Small businesses gain access to financing
By Prinz Magtulis (The Philippine Star) | Updated June 9, 2013 - 12:00am
MANILA, Philippines - An agreement to allow small businesses to secure
financing using movable collaterals was signed last Friday by the public
and private sectors.
The document will oversee the establishment of a movable collateral
registry by 2015 to "enhance transparency and accessibility" on
collaterals such as vehicles and consumer goods and inventories.
For the public sector, the agreement was signed by the Department of
Finance (DOF), Bangko Sentral ng Pilipinas, Securities and Exchange
Commission, Land Bank of the Philippines, Cooperative Development
Authority, Credit Information Corp. and Development Bank of the Philippines.
For the private sector, signatories include the umbrella bank groups,
the Philippine Center for Entrepreneurship, PinoyME Foundation,
Microfinance Council of the Philippines and the Philippine Finance
Association.
The International Finance Corp., the private sector arm of the World
Bank, was also a signatory to the document.
"The reluctance of banks to accept movable assets as collateral for
loans is one of the main barriers to inclusive economic growth," Finance
Undersecretary Gil Beltran said in a statement.
Joselito Almario, a DOF director, said only a third of micro, small and
medium enterprises (MSMEs) have access to bank credit. This is because
banks usually require real estate as collateral for loans.
According to DOF data, 73 percent of loans are financed with property
collaterals.
In contrast, 78 percent of MSME assets are movable objects that do not
match bank requirements.
A total of 96 percent of local firms are MSMEs, based on DOF estimates.
"But it is not the fault of the banks why they do not want to lend
precisely because we do not have that environment that will allow them
to feel secure when they lend," Almario explained during the signing
ceremony.
Beltran, for his part, said credit is necessary to allow MSMEs "to grow."
"The opportunity for future growth is when you give (MSMEs) the
opportunity to grow by giving them credit," he explained.
With MSMEs' expansion, Beltran said, more jobs will be created which
shall help in making growth more inclusive and sustainable.
Funding for the registry was not revealed, though Almario said the
government would look at "existing" systems to set up the necessary
infrastructure at less cost. The target is to set this up "by 2015".
The establishment of a movable collateral registry is part of the Aquino
administration's Medium Term Development Plan.
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