RCBC, fintechs launch P100 billion fund for MSMEs

MANILA, Philippines — Yuchengco-led Rizal Commercial Banking Corp. (RCBC) has partnered with financial technology firms (fintechs) led by Acudeen Technologies Inc. to launch a P100-billion fund for micro, small and medium enterprises (MSMEs).

RCBC president and chief executive officer Eugene Acevedo said access to finance has been among the challenges faced by MSMEs and the agriculture sector because banks require hard collateral, which borrowers do not have.

However, RCBC took the lead in launching ASEAN’s first MSME Opportunity Fund to jumpstart the banking and fintech industry in creating markets and encouraging the private sector to utilize movable assets as collateral especially with the passage of Republic Act 11057 or the Personal Property Security Act (PPSA).

 Now, PPSA allows the use of movable collaterals, such as account receivables, crops, farm equipment, warehouse receipts, bank accounts, and even future harvest.  

 “This pioneering initiative promotes innovation by giving all stakeholders the opportunity to offer creative solutions to sustainability challenges, especially in empowering our entrepreneurs in exponentially growing our MSME sector,” Acevedo said.

The open-ended fund will provide alternative funding for capital and operational requirements of MSMEs through the sale and purchase of invoice receivables and other movable assets registered by invoice receipts, certificates, or contracts as defined by the law.

It will be covered by a sovereign guarantee through PhilGuarantee to ensure the quality of underwriting and receivables assets.

A review of underwriting tools will be done and preference may be for shorter duration for loans/receivables including due diligence on the company providing long historical data.

This initiative hopes to address the MSME funding gap in the Philippines worth $2 billion as of 2017 per IFC Enterprise Finance Group. Global trade finance gap amounts to $1.5 trillion, 40 percent of which is from Asia Pacific region.

According to the Business and Sustainable Development Commission, sustainable business models could open economic opportunities worth $12 trillion and create 380 million jobs by 2030 globally.

 The pilot will initially cover Acudeen Technologies, a receivable factoring exchange that facilitates the buying and selling of SME invoices through its platform.

Deutsche Factoring Bank and Taishin Bank recently signed agreements with Acudeen to provide guarantees on export related receivables in the exchange.

The deal made it possible for the tech firm to attract more financial institutions like RCBC to consider investing in the movable asset space.

Lito Villanueva, executive vice president and chief innovation and inclusion officer at RCBC, said the next immediate step is to get the collateral registry operational as soon as possible and then quickly build up a real movable asset finance market with a diversified range of products and with as many players as possible from both banks and non-banks.

“A substantive movables finance market will mean, for example, that at least 30 percent of all commercial lending in the Philippines involve movable assets,” Villanueva said. 

Acudeen founder Magellan Fetalino said they expect two more major banks to participate in the first half of next year.

 “The entry of RCBC proves that we have put to life a bank-grade machinery that is instrumental in putting PPSA at work, and in really helping out our entrepreneurs in the country,” Fetalino said.

 Agriculture and MSME sectors form the backbone of the Philippine economy.  MSMEs account for 99.6 percent of the country’s enterprises and generate 61.6 percent of employment. 

“We really need to leverage technology to help our businesses, including MSMEs, thrive, compete, and grow while implementing regulations that reduce financial risks and boost confidence for MSME finance,” Finance undersecretary and chief economist Gil Beltran said.