Visa, PhilGuarantee team up for MSME credit
Visa has partnered with the Philippine Guarantee Corp. (PhilGuarantee) to study new ways of extending credit guarantees for micro, small and medium enterprises (MSMEs). They have plans to expand access to loans through banks and strengthen digital adoption through training programs.
Visa and PhilGuarantee sealed the partnership in a memorandum of understanding.
They will use Visa’s government solutions, which offer services like disbursement programs, payment acceptance and financial education to streamline operations and boost financial inclusion.
This, in turn, will help PhilGuarantee, an agency under the Department of Finance, to provide accessible and efficient guarantee systems for key government sectors.
Latest data from the Bangko Sentral ng Pilipinas (BSP) showed total loans to MSMEs reached P540.92 billion as of end-June. This was an increase of nearly 11 percent from a year earlier.
However, that amount only accounted for 4.59 percent of the Philippine banking industry’s P11.78-trillion lending portfolio. This was below the prescribed ratio of 10 percent.
Under the Magna Carta for MSMEs, banks must allocate 8 percent of their lending portfolio for micro and small businesses. Also, 2 percent must be extended to medium-sized enterprises.
The lending quota was in effect for a decade starting in June 2008. But many banks had been not compliant, opting to just pay the penalties instead of assuming the risks.
Banks are typically hesitant to extend credit to MSMEs. This was due to factors like lack of acceptable collateral, unstable income or cash flows, and lack of credit track record.
