THE BLACK HOLE AND THE MISSING MIDDLE

THE PROBLEM IN THE PHILIPPINES Lack of access to finance by mSMEs is listed as one of the top ten constraints by firms Only 33% of firms have access to credit Lenders taking security require 240% of loan value in collateral

MISMATCH OF ASSETS AND REQUIREMENT Assets Held by Firms Assets Banks Accept as Collateral 44% 34% 23%23% Vehicles/machinery/equipment Accounts Receivable Land / Real Estate 73% 27% Land / Real Estate Movable property

WHY HEAVY RELIANCE ON REAL ESTATE vs. MOVABLE ASSETS Movable Collateral is deemed risky: –No assurance of priority against other interests –Deficient registration system and unequal treatment of different forms of security interests in the law –Unreliable and slow enforcement against movable collaterals

THE MOVABLE COLLATERAL REGISTRY Broad scope of movable assets that may be used as collateral; Clear rules on priority of claims; Simple, cost-effective, accurate, and transparent registry Effective enforcement upon default

TYPES OF MOVABLES Equipment Inventory and raw goods Cash-flows (receivables & secured sales contracts) Intangibles and documents (e.g. securities, warehouse receipts, instruments, contracts, etc.) Crops and livestock Fixtures – movables fixed to real estate Consumer goods Patents and Intellectual Property Rights

Diversified portfoliosAccess to critical informationAssured lenders prioritiesStrengthened risk managementBetter reporting mechanisms BENEFITS TO LENDERS

MOVABLE COLLATERAL REGISTRY NOT ONLY ENHANCES ACCESS TO CREDIT BUT MORE IMPORTANTLY, IT PROMOTES FINANCIAL INCLUSION ACROSS ALL SECTORS

MARAMING SALAMAT