The Senate passed on third and final reading a bill that would allow more Filipinos to avail of loans from financial institutions by expanding the list of assets acceptable to banks as ‘collateral’ and reducing the risks associated with ‘movable collaterals.’
Approved with 21 affirmative votes, zero negative votes, and zero abstentions, Senate Bill No. 1459, was authored by Senator Bam Aquino IV and Senator Chiz Escudero, chair of the Senate Committee on Banks, Financial Institutions and Currencies.
“With the Personal Property Security Act, Filipinos will have better access to lower-interest loans, and more Filipino families can grow their business and livelihood for a brighter future,”Aquino said.
For his part, Escudero said that the bill was particularly meant to “increase access by micro, small, and medium enterprises (MSMEs) to more credit at the least cost, through the establishment of a unified and modern legal framework for securing obligations with personal property.”
“The proposed measure comes at a perfect time when investment demand is growing and the desire for self-sufficiency by Filipinos is strong,” Escudero said.
According to Aquino, the measure would “broaden the utilization of ‘movable assets,’ like bank accounts, accounts receivable, inventory, equipment, vehicles, agricultural products, and even intellectual property rights,” to provide more Filipinos access to loans.
The bill will broaden the utilization of ‘movable assets,’ like bank accounts, accounts receivable, inventory, equipment, vehicles, agricultural products, and even intellectual property rights to provide more Filipinos access to loans.
“Imagine a farmer using his livestock or a craftsman using a contract for a bulk order as collateral for a loan,” the legislator added.
The lawmaker noted that at present, the country already recognizes “a diverse set of movable assets acceptable as collateral for loan purposes, like motor vehicles, equipment, and standing crops, such as rice or sugarcane.”
To reduce the risk posed by accepting movable collaterals, Aquino said the bill would mandate a comprehensive, centralized, online and notice-based national collateral registry with the Land Registration Authority (LRA).
The said registry would contain information on personal properties which could be, or have been, registered and used as collateral, in order to “assure banks and lenders that any collateral being submitted has not been utilized for another loan.”
“Access to a centralized repository of information for movable assets will encourage financial institutions to lend to our MSMEs and may even speed up the loan application process,” he added. Aquino said that the bill sought to change the present ‘heart-breaking’ situation where MSMEs have difficulty in accessing loans, given that lenders favor land and real property as collateral.
“Many of our countrymen have a very difficult time accessing loans from banks and result to borrowing from friends and family or, worse, resorting to informal loans like the five-six system with exorbitant interest rates,” Aquino said.
“Many of our small businesses have so much potential – potential for success and potential to lift families out of poverty,” he concluded.