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Salceda to BSP: Boost borrower confidence amid economic slowdown

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The government should boost “borrower confidence” to increase credit in the fight against Covid-induced economic slowdown, according to the House tax panel chairman.

Albay Rep. Joey Sarte Salceda asked the Bangko Sentral ng Pilipinas (BSP) and the economic team to consider a five-point plan for to improve credit access and boost what he calls “borrower confidence,” in a 17-page white paper.

Salceda said in his report titled “Let Businesses Borrow” that the government’s credit programs will work only when there is interest and intent among the public to borrow.

“The right macroeconomic decisions are being made on credit expansion,” Salceda said, referring to the P1.4 trillion in liquidity released by BSP policy actions, and the P561 billion the House plans to release in credit through its stimulus proposal.

“But their results will come from their convergence with millions of microeconomic decisions. Credit stimulus works only when people actually borrow,” Salceda wrote in his report.

“Simple lang ang analysis ng rate cuts: in theory, these cuts incentivize people to borrow. In practice, people should borrow for the cuts to work,” he said.

“That’s why it is absolutely important that we work on ways to make credit actually available to the Filipino people and to small businesses,” he added.

Salceda laid out a 5-point strategy:

“First, we need to remove information asymmetry. That’s what’s keeping most people from borrowing: They don’t know they can borrow more cheaply. I suggest a dynamic master list of all cheap loans available in public and private financial institutions,” he said.

“Second, we get more people included in the formal financial system. That means speeding up the implementation of the National ID system, and improving financial literacy and education,” he added.

“Third, we need to digitize our payments and transfers system. The BSP has already accelerated this process, but not all banks have caught up,” Salceda said.

“Fourth, we make risk assessment more sensible,” he said.

“Finally, we will push for credit mediation and forgiveness strategies. I am still pushing for the condonation of agrarian reform loans, so that farmers can start anew with the financial system,” Salceda said.

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