Issue of September 1, 2019
     
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New Property Law to boost MSME financing
by Press release

A new law broadening the use of movable assets as collateral for loans is expected to increase access to finance for micro, small, and medium enterprises (MSMEs) and even farmers and fisherfolks, to expand business or boost productivity, according to an official from the Department of Finance.

Aurora Luz Diokno-Villaviray, chief of the Special Studies Division of DOF, said Republic Act 11057, otherwise known as the Personal Property Security Act (PPSA), aims to provide more options to access finance beyond “5-6” lending scheme.

“With the centralized system, faster loan processing is anticipated with less time spent by banks on due diligence,” she said. “(This will) support growth of MSMEs – from a start up to a more sustainable business.”

Under the PPSA establishing a unified and modern legal framework for securing obligations with personal property, MSMEs, farmers and fisherfolks can now secure their borrowings by using non-traditional collateral.

Diokno-Villaviray said personal properties that can be used as collateral include bank accounts, industrial and agricultural equipment, accounts receivable, durable consumer goods, inventory and raw goods, agricultural products (crops, livestock, fish), intellectual property rights, and vehicles.

She noted the new law will establish a modern, centralized and electronic collateral registry which is accessible 24/7.

“Online registry will help in performing due diligence,” she added.

Diokno-Villaviray explained that in case of a payment default, lenders and borrowers can negotiate and agree to sell the personal property to settle the obligation at fair market value.

Apart from MSMEs, farmers and fisherfolks, she said the financial institutions (FIs) can benefit from enhanced risk management while the warehouse industry with increased access to finance.

“Through the centralized registry, there will be no more blind side for the FIs,” she added.

Diokno-Villaviray said the draft implementing rules and regulations for the law is being finalized to include comments, concerns raised during consultations, and publication in the DOF website.

The PPSA, signed by President Rodrigo Duterte on Aug. 17, 2018, also aims at increasing competitiveness and ease of doing business in the country.


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