Personal Property Security Act

Sen. Bam: Equipment, livestock and other personal property now OK as bank loan collateral

Filipinos will soon be able to use their personal properties, and not just land titles, as collateral for bank loans, according to Sen. Bam Aquino.

Sen. Bam said that President Duterte signed on Aug. 17 Republic Act 11057 or Personal Property Security Act, which he pushed in the Senate as principal author and co-sponsor.

With the law, Sen. Bam said micro, small and medium enterprises (MSMEs) will have better access to capital to grow their business since they’ll be allowed to use personal properties, like inventory and equipment, as collateral for loans.

“Sa batas na ito, mabibigyan na ang ating mga kababayan ng mas maraming paraan para makakuha ng pautang na maaari nilang gamitin para makapagsimula o di kaya’y magpalawak ng negosyo,” said Sen. Bam.

 “Sa tulong ng batas na ito, umaasa tayo na mas marami pang Pilipino ang makakapagsimula ng negosyo bilang pagkukunan ng ikabubuhay,” added Sen. Bam.

Usually, banks and other financial institutions prefer to immovable assets, like land, as collateral for loans. With this law, equipment, inventory, livestock, motor vehicles and receivables will now be accepted as collateral, creating a healthier loan environment for both MSMEs and banking institutions.

The law also provides safeguards to reduce the risk involved in accepting movable assets.

“This just one step towards inclusive finance in the Philippines. Tuloy pa rin ang aming pagtrabaho sa mga reporma para sa mga maliliit na negosyanteng Pilipino,” said Sen. Bam.

A known advocate of entrepreneurship and MSME development as a source of livelihood for poor Filipinos, Sen. Bam passed several laws to support the sector, including the Go Negosyo Act, Youth Entrepreneurship Act, Philippine Competition Act, Foreign Ships Co-Loading, Microfinance NGOs Act and the Credit Surety Fund Cooperative Act.

The Personal Property Security Act is Sen. Bam’s 27th law in his five years as senator.

Senate passes measure to improve access to financing for small business

The measure that will give micro, small and medium enterprises (MSMEs) better access to financing was approved by the Senate on third and final reading, according to its principal author, Sen. Bam Aquino.

Sen. Bam Senate Bill No. 1459 or the Personal Property Security Act hurdled the Senate on third and final reading via an overwhelming 21-0 vote. The House has already passed its version on 3rd and final reading.

“Makakatulong ito sa mga maliliit na negosyo na nahihirapan makakuha ng mga loan sa bangko. Suportahan natin ang paglago ng maliliit na negosyo na kabhuayan ng mga pamilyang Pilipino,” said Sen. Bam.

If passed into law, Sen. Bam said MSMEs will be allowed to use other properties, such as inventory and equipment, as collateral for loans. Usually, Sen. Bam said banks and other financial institutions prefer immovable assets like land.

“Sa panukalang ito, mas madali at mas ligtas para sa mga bangko ang magpautang sa mga maliliit na negosyo,” Sen. Bam pointed out, adding that banks are more likely to offer loans to our small businesses, thus helping them grow.

According to Sen. Bam, a former social entrepreneur, a successful business is a way out of poverty for many Filipinos.

“Ang pagpasa sa Personal Property Security Act ay pagsuporta sa mga maliliit na negosyo at pamilyang Pilipino,” Sen. Bam stressed.

Sen. Bam explained that assets of MSMEs are mostly personal in nature, including equipment, inventory, livestock, motor vehicles and receivables, which makes it difficult for them to meet bank requirements to get loan approvals.

With this measure, MSMEs can use these personal properties and assets as collateral in acquiring loans from banks and other financial institutions.

During the technical working group (TWG) conducted by the Committee on Banks, different financial associations and concerned government agencies have supported the passage of the measure.

Sen. Bam said the proposal can provide a win-win situation for both MSMEs and banks with a healthier loan environment.

Countries like China, Vietnam and Mexico have passed a similar measure and helped more than one million entrepreneurs and unlocked value amounting to $4 billion.

As an advocate of small business development, Sen. Bam passed several laws to support the sector, including the Go Negosyo Act, Youth Entrepreneurship Act, Philippine Competition Act, Foreign Ships Co-Loading, Microfinance NGOs Act and the Credit Surety Fund Cooperative Act.

CO-SPONSORSHIP SPEECH: SENATE BILL NO. 1459 OR THE PERSONAL PROPERTY SECURITY ACT

SENATE BILL NO. 1459 UNDER COMMITTEE REPORT NO. 86

PERSONAL PROPERTY SECURITY ACT

 

Senator Paolo Benigno “Bam” A. Aquino IV
17th Congress, Senate of the Philippines
Sponsorship Speech, May 22, 2016

 

Good afternoon, Mr. President and esteemed colleagues! Mga kaibigan at mga kababayan, magandang hapon sa ating lahat.

 It is an honor, Mr. President, to sponsor Senate Bill No. 354, under Committee Report No. 86, entitled Strengthening The Secured Transactions Legal Framework In The Philippines, Which Shall Provide For The Creation, Perfection, Determination Of Priority, Establishment Of A Centralized Notice Registry, And Enforcement Of Security Interests In Personal Property, And For Other Purposes – it is otherwise known as the Personal Property Security Act.

But before I delve into the bill, Mr. President, I would like to share some trivia about basketball superstar, LeBron James, in the wake of today’s loss.

Alam niyo ba, Mr. President, na noong high school pa lang si LeBron, nais siyang regaluhan ng ina ng mamahaling sasakyan na Hummer para sa kanyang ika-18 taong kaarawan.

Ang problema? Ang Hummer ay nagkakahalaga ng $50,000 at walang pambili si Mommy Gloria.

Dahil walang pambili, lumapit si Gloria James sa isang bangko sa Ohio at nangutang.

 Mr. President, esteemed colleagues, ang ginamit niyang collateral ay ang future earnings ng kaniyang anak kung siya’y maging NBA player!

 Kapag napasok na raw si LeBron sa NBA, milyun-milyon ang kikitain niya.

 Ang kagulat-gulat dito, tinanggap ng bangko ang collateral!

Ang tinignan nila ay ang talento ni LeBron at ang posibilidad na ito’y magiging NBA player. 

Ang ending ay win-win-win! Gloria James got her loan. LeBron got a Hummer. And the bank was paid back with interest.

 Mr. President, this would not have happened in the Philippines.

 Currently, it is land and real property that banks consider to be the most favored form of collateral – and this is not just because of its value.

 Financial institutions see land and real estate as low-risk because it is easy to ascertain that the piece of land has not been used as collateral for any other loan.

 But with lenders fixated on real property, they miss out on the opportunity to provide loans to a broader groups of MSMEs and farmers.

Consequently, many of our countrymen have a very difficult time accessing loans from banks and result to borrowing from friends and family or, worse, resorting to informal loans like the 5/6 system with exorbitant interest rates.

This is particularly heartbreaking for micro, small and medium enterprises, Mr. President.

Friends and colleagues, sa aking pag-iikot, ang laging tanong sa akin ng mga nagnenegosyo ay, “Sen. Bam, saan po ako makaka-utang na mababa lang ang interes?”

Sayang, Mr. President!

Many of our small businesses have so much potential – potential for success and potential to lift families out of poverty.

 Mr. President, we need to address our MSME’s lack of access to loans.

The Personal Property Security Act is one of our remedies.

This measure will encourage financial institutions to lend to more Filipinos by, one, expanding what banks consider as acceptable collateral and, two, reducing the risks associated to movable collaterals.

 First, this measure will broaden the utilization of movable assets like bank accounts, accounts receivable, inventory, equipment, vehicles, agricultural products, and even intellectual property rights.

Imagine a farmer using his livestock or a craftsman using a contract for a bulk order as collateral for a loan.

But, Mr. President, we already recognize a diverse set of movable assets acceptable as collateral for loan purposes, like motor vehicles, equipment, and standing crops, such as rice or sugarcane.

 The major challenge of this measure, and those tasked to implement it would be to reduce the risk of accepting movable collaterals through an efficient, comprehensive, and centralized registry.

The Personal Property Security Act pursues the design, establishment, and operation of a unified, centralized, online notice-based national collateral registry to assure banks that the collateral being submitted has not been utilized for another loan.

Mr. President, this is not new. In other countries, a simple but effective registry have boosted financing for their local entrepreneurs.

In Mexico, the creation of a national Accounts Receivable Finance Platform by the government’s development bank supported at least 130,000 SMEs through accounts receivable financing.

In China, loans with movable assets as collateral now amount to 3 trillion US dollars per year.

 Mr. President, access to a centralized repository of information for movable assets will encourage financial institutions to lend to our MSMEs and may even speed up the loan application process.

With the Personal Property Security, our financial institutions increase their income by issuing more loans, Filipinos will have better access to lower-interest loans, and more Filipino families can grow their business and livelihood for a brighter future.

 Mr. President, the Personal Property Security Act seeks to replicate this win-win-win scenario for the James family in Ohio – not to help parents purchase luxury vehicles for their children – but to help parents provide a better life, better future for their children through sustained livelihood.

 With access to financing, a sari-sari store can grow into a convenience store and Pera Padala center.

 With access to financing, a farmer or agri-preneur can purchase equipment to boost production and develop his produce.

 With access to financing, a small bakery can endeavor to supply to a string of coffee shops and supermarkets.

Mr. President, aking mga kagalang-galang na kapwa senador, ipasa po natin ang Secured Transactions Act at suportahan po natin ang mga maliliit na negosyanteng Pilipino na magtagumpay at umasenso ang buhay!

Maraming salamat po!

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