BSP working with Japan to create a credit risk database

BANGKO Sentral ng Pilipinas (BSP) Governor Benjamin Diokno said the BSP recognizes the role of micro, small, and medium enterprises (MSMEs) in a sustainable economy and is pursuing various financial inclusion initiatives to unlock their immense potential.

In his keynote speech at the recent Philippine Exporters Confederation’s general membership meeting, Diokno said the BSP is currently spearheading and developing a host of financial inclusion initiatives with MSMEs and agriculture as identified priority sectors.

These programs will help improve the access of these groups, including MSME exporters, to financial services, consequently enhancing the country’s export competitiveness.

“This is because we recognize the immense potential and unique challenges of MSMEs,” Diokno said.

Together with agriculture, MSMEs form the backbone of the Philippine economy, accounting for 99.6 percent (911,768) of the country’s enterprises and generating 61.6 percent of employment.

But he also noted that “the lack of access to credit remains a fundamental obstacle to further development and sustainability of our MSMEs.”

Despite providing livelihood for millions of Filipinos, MSMEs account for only 3.32 percent of the country’s gross domestic product, while their gross value added sits at 35.7 percent.

Capital investment remains low, with MSME loans in the banking system accounting for 6.2 percent and share in total business loans at 9.2 percent, he said.

To address these challenges, Diokno said the BSP is working with the Credit Information Corporation in building a strong and reliable credit information system and with the Japanese government in establishing a credit risk database, with the aim to help MSMEs improve access to finance through risk-based lending and to lessen the dependence of banks on collateral.

Diokno said the BSP also supports laws on financial inclusion.

These are the Philippine Identification System Act passed in August 2018, which will help overcome the problem of the lack of verifiable identity documents faced by many Filipinos.

The Personal Property Security Act, also passed in August 2018, will enhance the access of MSMEs to business and consumer credit by enabling the use of alternative collateral such as equipment, inventory and warehouse receipts.

At the same time, the BSP is supporting the passage of a new Warehouse Receipts Law, as well as the review and amendment of the Agri-Agra Reform Credit Act of 2009.

“The introduction of updated and more flexible provisions in these laws would help MSMEs, especially those that are agriculture-oriented, to gain access to credit; leverage innovative models; and induce banks to venture into MSME and agriculture financing with better terms and standards for compliance,” Diokno said.

In addition, the BSP is implementing the Credit Surety Fund (CSF) together with the Cooperative Development Authority to enable cooperatives, businessmen and MSMEs to boost their credit worthiness by providing surety cover of up to 80 percent for bank loans.

CSF is a credit enhancement scheme developed by the BSP that aims to increase the credit worthiness of MSMEs that are experiencing difficulty in obtaining loans from banks due to lack of acceptable collaterals, credit knowledge and credit track records.

As of September 2018, there are 54 CSFs throughout the country with over 17,000 loan beneficiaries, said Diokno. (Philexport News and Features)

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