Philippine bank launches $1.9b SME fund with Acudeen, others

Philippine development bank Rizal Commercial Banking Corporation (RCBC), together with local fintech firm Acudeen and other fintech entities, has launched an opportunity fund of 100 billion pesos (US$1.9 billion) that seeks to support the local agriculture sector and micro, small, and medium-sized enterprises (MSMEs).

Photo credit: RCBC

The launch of the fund follows the passage of the Personal Property Security Act in August 2018, which made movable assets – such as crops, farm equipment, warehouse receipts, bank accounts, and even future harvest – eligible collateral for loan applications.

According to a statement, the fund will provide MSMEs with alternative funding for capital and operational requirements through the sale and purchase of invoice receivables and other movable assets registered by invoice receipts, certificates, or contracts as defined by the law.

The pilot will initially cover Acudeen, an online platform that allows businesses to sell their receivables to the startup’s network of funders.

To ensure the quality of underwriting and receivables assets, the fund will be covered by a sovereign guarantee system through government-linked entity PhilGuarantee.

Access to finance has been a challenge for smaller-scale enterprises in the Philippines, as banks require hard collateral that such borrowers may not have.

The initiative then hopes to address the MSME funding gap in the country, which is worth roughly US$2 billion as of 2017, according to data from IFC Enterprise Finance Group.

Agriculture and MSMEs account for 99.6% of the country’s enterprises and generate 61.6% of employment, according to the statement. However, MSMEs only contribute 3.32% of the country’s GDP.

“The next immediate step is clear: to get the collateral registry operational as soon as possible. Then, quickly build up a real movable asset finance market with a diversified range of products and with as many players as possible from both banks and non-banks,” said RCBC executive vice president and chief innovation and inclusion officer Lito Villanueva.

Stakeholders expect that the initiative will help local fintech companies grow, provide support to businesses through technology, and jump-start the banking and fintech industries in creating new markets.