Effective Access to Financing 1

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Effective Access to Financing
Sergio R. Ortiz-Luis, Jr. President, Philippine
Exporters Confederation, Inc. (PHILEXPORT) Nation
al Competitiveness Summit 06 October 2006
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VISION STATEMENT
To develop a financial system that is
accessible, facilitative and cost-effective for
MSMEs in the same way as large borrowers
through active partnership and continuous
commitment between the government and private
sectors
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The importance of Effective Access to Financing

• In the World Bank Doing Business 2007 report,
  RP ranked 101st out of 175 economies in
  Getting Credit. This is because to a great
  extent, we are weakest in credit information.
• MSMEs comprise over 90 of Philippine firms and
  exporters, and provide over 80 of employment,
  yet do not have easy access to financing
• Only a quantum increase of funds (tripling the
  loans) made available for MSMEs will broaden the
  base for sustainable competitiveness and
  economic development

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SITUATIONER

• The 1997 Asian Crisis affected RP least, but we
  are still struggling, while others have recovered
  by, among others, addressing their banking sector
  problems, and the credit needs of business,
  especially their MSMEs
• RPs banking systems liquidity is increasing but
  business lending has not increased significantly
• SMEs still have difficulty in accessing credit

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DIAGNOSIS OF THE CHALLENGE

• SMEs have encountered increasing difficulty in
  complying with stringent bank requirements,
  particularly regarding track records, financial
  statements and collateral.
• The need to conform with new international
  standards and prudential measures e.g., IAS,
  Basel II exacerbate SMEs woes.

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DIAGNOSIS OF THE CHALLENGE

• 3. The banking sector is out of synch with the
  spirit of SME and agri-agra lending laws,
  specifically on the implementation of the
  alternative compliance options.
• Data show that there are about 60,485 small
  enterprises across the Philippines. They require
  an average of P3 million for expansion or working
  capital, and will provide a credit market of
  PhP180 billion which is mostly unserved.

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SUMMARY OF RECOMMENDATIONS

• Encourage banks to lend to SMEs and exporters
  e.g., by
• assigning lower risk weights for lending to SME
  exporters
• developing credit information systems that
  include SMEs
• revitalizing GFI wholesale lending programs for
  SMEs at rates and terms attractive to PFIs
• waiving the requirement of BIR-stamped ITRs for
  MSME borrowers.
• Lower rediscount rates for SME exporters and
  persuade banks to lower pass-on lending rates
  correspondingly.

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SUMMARY OF RECOMMENDATIONS

• 3. Intensify capacity building for SME borrowing
  / financial management and bank SME lending
  capacity of the banks.
• 4. Provide alternative support programs for SME
  exporters e.g., an Export Development Fund for
  RD and market promotions.
• 5. But in order to initiate a quantum leap in
  SME lending
• We must implement the SME and agri-agra
• lending regulations in a manner that keeps
• to the spirit of the law, and to provide
  guidelines
• and safeguards so that alternative compliance
• is not overly relied upon

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Thank You