New banking model mulled to check decline in SME lending


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 institution CARD Bank would introduce a banking model, which they hope could become the industry standard in lending services to SMEs.

Industry figures showed bank lending to SMEs was falling short by P67 billion to P180 billion despite a Magna Carta for SMEs that requires banks to allot at least eight percent of their loan portfolio to middle-market companies, the Philippine 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 marketing and further development. It also would look at adopting a robust management 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 private sector arm was expected to look at partnerships with other microfinance institutions or commercial banks, which are keen to diversify its portfolio and tap the SME market.

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November 20th, 2007
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Comment Number:
1
Written by:
Eugenio A. Demigillo, Jr.
Posted on:
November 20, 2007 at 6:21 pm

Why Card Rural Bank? Does it have expertise in SME lending operations? From what I know, Card Rural Bank ties up with its own Card Foundation for promotion and implementation of microfinance credit schemes, or does MF alternately with its own NGO-foundation. They have not been known for SME lending, rather for MF models. I am sure there are a number of provincial thrift banks engaged in the sector. If none, then it proves the sorry state of SME finance in the Phils.

Comment Number:
2
Written by:
Karen Galarpe
Posted on:
November 22, 2007 at 10:21 am

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.

Comment Number:
3
Written by:
Ned Liuag
Posted on:
November 23, 2007 at 9:35 am

The International Finance Corporation (IFC) has been a shareholder of Planters Development Bank (Plantersbank) since 2000. IFC and Plantersbank–which specializes 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.

Comment Number:
4
Written by:
Luc Vaillancourt
Posted on:
November 28, 2007 at 9:55 am

CARD Bank was selected as the first SME partner bank by IFC because it proved to 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 efficiently, 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 yet available also give this partnership much potential. As mentioned in the article, however, IFC is working on several other banking partnerships that should further increase the outreach of financial services to SMEs in the Philippines.

Comment Number:
5
Written by:
Mike Bohol
Posted on:
December 5, 2007 at 3:51 pm

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 they 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.