LAST WEEK the country hosted the 5th Financial Infrastructure Development Network (FIDN) Conference at the Philippine International Convention Center with the theme of “Leveraging Movable Asset and Warehouse Receipt Finance to Support MSMEs and Agri-Businesses.”

FIDN is a collaborative effort among the 21 APEC member economies, the APEC Business Advisory Council (ABAC), the IFC World Bank Group, the SME Finance Forum, and the Organization for Economic Cooperation and Development. This initiative is an integral part of the APEC finance ministers’ Cebu Action Plan, formulated in 2015 when the Philippines was host of the APEC Summit.

Finance Undersecretary Gil Beltran led the opening session on how the credit infrastructure reforms promote MSMEs and agri-finance. Among the speakers and panelists were ABAC Chair and Presidential Adviser on Entrepreneurship Jose Concepcion III; Securities and Exchange Commission Chair Teresita Herbosa; Michael Turner of US-based Policy and Economic Research Council; Julius Caesar Parrenas of Japan’s Mizuho Bank; Zhijian Liu of China’s JD Finance; and Kheng Leong Lee of FCI Singapore.

Yuan Xu, IFC’s country manager for the Philippines, urged lawmakers to pass Senate Bill (SB) 1459, otherwise known as the Personal Property Security Act. “If the Philippines truly wants to increase MSMEs’ access to finance and increase its competitiveness in doing business, this bill needs to be prioritized so that a sound institutional framework will be in place to give financial institutions more confidence to lend to MSMEs,” she said, citing the example of China where the implementation of a comprehensive secured transactions reform mobilized $3 trillion to MSMEs initially.

MSMEs and agriculture are critical in the Philippines’ drive to maintain strong economic growth and uplift millions who live in poverty.  Both MSMEs and agriculture contribute substantially to job creation at 62.8% and 29% of the country’s employment, respectively. In 2014, MSMEs comprised 99.6% of all Philippine businesses and contributed to 35% of our gross domestic product.

Despite these compelling statistics, the enabling environment for MSMEs and agriculture to thrive remains weak. The challenge for MSMEs is to ensure that microenterprises grow into small businesses, which eventually develop into medium-sized enterprises. For agri-businesses, the challenge is to sustain at least a third of the Philippine population who rely on agriculture as a source of livelihood.We must provide both MSMEs and farmers with a stronger enabling environment so they survive, grow, and expand to create better lives for their families and increase job opportunities for other Filipinos. Crucial to the growth of MSMEs and agriculture is access to financing at reasonable rates.

As early as 1906, the Philippines already had in place a secured transactions legal environment under the Chattel Mortgage Law as well as a document-based movable collateral registry operated by the Register of Deeds. The current legal regime recognizes a diverse set of movable assets acceptable as the following collateral for loan purposes: standing crops like rice, sugarcane, and other agri-aqua commodities; warehouse receipts or quedans; inventories, accounts receivable, equipment, intellectual property.

However, these assets are not being fully utilized nor preferred by banks as loan collateral, except motor vehicles, which leaves the law ineffective to increase trade or facilitate access to finance for MSMEs and farmers. This underscores the need to modernize the laws governing movable asset lending in the Philippines.

SB 1459 can effectively facilitate the use of movable assets for MSMEs and promote their growth while increasing their contribution to job creation and economic growth. It seeks to strengthen the legal framework of personal property security in the Philippines and advocates the establishment of a centralized collateral registry as a key component of operationalizing secured transactions reform.

IFC senior financial sector specialist Gay Santos pointed out that the passage of this bill could help boost the Philippines’ ranking in ease of doing business. She said it aligns well with the Duterte administration’s 10-point socioeconomic agenda on rural finance and MSMEs under the Philippine Development Plan 2017-2022.

Only through dialogue and active communication between all relevant stakeholders can farmers and MSMEs gain much needed funds, which would then lead to financial inclusion. Several APEC member economies are making concrete progress in modernizing their financial infrastructure, and the Philippines has no reason to lag behind.

J. Albert Gamboa is Chief Financial Officer of the Asian Center for Legal Excellence and serves as Co-Chairman of the FINEX Media Affairs Committee.