The Department of Finance (DOF) on Tuesday committed to support the swift passage of legislative measures that ensure greater financial access for micro, small and medium enterprises (MSMEs), such as the use of nontraditional collateral for loans, for instance.

According to DOF Undersecretary Gil S. Beltran, there are bills in Congress seeking to strengthen the existing secure transactions framework and modernize the country’s warehouse receipts system that help ensure MSME financial inclusion.

“I cannot but emphasize how important [the secured transactions law and warehouse receipts law are] given the country’s goals of improving competitiveness, harnessing the potential of the country’s MSMEs, and making these MSMEs, especially with those that have linkage to the global supply chain, on a par with that of regional players,” Beltran said.

The secured transactions law seeks to establish a legal framework for the use of nontraditional collateral, such as accounts receivable and inventory, in applying for loans in financial institutions.

Modernizing the warehouse-receipts system involves overhauling a 105-year-old law to make way for a computerized central registry of all warehouse receipts used by farmers and other members of the agriculture sector as collateral to obtain credit.

According to the DOF, farmers are issued warehouse receipts as proof of ownership of goods stored in warehouses. The receipts are then traded in exchange for credit to informal lenders as banks are often hesitant to extend loans using unreliable and easily tampered paper receipts as collateral.

“On the part of the DOF, we remain committed to support the passage of the Secured Transactions Law and the Warehouse Receipts Law. We will also work on creating the enabling environment for these laws to affect their intended benefits, such as creating linkages between financial services suppliers and users, and supporting the development of a market for secured transactions,” he added.

Beltran underscored the need to empower MSMEs to realize the global goal of eradicating poverty, pointing out that these enterprises “are the life-force of the regional economy, account for over 40 percent of the total economy, 97 percent of total enterprises and employ half of the labor force in the region.”

But more than 40 percent of MSMEs in the region are hampered by lack of hard assets that can be used as collateral and a credible credit-information system that banks used to make loan decisions, according to Beltran.

“We focused on MSMEs, recognizing their important role to the economy. MSMEs provide not only employment but also enable linkages in the production chain. We have seen many economies, particularly in Southeast Asia, emerge to be among the engines of global growth, on the back of a healthy MSME ecosystem,” he said.

Earlier, Finance Secretary Carlos G. Dominguez III assured the country’s MSMEs that the government is ready to provide funding support to gird them up for competition in the imminent common market for Southeast Asian economies, with two state-run banks having already made available over P82 billion this year to help entrepreneurs in the countryside expand their businesses.

Land Bank of the Philippines has extended outstanding loans to MSMEs totaling P71 billion from January to September this year, while the Development Bank of the Philippines has extended a total of P11.6 billion to MSMEs in the first 10 months of 2017.

Source: https://businessmirror.com.ph/dominguez-seeking-greater-msme-inclusion-measures/