International Finance Corp., the investment arm of the World Bank group, said Friday it will lend up to P700 million to micro, small, and medium enterprises, micro-finance borrowers and women’s groups.
IFC said in a statement it would course the amount through the CARD Bank Inc and CARD SME Bank Inc. to support the development of SMES and MSMEs in rural areas.
CARD Bank will receive P540 million from the lending facility to expand its micro-finance client base and establish new branches, especially in rural areas, while CARD SME Bank will get a maximum of P160 million for lending to MSMEs. The IFC loan will mature in seven years.
IFC said almost three-quarters of the poor in the country live in rural areas. Poverty among farmers is three times higher than in other sectors.
“Without access to formal financial institutions, a majority of the population borrows from informal sources. Increasing MSME access to financing will enable the sector to create jobs, while affordable micro-finance will better meet the capital needs of the poor,” IFC said.
“CARD Bank and CARD SME Bank were founded to help poor people work themselves out of poverty,” Jaime Aristotle B. Alip, chairman of both banks, said. “We are privileged to have IFC as a long-time partner in our mission.”
IFC has provided advisory services to CARD Bank since 2007, when it helped develop an SME lending platform, which CARD SME Bank implemented in 2009.
In 2013, IFC helped CARD SME Bank design an agri-finance strategy, which was expanded in early 2015 to reach more regions and farmers. In 2014, IFC assisted CARD-Pioneer Micro-Insurance develop insurance products to protect farmers from typhoon risks.
“IFC’s experience worldwide provides evidence that making loans more affordable to people and MSMEs through formal financial institutions quickens the pace at which people are lifted out of poverty,” said IFC Financial Institutions Group global director Marcos Brujis.
IFC had so far invested about $140 million in the Philippines from August to November this year, country manager Jane Xu said.
She said IFC was not yet close to reaching its exposure limit in the Philippines
“Well, we do have a country exposure limit but Philippines is far away from the limit... We have project exposure limit but it’s more like a percentage of total project financing. We don’t really have an absolute number,” Xu said.
“... I think so far we have committed around $140 million dollars in terms of investment. But normally, in the second half of the year we see more [investments] because it’s just the cycle of business,” she added.
IFC said the improved credit information would provide sufficient information and encourage banks to lend to small borrowers with good credit histories.
IFC is also promoting policy reforms on secured transactions, which allows banks to accept movable assets like accounts receivables, inventory, equipment and intellectual property as collateral.