PH sees jump in ranking in World Bank’s ease of ‘getting credit’ report

The Philippines’ ranking in “getting credit” indicator of the World Bank’s annual ease of doing business report is expected to jump by 100 places once Congress passes the secured transactions systems bill, the Department of Finance (DOF) said yesterday.

From last year’s rank of 142nd out of the 190 countries covered by the Washington-based multilateral lender’s report, the DOF said the country could move up to as high as 42nd place if both houses of Congress would fast-track the bill’s approval.

The secured transactions systems bill will be up for third reading in the Lower House and is on second reading in the Senate, the DOF noted.

“This bill, if passed, will encourage more lending to micro, small and medium enterprises (MSMEs) and agriculture since it offers entrepreneurs opportunity to use movable collateral (such as inventory, receivables, crops, livestock and equipment) to back up their loan applications. Right now, lenders accept only real estate as collateral. About 31 percent of production by Philippine family household businesses and 65 percent of household businesses are constrained by credit lack,” the DOF said in an economic bulletin.

Also, once enacted into law, it will “develop a professional, regulated warehousing industry which issues receipts that can be used as collateral by lenders and can be traded by investors and industry players,” the DOF said.

It will also develop an automated movable collateral registry wherein announcements and information on transfers and pledges of collateral can be made and accessed by participants, the DOF added.

According to the DOF, passing the secured transactions systems will develop the backbone of an efficient commodities market that will stabilize prices and expand transactions.

“In other countries that undertook the reform, lending to MSMEs increased by 50-100 percent. In China, $3.58 trillion in lending was spurred four years after the reform. Thus, movable collateral now account for 45 percent of commercial lending in China and 30 percent in Vietnam,” the DOF noted.

Government agencies are getting ready for the eventual passage of the bill. The Land Registration Authority announced that the automated collateral registry has been established and is ready to accept announcements/information and be accessed by borrowers and lenders. —BEN O. DE VERA