The government of the Philippines has thrown a lifeline to exporters struggling to obtain credit to fulfil foreign orders in the face of widely fluctuating foreign exchange rate. Instead of having to put up assets as collateral, exporters are only required to put up purchase orders or confirmed letters of credit under a special credit scheme operated by the Small Business Guarantee Loan Fund and the Land Bank of the Philippines.

The scheme has proved popular with the small- and medium-sized exporters eligible for support at a time when commercial banks with large non-performing loan books are reluctant to provide credit.

Roll-out to other exporting areas

The scheme emerged as a result of pressure from the Export Development Council, the Philippine Exporters Confederation and the Foreign Buyers Association of the Philippines (FBAP) for a mechanism that would provide liquidity for Manila-based exporters to continue international trading activities.

The success of the scheme is attributed to rigorous checks undertaken by FBAP to determine that orders are genuine and that firms utilise credit extended under the scheme for approved purposes.

Around US$1.4 million has already been disbursed to exporters in the metropolitan region of Manila. Officials report a 96.5 per cent repayment rate and are considering rolling out the scheme to other areas with export-oriented industries.

The views expressed in this article are those of the author and not necessarily those of ICC or of the other partners in DC-PRO.