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Academe, private banks, government join SMEDSEP to intensify access of SMEs to credit

Martina Vahlhaus, SMEDSEP Manager, GTZ and UPD Chancellor Sergio S. Cao
(center) at the signing of the Memorandum of Agreement between the German
Technical Corporation – Small and Medium Enterprise Development for Sustainable
Employment Program (SMEDSEP) and the Institute of Small Scale Industries (ISSI).
Witnesses to the signing were (from left) Sonia Tiong-Aquino, ISSI Deputy Director;
Dante O. Portula, MSME Finance Adviser; Ruperto Alonzo, ISSI Director and
Benel Lagua, President and COO, SBGFC.

(German Technical Cooperation, June 6, 2007)--The University of the Philippines, through the Institute for Small Scale Industries (UP-ISSI), recently signed an agreement with the German Technical Corporation – Small and Medium Enterprise Development for Sustainable Employment Program (GTZ-SMEDSEP) to institutionalize small- and medium-sized enterprise (SME) finance trainings among rural banks and thrift banks in the Philippines. Supporting this initiative to further intensify lending to the SMEs are the Small Business Corporation (SBC), the Rural Bankers Association of the Philippines (RBAP) and the Chamber of Thrift Banks (CTB).

This joining of forces of the German government and the Philippine stakeholders is a manifestation of the commitment to further contribute to the solution on the lack of SME access to credit. This is consistent with the effort of the Philippine government under the SME Development Plan.

Under this partnership, SMEDSEP will hand over to the UP-ISSI the technologies on the provision of SME credit by the rural banks and thrift banks to the SME sector. A particular technology at hand is the use of an information-based lending approach as a substitute to the traditional collateral-based lending of banks. This technology is expected to encourage more banks to intensify lending to SMEs on the basis of business viability, thereby making collateral requirements only a secondary consideration in providing loans.

SMEDSEP, on the process of handing over technologies, shall conduct a series of trainings to capacitate a pool of accredited trainers. The university is expected to commence the rollout of the training program by September of this year. Visayan banks, being the program area of SMEDSEP, shall be the main target of the training program. Other banks in the country shall also be served as the capacity of UP-ISSI increases.

The SBC, for its part, is ready to support the banks for more load funds. Aside from its regular loan products, the SBC is also managing a wholesale fund of the German Development Bank (KfW) especially catering to long-term loans of SMEs.

The RBAP and CTB shall also help the UP-ISSI in the marketing of the credit technologies to its member-banks.

At the later stage of implementing this fee-based training program, the UP-ISSI will also come out with coaching services to assist the banks in the implementation of these credit technologies.

As of this writing, an international SME finance expert commissioned by SMEDSEP is providing technical assistance to the university in launching the training of trainers and is also planning for the initial rollout of the trainings to the banks. More short-term experts shall be provided by SMEDSEP as the partnership progresses.

SMEDSEP, a development cooperation project between the Republic of the Philippines and the Federal Republic of Germany, aims to improve the business and investment climate for SMEs in the Philippines, especially in the Visayas. It contributes to the efforts of the Philippine government in improving the framework conditions for private sector development in the country. SMEDSEP is implemented in partnership with the Department of Trade and Industry (DTI) at the national, regional and provincial levels and the German Technical Cooperation (GTZ).

The GTZ is an international cooperation enterprise for sustainable development with worldwide operations owned by the German government. For 30 years it has been providing viable, forward-looking solutions for political, economic, ecological and social development in a globalized world. GTZ supports complex reform and change processes, often working under difficult conditions. The joint projects and programs are designed as results and impact oriented with the German contribution provided by the German Federal Ministry for Economic Cooperation and Development.