Category : Press Release
Date : February 02, 2018
Agency : Department of Finance
Title : DOF Economic Bulletin on Secured Transactions System
Article : The Secured Transaction Systems Bill is at advanced discussions in both houses of Congress. The bill is on second reading in the Senate and scheduled for third reading in the House. 1/ Similar reforms which are among the priorities of the Cebu Action Plan are also being implemented in APEC and ASEAN economies.

The passage of this bill will strengthen the Philippines’ position in the “Getting credit” indicator in the Ease of Doing Business and boost it by about 100 notches---from rank 142 among 190 countries to 42.

This bill, if passed, it will bring the following benefits, as follows:
1. Encourage more lending to MSMEs and agriculture since it offers entrepreneurs opportunity to use movable collaterals (e.g., inventory, receivables, crops, livestock, equipment) to back up their loan applications. Right now, lenders accept only real estate as collateral. About 31% of production by Philippine family household businesses and 65% of household businesses are constrained by credit lack. 2/
2. Develop a professional, regulated warehousing industry which issues receipts that can be used as collateral by lenders and can be traded by investors and industry players.
3. Develop an automated movable collateral registry wherein announcements/information on transfers and pledges of collateral can be made and accessed by participants.
4. Develop the backbone of an efficient commodities market that will stabilize prices and expand transactions.

In other countries that undertook the reform, lending to micro, medium and small enterprises (MSMEs) increased by between 50 to 100%. In China, US$3.58 trillion in lending was spurred 4 years after the reform. Thus, movable collaterals now account for 45% of commercial lending in China and 30% in Vietnam.

Government agencies are getting ready for the eventual passage of the bill. The Land Registration Authority (LRA) announced that the automated collateral registry has been established and is ready to accept announcements/information and be accessed by borrowers and lenders. The SEC is drafting regulations regarding the operation of warehouses that wish to join the secured transactions system. It is now preparing audit systems to check compliance with regulations.

1/ Senate Bill 1459 (Personal Property Security Act) sponsored by Senators Chiz Escudero, Sherwin Gatchalian, Cynthia Villar, Manny Pacquiao and Bam Aquino and House Bill 6907 (Financial Inclusion Act) sponsored by Congressmen Arthur Yap.

2/ Marie Godquin and Manohar Sharma, “If only I could borrow more! Production and consumption credit constraints in the Philippines”, 2005.