Tight credit conditions are impacting negatively on exporters in the Philippines, who, prior to the global financial crisis, relied on letters of credit (L/Cs), according to a recent World Bank report.

The Philippines Quarterly Update, published in July 2009, says the recession has had a particularly sharp impact on some specific sectors.

Changed conditions

Prior to the crisis, exporters - especially multinationals - simply maintained open accounts with their foreign counterparts, while smaller exporters tended to rely on L/Cs opened by their customers, says the report.

It says that now, as a result of the financial crisis, all banks have become more selective with respect to industries that are severely affected by the crisis, or whose long-term prospects are not particularly positive.

Sectors affected

Traders finding it harder to find export credit according to the World Bank include sellers of garments, furniture, electronic goods and automotive parts, as well as exporters unable to provide collateral.

Banks have also become more discerning about the type of companies they will support. Small- and medium-sized enterprises - especially those not belonging to a conglomerate - are particularly affected.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.