RP'S SME GUARANTEE, FINANCE SYSTEM WON ADMIRATION OF INDONESIAN BANK
MALACANANG, August 23, 2004 (www.ops.gov.ph) The governmentís small business guarantee and finance system has won the admiration of a regional ally: Indonesia
"We are impressed by the smooth operations of the guarantee system between SB Corp. and its partner banks. The terms and conditions of the operations are transparent, according to Ardiansyah, Bank of Indonesiaís regulations bureau manager.
"This must be the reason why almost all of the guaranteed accounts of SB Corp. are successful," he added.
Impressed by the Small Business Guarantee Finance Corporationís (SB Corp.) guarantee system, Indonesiaís Central Bank said it would set up its own credit guarantee facility for small and medium Indonesian enterprises using SB Corp. system as benchmark.
The Indonesian bank official also commended SB Corp.ís small and medium enterprises (SMEs) financing models, which are based on the SMEsí bankability, financial needs, and the appropriate interventions made. SB Corp. classifies SMEs as pre-bankable, near bankable, and bankable.
Under this classification, pre-bankable SMEs are those with no track record and collateral to offer. For the near bankable, the borrower is credit worthy except that it lacks collateral, while bankable borrowers are those that did not get the needed loan as the private conduit bank lacks funds.
On the basis of these classifications, SB Corp., an agency of the Department of Trade and Industry (DTI), makes specific financial interventions such as retail lending for pre-bankable, guarantees for near bankable, and wholesale facility for bankable SMEs.
Considered as the backbone of the Philippine economy, the SME sector comprises about 99.6 percent of all registered firms nationwide. The sector employs 69.9 percent of the countryís labor force, and contributes 32 percent to the economy.
In compliance with a directive of President Gloria Macapagal Arroyo, DTI convened all key players in SME development, including concerned government departments and agencies, and formulated the National SME Development Agenda.
In pushing the SME program, the President underscored the role of small and medium firms in ensuring a more equitable distribution of income, dispersal of economic activities to the countryside, and as a potent force in the war against poverty.
"Our credit guarantee system is basically a scheme that bridges the gap between SMEs which are not able to meet the collateral requirements of the formal banking sector (and the loan provider)," SB Corp.ís vice president for credit guarantees Hector M. Olmedillo said.
"In the absence or insufficiency of collateral, the financial institutions turn over loan applications to us for our guarantee cover. In a way, this will help the SMEs get more funds needed for their businesses and nurture them prior to their full access to credit in the formal banking sector," he added.
Reported by: Sol Jose Vanzi
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