A new financing model was being developed to stop a steep fall in bank lending
to small and medium-sized enterprises (SMEs).
A partnership between the International Finance Corp (IFC) and microfinance ins
titution CARD Bank would introduce a banking model, which they hope could becom
e the industry standard in lending services to SMEs.
Industry figures showed bank lending to SMEs was falling short by P67 billion t
o P180 billion despite a Magna Carta for SMEs that requires banks to allot at l
east eight percent of their loan portfolio to middle-market companies, the Phil
ippine Daily Inquirer reported. The report said the model would depart from the
traditional lending approach.
The tie-up would concentrate on building SME banking products, which includes m
arketing and further development. It also would look at adopting a robust manag
ement information system which can support credit scoring and credit relations
management, the report further said.
Although the IFC would pilot-test the model with CARD Bank, the World Bank's pr
ivate sector arm was expected to look at partnerships with other microfinance i
nstitutions or commercial banks, which are keen to diversify its portfolio and
tap the SME market.
New banking model mulled to check decline in SME lending
A new financing model was being developed to stop a steep fall in bank lending
to small and medium-sized enterprises (SMEs).
A partnership between the International Finance Corp (IFC) and microfinance ins
titution CARD Bank would introduce a banking model, which they hope could becom
e the industry standard in lending services to SMEs.
Industry figures showed bank lending to SMEs was falling short by P67 billion t
o P180 billion despite a Magna Carta for SMEs that requires banks to allot at l
east eight percent of their loan portfolio to middle-market companies, the Phil
ippine Daily Inquirer reported. The report said the model would depart from the
traditional lending approach.
The tie-up would concentrate on building SME banking products, which includes m
arketing and further development. It also would look at adopting a robust manag
ement information system which can support credit scoring and credit relations
management, the report further said.
Although the IFC would pilot-test the model with CARD Bank, the World Bank's pr
ivate sector arm was expected to look at partnerships with other microfinance i
nstitutions or commercial banks, which are keen to diversify its portfolio and
tap the SME market.
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Why Card Rural Bank? Does it have expertise in SME lending operations? From wha
t I know, Card Rural Bank ties up with its own Card Foundation for promotion an
d implementation of microfinance credit schemes, or does MF alternately with it
s own NGO-foundation. They have not been known for SME lending, rather for MF m
odels. I am sure there are a number of provincial thrift banks engaged in the s
ector. If none, then it proves the sorry state of SME finance in the Phils.
Well I think it's good that one bank has partnered with IFC. Let's give them a
chance. This is just the start. Other banks can partner with IFC.
The International Finance Corporation (IFC) has been a shareholder of Planters
Development Bank (Plantersbank) since 2000. IFC and Plantersbank--which special
izes in SME finance--set up the joint venture SME.com.ph (http://www.sme.com.ph
) to introduce information technology solutions for and promote confidence in e
-business in the Filipino SME community.
CARD Bank was selected as the first SME partner bank by IFC because it proved t
o me the most determined and commited to bringing in outside capacity building
in order to better serve the SME segment. IFC is pleased to be partnered with
the CARD group as it has proven its ability to offer financial products efficie
ntly, profitably, and to a large number of people (over 500,000 clients). CARD
Bank's ability to serve rural areas where no other SME banking products are ye
t available also give this partnership much potential. As mentioned in the art
icle, however, IFC is working on several other banking partnerships that should
further increase the outreach of financial services to SMEs in the Philippines
.
I've personally seen how CARD work with their microfinance in my province and I
would say that they are really successful in providing much needed capital at
these rural areas. At the same time, their model is really good that even if th
ey deal with rural folks, they remain profitable. However, it would still be a
challenge for them to serve a larger and much more challenging market. I'd say
let's give them a chance.
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Microfinance is the next buz word in the finance industry all over the world. I
t is very safe of lending compared to larger exposures that the banks have to u
ndertake. The challenge is distribution to the interest groups.