirements for any entity that sets up a credit-rating bureau; namely, the founders of a credit bureau must be an institution and not an individual; the bureau must be run under a public-private partnership (PPP) model; the maximum shareholding for a single entity is 51 percent, and the maximum level of foreign ownership is 20 percent.

Ronald said that Pefindo Biro Kredit would be 51 percent owned by Pefindo; 23.6 percent owned by state-owned pawnshop PT Pegadaian; 10 percent by PT Cigma Cipta Caraka '€” a subsidiary of state-owned telecommunications firm PT Telkom; 10 percent by the Indonesian Financing Firms Association (APPI), and 5.4 percent by PT Credit Information Corporation (CIC) Indonesia '€” a subsidiary of the CIC, Japan'€™s largest private credit bureau.

Ronald said Pefindo would spend between Rp 80 billion (US$6.8 million) and 100 billion to establish Pefindo Kredit Biro, substantially higher than the minimal capital level of Rp 50 billion as stipulated by BI.