BSP eyes guarantee fund for first-time borrowers

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) is ramping up initiatives to push financial inclusion in the country by onboarding more Filipinos in the financial system.

BSP Governor Felipe Medalla said the government could consider a guarantee fund to subsidize fees for first-time borrowers and bring them into the formal financial system.

“Through #digitalpayments, borrowers can develop a track record. Once they have a track record, they can become bankable and graduate to the formal financial system,” Medalla said.

Medalla was one of the speakers in a seminar at the Asian Development Bank annual meeting in Incheon, South Korea. The details of the proposed fund are still being finalized.

“Digitalization unlocks innovative solutions for the delivery of financial services that are affordable, convenient, and tailored to the needs of the underserved markets and consumers,” Medalla said.

Under its Digital Payments Transformation Roadmap, the central bank aims to increase the number of Filipino adults with bank accounts to 70 percent and shift 50 percent of total retail transactions to electronic channels by 2023.

With the pandemic serving as catalyst, the number of banked Filipino adults almost doubled to 56 percent in 2021 from 29 percent in 2019.

Likewise, the share of digital payments to total retail transactions increased to 30.3 percent in 2021 from only 20.1 percent in 2020.

Medalla pointed out that the private sector is also doing its part to reach the underserved through agent banking and assisted transactions.

“There are many things we can achieve working together to expand access to credit in an effort to reduce both poverty and financial exclusion,” he said.

Last week, Medalla led the launching of the Credit Risk Database Scoring Model to help financial institutions better assess the creditworthiness of small and medium enterprise (SME) borrowers, including those without credit histories or adequate collateral.

Medalla said the scoring model aims to bridge the funding gap for micro, small and medium enterprises (MSMEs) as well as enhance the credit risk management of financial institutions using a data-driven approach.

The scoring model, the key output of the three-year Technical Cooperation Program between the BSP and the Japan International Cooperation Agency (JICA), provides additional information for banks to assess the creditworthiness of MSMEs.

Japanese Ambassador Koshikawa Kazuhiko said ensuring that promising SMEs have access to appropriate financing is essential to fully harness the Philippines’ economic potential and realize its goal of financial inclusion.

For his part, JICA Philippines chief representative Sakamoto Takema said JICA’s continuous cooperation is grounded on robust partnership and mutual trust to address the priorities of the Philippine government.