by Jan Michael Carpo, Reporter
In a move poised to significantly expand access to crucial financing, the Bangko Sentral ng Pilipinas (BSP) has forged a strategic alliance with the International Finance Corporation (IFC) to champion the growth of movable asset financing (MAF) across the Philippines.
The landmark agreement, formalized through a memorandum of understanding, sets the stage for a collaborative effort aimed at empowering micro, small, and medium-sized enterprises (MSMEs) and the agricultural sector by enabling them to leverage their movable assets to secure much-needed credit.
For countless MSMEs and agribusinesses in the Philippines, accessing capital has long been a significant hurdle. Traditional lending practices often require fixed assets like land or buildings as collateral, leaving those with limited such holdings struggling to obtain the funds necessary for working capital, expansion, or even day-to-day operations. This partnership between the BSP and the IFC seeks to dismantle these barriers by fostering a robust ecosystem for MAF.
BSP: Creating a vibrant MAF ecosystem in PH
BSP Governor Eli M. Remolona Jr. expressed his enthusiasm for the collaboration, stating, “The BSP is eager to collaborate with the IFC in order to create a vibrant MAF ecosystem. This will allow MSMEs and agribusinesses to access funding for working capital and other needs by utilizing their available assets.”
This sentiment underscores the central bank’s commitment to exploring innovative financial solutions that cater to the diverse needs of the Philippine economy.
The agreement outlines a clear roadmap for the joint efforts, with the BSP and IFC committing to work together until 2027 to cultivate the nation’s movable financing sector. The core principle of MAF lies in allowing borrowers to utilize transportable assets – such as inventory, accounts receivable, and equipment – as security for loans.
This innovative approach promises to unlock financial opportunities for those who lack the conventional collateral demanded by traditional lenders.
The collaboration will strategically focus on several key areas to ensure the effective and widespread adoption of movable asset financing. These include sector capacity building, which will involve educating lenders and borrowers on the intricacies and benefits of MAF.
Regulatory reform will also be a crucial component, with the BSP and IFC working together to refine existing frameworks and potentially introduce new regulations that further facilitate and safeguard MAF transactions. Furthermore, the partnership will focus on the creation of auxiliary services, such as efficient registries and valuation mechanisms for movable assets, which are essential for a well-functioning MAF ecosystem.
Partnership to expand financial access beyond traditional collateral
BSP Deputy Governor Bernadette Romulo-Puyat highlighted the broader implications of this initiative, emphasizing its alignment with national development goals. “The program supports inclusive growth and financial resilience, two objectives of the National Strategy for Financial Inclusion 2022–2028,” she stated, underscoring the potential of MAF to bring more Filipinos into the formal financial system and enhance their economic stability.
Despite the enactment of the Personal Property Security Act, a crucial piece of legislation designed to facilitate MAF, a 2022 IFC analysis revealed that loans secured by movable assets still constitute less than 5% of the total loan portfolio in the Philippines. This stark statistic underscores the significant untapped potential of MAF and highlights the urgent need for concerted efforts to raise awareness and build the necessary infrastructure.
The BSP-IFC partnership is viewed as a pivotal step towards bridging this gap. By actively promoting awareness among financial institutions and potential borrowers, and by working to improve the underlying infrastructure that supports MAF, the alliance aims to catalyze a significant shift in lending practices. This, in turn, is expected to inject much-needed capital into the MSME and agricultural sectors, serving as a powerful engine for economic growth and job creation across the archipelago.
This strategic alliance represents more than just an agreement on paper; it signifies a tangible commitment to fostering a more inclusive and dynamic financial landscape in the Philippines. By embracing innovative financing strategies like movable asset financing, the BSP and IFC are paving the way for a future where access to credit is no longer solely determined by the ownership of traditional assets, but by the inherent value and potential held within the movable resources of the nation’s hardworking entrepreneurs and agricultural producers.
This collaborative endeavor holds the promise of unlocking a new era of financial empowerment for the Philippines’ most vital economic drivers.