Small businesses across the member-economies of the Asia-Pacific Economic Cooperation (Apec) are seen to benefit from the public-private or FIDN, which is being pushed under the Cebu Action Plan spearheaded by the Philippines.
Launched on Thursday, the FIDN will promote improved access to credit among micro, small and medium enterprises (MSMEs) primarily through the establishment of credit information systems and bureaus, which shall provide credit data to prospective lenders at affordable cost, Finance Assistant Secretary Maria Teresa S. Habitan said in a briefing.
Habitan noted the importance to Apec of MSMEs, which account for 97 percent of the total number of enterprises across the region and employ more than half of the labor force. However, MSMEs usually have “very low” access to credit—many of them cannot borrow from financial institutions as they could not provide collateral mostly in the form of real properties.
In a statement, the Department of Finance (DOF) explained that “with sufficient credit information, such as those that can be provided by credit information bureaus, banks will be more inclined to lend to small borrowers who have good ‘reputational’ collateral.”
Credit information bureaus serve as repositories of a variety of information pertaining to credit history as well as creditworthiness of individuals and enterprises alike.
Also, the FIDN pushes the development of conducive legal and regulatory regimes across Apec facilitating the increased usage of movable assets as collateral in credit markets, hence will expand MSMEs’ access to financing, including supply chain and trade finance, Habitan added.
As a whole, the FIDN “will provide a venue for Apec member-economies to share experiences and best practices in these and seek to promote their adoption in interested economies,” Habitan said, as the FIDN will not be prescriptive just as Apec is non-binding.
The FIDN is the first deliverable under the Cebu Action Plan approved by Apec finance leaders in Cebu last September.