THE BLACK HOLE AND THE MISSING

MIDDLE

THE PROBLEM IN THE PHILIPPINES

• Lack of access to finance by mSME’s 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 REQUIREMENTAssets Held by Firms Assets Banks Accept

asCollateral

44%

34%

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 portfolios

Access to critical information

Assured lenders’ priorities

Strengthened risk management

Better 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