New law allows MSMEs to use personal properties as loan collateral

President Rodrigo Duterte has signed into law a measure giving micro, small, and medium enterprises better access to financing by expanding the list of assets acceptable to banks as "collateral" and reducing the risks associated with "movable collaterals.”

Republic Act 11057 or Personal Property Security Act was signed on August 17.

In a post on his Twitter account, the bill's principal author Senator Paolo Benigno Aquino III said the law will allow the use of properties such as inventory and equipment as collateral for loans.

“Sa panukalang ito, maaari nang gamitin ng MSMEs ang kanilang personal na ari-arian (farm animals, crops, machinery, inventory, etc) bilang collateral para makautang sa mga bangko at iba pang financial institutions,” he said.

GOOD NEWS! Naisabatas na ang “Personal Property Security Act".

Sa panukalang ito,maaari nang gamitin ng MSMEs ang kanilang personal na ari-arian (farm animals, crops, machinery, inventory, etc.) bilang collateral para makautang sa mga bangko at iba pang financial institutions. pic.twitter.com/L8yhRqXb49

— Bam Aquino (@bamaquino) August 20, 2018

Aquino earlier said that assets of MSMEs are mostly personal in nature, including equipment, inventory, livestock, motor vehicles and receivables, which make it difficult for them to meet bank requirements to get loan approvals.

To reduce the risk posed by accepting movable collaterals, a comprehensive, centralized, online and notice-based national collateral registry shall be established and administered by the Land Registration Authority (LRA).

The said registry would contain information on personal properties which could be, or have been, registered and used as collateral, in order to “assure banks and lenders that any collateral being submitted has not been utilized for another loan.” — BM, GMA News