The Bangko Sentral ng Pilipinas (BSP) considers and has identified certain supply chain finance (SCF) measures to help micro-, small and medium enterprises (MSMEs) gain access to, and secure financing from banks.
In a recent virtual briefing, BSP Governor Benjamin Diokno said the SCF will allow lenders to use MSMEs’ receivables and inventory flow to finance them. He said a formal SCF study may be be launched next month and policies and guidelines are targeted to be implemented in 2022.
“This will particularly be helpful for smaller firms that banks typically are unable or unwilling to serve using traditional financing approaches,” he said, adding that the 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.”
In coordination with the Asian Development Bank (ADB) the BSP plans to undertake a nationwide MSME survey 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 MSME sector,” Diokno explained.
He said a technical working group (TWG) has been constituted to explore the possibility of having a standard business loan application form for MSMEs to simplify requirements and processes.
The standardized loan form, as well as the policies and guidelines, are expected to be crafted next year and targeted to be institutionalized by 2022, he added, which measures are aimed at addressing challenges being faced by MSMEs in securing bank financing.
Diokno pointed out that 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, he said MSME loans account for only around 8.8% of total business loans and 6.1% of total bank loans to date.
Data show that year-on-year expansion of bank loans to total businesses dropped from 20% in 2014 to just 7.3% in 2019. “This reflects the long-standing access to finance challenge confronting MSMEs,” he shared.
Diokno said these challenges are attributed to beliefs that MSMEs are unbankable because of limited information regarding their market operations, lack of data on credit risks assessments, and paucity of acceptable collaterals and credit histories.