The Bangko Sentral ng Pilipinas (BSP), with the support of the World Bank’s International Finance Corp. (IFC), renewed calls for the immediate passage of the Warehouse Receipts (WR) Financing bill to extend borrowers especially micro, small and medium enterprises (MSMEs) and the agriculture sector with more options in terms of loan collateral.
The bill aims to strengthen and modernize the Warehouse Receipts Law of 1912 by establishing a central electronic registry where goods and products can be deposited in exchange for a warehouse receipt that can easily be traded, bartered or sold in order to obtain credit, said the BSP.
“This can help boost the confidence of banks and other financial institutions on the viability of warehouse receipts as loan collateral,” it added.
The central bank also said on Monday, Nov. 20, that “based on the experience of other countries, a well-functioning WR system can help raise farmer income and access to credit, reduce post-harvest losses, improve stability of market prices, and increase food security.”
“WR financing is also a priority initiative for micro, small and medium enterprises under the National Strategy for Financial Inclusion 2022-2028,” said the BSP.
In a statement, the central bank said it has recently conducted a roundtable discussion (RTD) with the IFC to rally its support for the immediate passage WR financing proposed bill.
The RTD was prompted by a House of Representatives’ approval last May 29, 2023 of “An Act Providing for the Revised Warehouse Receipts Law of the Philippines,” which was transmitted to the Senate on May 30.
More than 40 representatives from banking associations, government agencies and the private sector attended the BSP-led RTD last Oct. 4.
According to the BSP, the talks not only centered on the legislative process for the WR bill, but the participants also exchanged knowledge and information on the WR finance practice in developed markets, as well as “the needs and digitalization of the agriculture sector and the next steps for the country’s lenders and policymakers to move forward with WR finance.”
The BSP has been actively promoting WR finance especially for agricultural commodities.
The proposed changes to the 1912 Warehouse Receipts Law, will address the development needs of the agriculture and MSME sectors. Warehouse receipts are used as proof of ownership of certain goods, and these are transferable and can be used as collateral.
An updated law will also expand access to credit by professionalizing the warehousing activity through the accreditation of warehouses and warehouse operators and establishment of an electronic warehouse receipts registry, said the BSP.
Primarily, an amended warehouse receipts law will also pave the way for the acceptance of warehouse receipts as credible collateral for bank loans.
The BSP has been trying to generate support for the passage of the proposed legislation since last year.
It continues to argue that while MSMEs and agriculture account for a large part of total employment in the country, they remain among the most vulnerable segments of the population. Households headed by farmers and fisherfolk ranked among the poorest and the least banked, with only three in 10 owning formal transaction accounts, said the BSP.