Bank loan terms intimidate SMEs

CEBU, Philippines - No matter how hard banks are trying to attract creditors in order to boost their loan business, entrepreneurs largely the small and medium, including micro traders are still intimidated by the banks’ high standard of requirements for corporate financial access.

Entrepreneur Jay. P. Aldeguer believes that there is still a huge gap between the banking sector and the business players specifically the SMEs and the start-up companies, as banks continued to offer intimidating packages, and can only attract bigger companies.

Aldeguer mentioned a recent survey among budding entrepreneurs and students who want to enter in into entrepreneurship that showed that bank is not in the top five choice for accessing capital.

Start-up businesses in the Philippines do not regard banks as a support to entrepreneurship, as capital resources are mostly borrowed from parents and friends.

“Banks are still maintaining intimidating factors. Clearly, there is a huge ‘disconnect’ between the financial institutions and the business sector,” said Aldeguer adding that this problem should be taken in consideration by the banking sector, specifically that the Philippines need to pump prime its economy to sustain growth, amid the fragile economic global condition.

According to Aldeguer, there is need for banks to re-examine and understand the changing needs of today’s young and vibrant entrepreneurs.

The younger entrepreneurs are very dynamic, and coming from diverse family backgrounds, they have different capitalization requirements. Thus, banks should also be as dynamic as the new generation of Filipino entrepreneurs.

In a recent economic briefing conducted by the Banco de Oro Universal Bank, economist Jonas Ravelas said the private sector should take advantage of the country’s excess liquidity in the banking system, as there are less loan takers due to uncertainty of the economy.

Ravelas urged the traders to make good relationship with the banks in order to avail of credit for expansion of their respective businesses, saying it is now the time to take advantage of the banks’ credit facilities because of low interest rates.

He however warned that the banking institutions are strictly upholding its “credit scoring” practice to avoid high delinquencies in the future.

On the other hand, banker Alberto S. Villarosa, president and chief executive officer (CEO) of the Security Bank, said that the banking sector is tied up with the rules and regulations provided for by the Bangko Sentral Ng Pilipinas (BSP) on providing loans to customers.

“Our hands are tied,” Villarosa said adding that the BSP has different set of rules that banks need to implement specifically for the micro-finance sector.

At present, the banking sector suffers from lack of “eligible” borrowers, while the Philippine business is composed of over 90 percent SMEs, including the micro-entrepreneurs. – (FREEMAN)