MANILA – A supply chain finance (SCF) is being considered by the Bangko Sentral ng Pilipinas (BSP) to help micro, small and medium enterprises (MSMEs) secure financing from banks.
In a virtual briefing Friday, BSP Governor Benjamin Diokno said the SCF will allow lenders to use MSMEs’ receivables and inventory flow to finance them.
He said the formal SCF study is expected to be launched next month and policies and guidelines are targeted to be implemented in 2022.
“This is particularly helpful for smaller firms that banks typically are unable or unwilling to serve using traditional financing approaches,” he said.
Diokno said SCF’s potential was seen since the pandemic started after “more firms relied on early payments from customers than bank loans as (a) source of working capital.”
A nationwide MSME survey will be conducted, in coordination with the Asian Development Bank (ADB), by September 2021 to provide authorities granular data on the businesses’ access to finance, their preferences, as well as practices in managing their finances.
“The survey could support evidence-based policymaking. It could also provide deeper market insights for financial service providers to tailor fit their products and services for the sector,” he said.
Diokno said a technical working group (TWG) has been formed to evaluate the possibility of having a standard business loan application form for MSMEs to simplify requirements and processes.
He said the standard loan form, as well as the policies and guidelines, are expected to be crafted next year and targeted to be institutionalized by 2022.
These measures, he added, are aimed at addressing challenges being faced by MSMEs in securing bank financing.
He said MSMEs play a critical role in economic growth, yet they have only a small chance of securing bank loans because they are considered as risky borrowers.
Citing BSP data, Diokno said MSME loans account for only around 8.8 percent of total business loans and 6.1 percent of total bank loans to date.
He said year-on-year expansion of bank loans to total businesses dropped from 20 percent in 2014 to just 7.3 percent in 2019.
“(This) reflect(s) the long-standing access to finance challenge confronting MSMEs,” Diokno added.
These challenges were attributed to beliefs that MSMEs are unbankable because of limited information regarding their market operations, scarcity of data on credit risks assessments, and lack of acceptable collaterals and credit histories. (PNA)