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THE
Bangko Sentral ng Pilipinas endorsed on Wednesday Small
Business Guarantee and Finance Corp.’s (SBCorp.) scheme
for micro, small and medium enterprises (MSMEs) to
obtain financing without collateral.
“Collateral will no longer be the determinant of
borrower eligibility,” SBCorp. chair and chief executive
Virgilio Angelo said at the launch of the noncollateral-lending
movement in Makati City.
BSP
Deputy Governor Nestor Espenilla expressed support for
SBCorp.’s move and cited the need for collateral to back
credit has been a major barrier to growth and success of
small and medium businesses.
“There
has been greater reliance on fiscal collateral, like
real estate, yet, in some economies, financial
institutions have successfully proved an aversion from
such is more profitable,” Espenilla said in his speech.
Espenilla made his statement after government-lending
arm SBCorp. reported its wholesale lending went down
nearly 7 percent year-on-year to P1.08 billion from
P1.16 billion in June 2007.
Despite
the importance of MSMEs, “their access to financing
still leaves much to be desired,” Espenilla added.
He said
close to 100 percent of businesses in the Philippines
are composed of MSMEs.
They
generate more than 70 percent of jobs and accounts for
30 percent to 32 percent of our gross domestic product,
Espenilla said.
He cited
a report by executives of the International Finance
Corp.—who met with central bank officials on
Tuesday—that says 3 percent of Filipinos living below
the poverty line manage at least two microenterprises as
their “major, if not only, source of income.”
Still,
Espenilla said, 12 percent to 25 percent of MSMEs’ total
current funding requirements are from formal financial
institutions. The numbers pale “in comparison with
Thailand’s 34 percent.”
Angelo
said SBCorp. expects the use of a new system would
change that and “create an enabling environment for
MSMEs to flourish.”
SBCorp.’s borrower risk rating (BRR) system covers all
direct MSME borrowers, regardless of type of business
registration and asset size, according to president and
chief operating officer Benel Lagua.
“What
commercial banks have now is limited to medium-sized
corporations,” Lagua said.
The BRR
allows an MSME to borrow more than the current average
of P5 million without collateral, based on a lender’s
rating of the borrower. The borrower’s risk aversion,
according to Lagua, is measured according to cash flow,
administration, market and production.
The BRR
scorecard has a passing mark of 55 out of 100 on several
criteria. BRR-1 represents the lowest risk level, while
BRR-10 represents bankruptcy.
Espenilla said experiences by financial institutions in
other countries proved adopting a noncollateral system
makes lenders and borrowers work closely together.
“It also
provides an opportunity for the lender to cross-sell
other products and services.”
SBCorp.’s move to adopt such system comes ahead of the
government’s move to make final the implementing rules
and regulations of the amended Magna Carta for MSMEs
that emphasizes increasing lending to these businesses.
“We’re
gearing up [for the BRR] by advocating an open credit
system with a more level playing field where MSMEs can
compete without disadvantages,” Angelo said. |
