By Genalyn Kabiling
Filipinos can use other personal properties such as inventory and equipment as collateral for bank loans under a new law signed President Duterte.
Republic Act No. 11057, also known as the Personal Property Security Act, aims to give micro, small and medium enterprises (MSMEs) better access to financing.
The new law, signed by the President last August 17, is titled an “Act strengthening the secured transactions legal framework in the Philippines, which shall provide the creation, perfection and determination of priority, establishment and centralized notice registry and enforcement of security interests in the personal property.”
“It is the policy of the State to promote economic activity by increasing access to least cost credit, particularly for micro, small and medium enterprises (MSMEs) by establishing a unified and modern legal framework,” the law read.
The new law expands the list of assets acceptable to banks and other financial institutions as collateral.
It said a description of collateral shall be considered sufficient whether it is specific or general if it reasonably identifies the collateral. “A description such as ‘all personal property,’ ‘all equipment,’ ‘all inventory,’ or ‘all personal property within a generic category’ of the grantor is sufficient,” the law read.
At present, some financial institutions prefer land and other real property assets as collateral that make it hard for small entrepreneurs to access loans.
To reduce the risk posed by accepting movable collaterals, the new law also mandates the establishment of a electronic national registry with the Land Registration Authority (LRA).
Senator Bam Aquino, author of Sente Bill No. 1459, earlier said the measure would “broaden the utilization of ‘movable assets,’ like bank accounts, accounts receivable, inventory, equipment, vehicles, agricultural products, and even intellectual property rights,” to provide better access to loans.
Aquino said the registry, which would contain information on personal properties registered as collateral, would help banks to lend to MSMEs and help hasten the loan application process.