Risk-Based Lending Movement Pledge of Commitment – Risk-based lending movement is a big help to micro and small and medium enterprises (mSMEs) in the Philippines. Now, the movement is reaching out to all stakeholders and gain support, especially in the business community, and to join them and make a united stand supporting the risk-based lending movement missions in order to have a healthy business atmosphere despite of the on-going financial crisis wrecking havoc in the economy.
Many Philippine small and medium enterprises businesses rely on credit offered by banks and other financing institutions or additional capital to support growth and development. But when a credit crunch occurs, banks tighten credit and increase the cost of credit resulting to disruption in many business activities. Further, the fear that loans will not get paid back causes the movement of money to stop putting to a halt the engines of commercial growth.
No wonder, there are small businesses being abandoned especially during an economic crisis. That is why an appeal to the societal obligations of banks become timely and relevant. This is the core idea behind the risk-based lending movement, an advocacy of the Small Business Corporation.
Here is the pledge of commitment of the risk-base lending movement:
“We, citizens of our beloved country, the Philippines, and partners in the global community, collectively pledge to support the building of a sustainable financing system that is more inclusive of micro, small and medium enterprises (mSME) which comprise the large majority of firms in the country and worldwide.
We commit to work for the implementation of credit assessment models more focused on the borrower-enterprise itself and less dependent on capacity to put up collateral. We acknowledge that the collateral culture has for a long time restricted the growth of mSME finance in the country and other parts of the world. Now, there is an urgent need to go beyond the present collateral mentality, and to build more responsible and responsive credit systems.
Thus, we commit to engage in capacitating the financing sector, as individual institutions develop their internal risk management system, inclusive of borrower risk rating or BRR models intended to expand their mSME portfolio. We support the sector as it works on the implementation of a more comprehensive credit information system. These we agree to do in recognition of the need for financial institutions to open up to new and emerging mSME for the benefit of both borrower and lender, and of the larger economy.
As part of responsible finance, we commit to push for a change in mindset in credit supervision, which should focus on the borrower, not just on the account. We acknowledge the need of mSMEs for sound advice, timely consultation and hand-holding under a pro-active credit relationship.
In order to move further, we also commit to pursue the institutionalization of alternative forms of collateral outside of the traditional definition so as to empower small borrowers access credit in a progressive environment at more competitive terms.
And with the same dedication, we commit to work for financial literacy and transparency of mSMEs, enabling even small firms to maintain accurate financial recording. We are cognizant that reliable financial information eases the credit assessment process for lenders, as well as allows the enterprise to formulate business knowledge necessary in planning and managing growth.
With this, we pledge ourselves to unite, to advocate and to work for the attainment of the vision for a robust, efficient and open credit system able to put into use the financial resources of the country and the world in a way that truly brings about a more level playing field for the mSME sector, as it aims for greater competitiveness, stability and growth.
We represent, a united front of government, domestic and international development agencies, of chambers of financial institutions, of mSME industry associations, of business development service providers, of civil society organizations and of other development-oriented interests throughout the country and the world, dedicated to making our share in pushing forward the commitments of this Risk-Based Lending Movement.”
If you are interested to join Risk-Based Lending Movement, please contact:
Small Business Corporation
Mr. Benel P. Lagua
Email: benellagua@alumni.ksg.harvard.edu.