Providing loans-A A +A
Wednesday, April 23, 2014
THE most conspicuous government-owned and controlled financial institution in the country that extends assistance to all sorts of enterprises is the Land Bank of the Philippines (LBP). The bank caters to the so-called micro, small and medium enterprises (MSME).
But the extension of LBP’s financial support depends upon whether the business enterprise has passed through LBP’s thorough policy consideration scrutiny, and has been approved.
Contrary to the traditional system of collateral-based consideration, an applicant for a loan may not have to worry over whether it has valuable enough collateral to secure approval. On the other hand, according to an LBP official, collateral should be the applicant’s least worry.
It seems that the lending institution, in the view of the bank official, would consider first the character of the applicant and then his or her capacity to pay, as well as the viability of the business.
Under the wide swath of the LBP’s coverage, which also embraces the country’s agrarian reform program as mandated by the land reform law, the management of the business and its sustainability and viability becomes even more compelling factors for consideration, especially in determining whether the business can pay for itself, or be capable of succeeding.
At least, if the prospective lender/borrower has personal integrity and honesty, and is a known good debtor, his rating is high.
In any case, Ms. Elsie Tagupa of the LBP said that, in evaluating the quality of ownership of the business, they also check on the “skills, integrity and reputation of the business owners. Those with canceled credit cards and estafa cases are sure to be rejected outright.
The bank lending evaluators also consider whether one has gone into “heavy personal withdrawals from the business accounts and if they have a reputation for indulging in gambling and other vices.”
Other considerations, which the LBP considers more significantly than just the collateral of a potential bank borrower, is whether he has genuine focus and commitment on his business operation, especially his business experience, educational background, track record, and the performance of “the business under its managers, including the human resource turnover, the corporate governance, and records keeping.”
The point we wish to bring out here is the reality that our country could be a place where micro, small, and medium enterprises can thrive, and are capable of getting financial support from the banks, if they can at least attain the level of assessment parameters desired by funding sources, such as the government’s LBP. According to Ms. Tagupa, there are many formal financial institutions that do offer loans for small businesses as long as they could show their viability.
Indeed, the micro and small businesses could become big, if they would help themselves.
Published in the Sun.Star Cebu newspaper on April 24, 2014.