Remarks by Gloria Steele, Mission Director: Ceremonial Signing of the Credit Facility

Friday, January 17, 2014

[As Prepared]

Jose Vicente Alde, Executive Vice President Philippine Savings Bank
Eduardo M. Olbes, Executive Vice President, Security Bank Corporation
Samuel Tang, President & CEO, Bank of the Philippine Islands (BPI) Leasing Corporation
Jo Ann B. Eala, Vice President, BPI
Rolando Avante, President & CEO, Philippine Business Bank
Ladies and Gentlemen

Good morning!

I am happy to join you this morning on behalf of the U.S. Embassy Manila’s United States Agency for International Development (USAID) to formally launch our new partnership through the $60 million Credit Facility.

In the Philippines, about 99% of all firms are micro, small, and medium enterprises. Supporting the country’s SMEs is crucial to igniting and sustaining inclusive economic growth in the Philippines. SMEs contribute to the generation of wealth, business opportunities and employment in rural and urban areas. This vital economic sector also contributes to a dynamic supply of ideas, skills and innovation needed to propel the country’s development.

However, despite a banking system awash with liquidity, access to financing continues to be an important challenge faced by SMEs for many reasons. A number of issues in SME financing continue to dampen credit and investment flow to this sector. Among others, these include lack of risk sharing, high transaction costs, and borrowers’ inability to put up collateral.

This credit facility will address the problem of lack of risk sharing and the borrower’s inability to put up collateral.

In September 2012, USAID introduced the credit facility partnering with Bank of the Philippine Islands (BPI) and BPI Family Bank. We are pleased that our partners, who are represented here today, have been using the facility to more actively make credit available to SMEs to help stimulate development in the targeted sectors.

As you know, the credit facility, which will be available to our partner banks for 10 years through September 25, 2023, is intended to encourage lending to businesses, predominantly small and medium enterprises (SMEs). Consistent with USAID’s objectives under our Cities Development Initiative, this credit facility is designed to focus on second-tier cities outside of major urban cores where credit is more accessible.

This credit facility is among the U.S. Government’s activities that promote broad-based and inclusive growth in the Philippines under the bilateral Partnership for Growth (PFG). One of the major objectives of the PFG is to foster a more open and competitive business environment so that growth will be enjoyed by ALL Filipinos.

With expanded access to capital, entrepreneurs can improve and expand their businesses. More importantly, this increased access to credit will encourage the creation of more businesses that translate to more income and employment opportunities for Filipinos.

Take the case of the Bukidnon Pharmaceutical Multipurpose Cooperative (BUPHARCO). A cooperative involved in the manufacturing and distribution of medicines , BUPHARCO is the first pharmaceutical cooperative in the Philippines and has been aggressive in its efforts to compete with larger retailers in Bukidnon . In 2013, the cooperative decided to expand with the construction of a three-storey commercial building that will serve as the main administration office of the cooperative. Through the credit facility, BUPHARCO was granted a loan of Php15 million for the construction of the building.

It is our hope that our new partners will likewise find the guarantee facility a useful tool that will help you expand your current portfolio caps and allow you to increase lending to businesses, particularly SMEs engaged in productive activities in the targeted regions.

USAID, through its Advancing Philippine Competitiveness (COMPETE) activity, will also assist partner banks in identifying and capacitating SMEs who may be eligible for guarantee coverage under the credit facility. We hope that you will take advantage of this additional support and work with the COMPETE Team in identifying potential SME sectors and borrowers in your business area coverage.

Through this agreement, we look forward to greater cooperation between USAID and the partner banks in order to assist SMEs like BUPHARCO to scale up and be more competitive.

Maraming salamat po!

Issuing Country