RBs set to undergo training for risk-based SME lending
July 15, 2009 9:15 am
MANILA, July 14 – About 100 rural banks (RBs) are expected to give their personnel training on risk-based lending to small and medium enterprises (SMEs) in the next three years.
In a briefing Wednesday, Tomas Gomez IV, former president of the Rural Bankers Association of the Philippines (RBAP) and current Rural Bankers Research and Development Foundation, Inc. chairman, said three banks are set to pilot-train their personnel next month while another seven are scheduled in December.
These three banks are Butuan City-based Rural Green Bank of Caraga, Iloilo City-based Valiant Rural Bank, and Cabanatuan City-based GM Bank.
Gomes said the training will be given in coordination with SB Corporation and Capacity Building International, Germany (Inwent).
He explained that part of the training would be helping the RBs determine the right marketing strategy beneficial both to the RBs and the SMEs.
He said adoption of the risk-based lending among RBs provides SMEs greater access to funds.
SMEs have less access to credit compared to bigger businesses since SME lending to date is collateral-based.
To date, an SME has to present its collateral first before its loan proposal would be assessed.
But under the proposal to increase SME lending, a SME needs to first present its loan proposal then the bank will assess it and check the risks.
After this, the bank will check the collateral and from here will decide on loan pricing.
Gomez said because of their thrust to give SMEs bigger opportunities to get funds banks have to also make sure that they will also be provided with additional safeguards.
He said interest rates for regular SME loan is around two to three percent.
And because of the expected improvement in the SME access to loans, Gomez project lending growth to improve this year after a flat growth in the first six months of the year.
“We expect it to pick up in the second half because there’s less uncertainty,” he said.
Relatively, discussions on how RBs can offer simple insurance products are underway with the draft circular of the Bangko Sentral ng Pilipinas (BSP) to be out by year-end.
Gomez said they want to offer basic insurance products like life and agriculture insurance, but RBs are not qualified to date under BSP regulation.
Under BSP Circular 357 issued in 2002, a bank needs to own at least five percent of an insurance company before it can engage in bancassurance.
Gomez said RBs do not want to offer complicated products like variable or unit-linked products (VUL), which are insurance tied up with investment.
“For most rural banks there’s no need and resources to invest in an insurance company,” he added. (PNA) LDV/JS/utb
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