Credit bureau to help SMEs, says ECCP exec

The credit bureau will help micro small and medium sized enterprises (MSMEs) to become more stable and get rid of their non-core assets, a foreign businessman based in Manila said.

“If there is no credit bureau then the MSMEs will not be pressured to clean up their balance sheets,” European Chamber of Commerce of the Philippines (ECCP) vice president Henry Schumacher said in reaction to statements that the creation of a credit bureau will be harmful to smaller entrepreneurs.

In an interview, Schumacher said if the business is not hiding anything then it should not be afraid of a mechanism that allows financial institutions to share credit information.

When asked how MSMEs can qualify for loans with the credit bureau in place, Schumacher said the small business should get rid of assets not needed for business.

“In small businesses, especially those that are family run, there are many emotional assets. People don’t make wise business decisions. Instead they tend to keep properties because of sentimental reasons,” he explained further.

Contrary to this, a group of local businessmen said most entrepreneurs will not have access to capital they need to start or expand their businesses once Congress passes the bill that will create a credit bureau.

“The creation of the credit information bureau will make it harder for small and medium sized enterprises to borrow money from banks,” Sergio Ortiz Luis Jr., Honorary Chairman of the Philippine Chamber of Commerce and Industry (PCCI) said in an interview.

More than 90 percent of businesses operating in the country are classified as SMEs.

According to Ortiz-Luis, of the 800,000 SMEs only 200,000 are qualified to borrow from formal financial institutions. Should the credit bureau be implemented, he said the number is expected to go down significantly.

The former banker said this is because most SMEs still have not recovered from the Asian financial crisis. In the late 90’s the local currency plummeted against the dollar making dollar denominated loans more expensive.

This has resulted in non payment of loans of businesses including SMEs.

“The credit bureau will give banks more reason to ignore the small players. Now more than 60 percent are not going to banks,” Ortiz Luis noted.