BSP pushes for digital services, microfinancing for small businesses

Jessica Fenol, ABS-CBN News

Posted at Nov 26 2019 08:04 PM | Updated as of Nov 27 2019 07:26 AM

MANILA – The Bangko Sentral ng Pilipinas (BSP) is pushing for digital services to make microfinancing more attractive to small businesses compared to informal lenders that charge higher fees, central bank Governor Benjamin Diokno said Tuesday. 

The BSP aims to improve the exposure of micro, small and medium enterprises (MSMEs) to loans by supporting policies for innovative services, Diokno said in a speech during the 17th Citi Microentrepreneurship Awards. 

Loans by MSMEs currently account for only 6.2 percent of banks’ total loan portfolio, he said.

Putting up financial and digital infrastructure, such as the national ID system or PhilSys, could help "mitigate the risks and lower costs" of loans, he said. 

Digital wallets, meanwhile, could give small vendors access to immediate credit lines through their mobile phones, Diokno said. Payments can also be done using their devices. 

“Our efforts to promote digital payments are meant to facilitate delivery of financial services, including credit that are designed around the needs and preference of small value transactors,” Diokno said. 

“The convenience, affordability and flexibility of these digital products will hopefully make informal lenders charging exorbitant fees less attractive,” he added.

The use of non-real property assets such as crops as collateral will also give small players access to capital, he said. 

The BSP also recently launched its electronic payment platform for government transactions called EGov Pay and the national QR code standard, which will be used by banks and other financial firms in the country.

It had also earlier introduced PesoNet and InstaPay under the National Retail Payment System in a bid to raise cashless transactions in the country to 20 percent by 2020.

The central bank is working to create a credit risk database and a comprehensive MSME study to serve as statistical tools to facilitate collateral-free and more affordable credit for small businesses, he said.

“This can support evidence-based policymaking and equip banks and other lenders with valuable market insight for customer-centric product development,” he said. 

Diokno also recognized microfinancing firms that offer affordable and flexible loans to small entrepreneurs for their contribution to nation-building.

According to the 2018 data from the Philippine Statistics Authority (PSA), MSMEs comprise 99.52 of the total businesses in the country.