MORE small and medium enterprises may now be able to tap the financial markets through the Credit Risk Database (CRD), according to the Bangko Sentral ng Pilipinas (BSP) and the Japan International Cooperation Agency (Jica).
In a launch on Tuesday, BSP Governor Felipe M. Medalla said that while SMEs are often referred to as the backbone of the Philippine economy, the sector is beset by challenges, particularly in accessing financing.
Medalla said the problems of the SME sector have been compounded by “bad policies” such as mandating banks to lend to them, leading to “one-size-fits-all” solutions that do not work.
“[Even small foreign banks in] the Philippines are being told to lend to MSMEs and agriculture. And most of them end up saying we must just pay fines. It’s a terrible thing. It’s a tax on foreign investors who want to help the economy. [It’s a] one-size-fits-all policy,” Medalla said in his speech.
“Another terrible example is rural banks are being penalized for not lending enough to MSMEs when in fact, some medium-scale industries are bigger than some rural banks. So you can see that good intentions lead to bad policies,” he added.
However, some of these challenges can be addressed through the CRD. According to the BSP, the database created through the CRD project, which has been extended by Jica to March 2024, can be used by banks to construct a credit-scoring model for SME borrowers.
Deputy Governor Bernadette Romulo-Puyat said the CRD was crafted by a team composed of the CRD Japan Expert Team and BSP’s CRD Project Implementation Unit which carried out data collection, credit scoring model development and validation, knowledge and technology transfer, and framework development.
The CRD Project was launched virtually in December 2020 at the height of the Covid-19 pandemic. It started with 17 participating banks and has since expanded to 32 rural and universal and commercial banks.
“Today we have reached a milestone in our financial inclusion agenda. As such, let us celebrate the success of our efforts over the past three years in rolling out the CRD project, as we look forward to the future that we all envision: a vibrant SME sector fueled by an effective and inclusive access to legitimate and affordable credit,” Puyat said.
Puyat noted micro, small, and medium enterprises (MSMEs) make up 99.6 percent of business establishments in the country.
It also provides 64.7 percent of employment to the country’s workforce and contributes about 35.7 percent to the country’s Gross Domestic Product (GDP).
The 32 rural and universal and commercial banks include 1st Valley Bank; AllBank; Asia United Bank, BK Private Development Bank; Bangko ng Kabuhayan; BOF rural bank; Camalig Bank; BPI; Cbs; Card SME Bank; Development Bank of the Philippines; First Consolidated Bank; Land Bank of the Philippines; Lipa Bank; Malayan Savings Bank; Metrobank; PBCom; and Philippine Business Bank, among others.
In 2020, Jica said the technical cooperation project, to be undertaken for three years, aims to improve SMEs’ access to financing in the Philippines.
The initiative will include the creation of a scoring model based on a database built from information gathered from banks. Jica said some banks have already expressed their interest to participate.
In Japan, Jica said the CRD system helped improve credit access of SMEs using a tool that analyzes credit risk information.
Jica said the Philippine Magna Carta for Small Enterprises has consolidated all programs for MSME development in the Philippines. The project also helps improve risk perception on small businesses and widens their access to finance.