SBC trains rural banks on risk-based lending

CEBU, Philippines - In line with its thrust to give micro enterprises in the countryside easy access to capital, the Financial Institution Development Group of the Small Business Corp. (SBC) has started training rural banks with the technology on SME risk-based lending.

“It is our aim to encourage rural banks to migrate to this system of evaluating loan applications from the traditional collateral-based lending, wherein most micro and small companies find hard to qualify due to the absence of collateral,” SBC Visayas Office manager Cesar Antoni said.

“The adoption of risk-based SME lending technology by the RBs will impact on their ability to lend to more SMEs and thus increase the volume and improve the quality of their SME portfolio,” SBC former chairman and chief executive officer said in a report.

Called the “Consultancy Program on SME Risk-Based lending,” the capacity building program is a partnership with the Rural Bankers Association of the Philippines, wherein selected RBAP members are provided consultancy services to transfer the technology on risk-based lending to the bank’s management and lending units.

Antoni said SBC has started training rural banks in the province. The new system will enable the banks to confidently lend to deserving SMEs even without collateral. This would be most helpful to micro enterprises that are ready to graduate to become a small enterprise and would need a bigger capita to do so.

The long-term goal of the program is to set up a credit information sharing system among rural banks on risk-rated SME borrowers. This is similar to a credit bureau to be managed by a host-agency and will be accessed fee-based.

“By itself, SMEs could be a profitable portion of a bank’s loan portfolio. This may yield to the SME sector being considered as a viable core business even by large banks. When this happens, then large banks will open their doors to SME borrowers, and we have achieved greater access to financing for SMEs,” Angelo.