Debt Watcher Report
Philippines credit rated positive, benefits SMEs in getting credit.
In recent months, Philippines has seen improvements in its infrastructure development and has had immense economic growth. Its external payments position has improved significantly and efforts are being undertaken for tax reforms - all of this is happening under the Duterte administration. Based on these indicators, one of Malaysia’s credit rating agency, RAM Rating Services Bhd (RRS) declared the Philippines to have a positive credit rating – this is an improvement from stable in previous periods.
RRS stated that its results are based on the performance of the country even after the change in administration only 3 months ago. The GDP performance has been better than expected in 2016 and foreign investors are taking interest in the country. Everything seems to be pointing towards a growing economic outlook.
A better credit rating means that investors and lenders would be keener in starting projects in the country, compared with other countries that have a lower credit rating. At the moment, Philippines has been rated A1, which is just 4 grades less than the highest (AAA).
Generally, a country’s sovereign credit rating affects the credit rating of its bonds as well as its domestic banks that, consequently, impact on its borrowing cost with international financial institutions. The Philippines favourable credit rating means that it would easier for SMEs to obtain funding. Credit will be available at a lower rate. Savings in interest rates may be as large as 1.25% which may lead to up to 20% increase in investor returns for SMEs.
SMEs can reap even more benefits by obtaining a credit rating for themselves through CreditBPO. With a good rating, lenders are comfortable in increasing credit limits and SMEs are able to obtain larger sums of loans.
CreditBPO uses advanced technological tools to rate an organization which provides owners with insights into why they have a certain score and a list of actionable points to increase said rating. Even if an organization does not immediately need credit, credit rating acts as a monitoring metric and improvements can be made so that whenever credit is required, it would be readily available.
Managing a country’s credit rating is not an easy feat. However, it’s not an isolated effort. All of the country’s economic units including SMEs, corporates, government and investors work their part to achieve and maintain a positive sovereign rating for the Philippines. In return, everyone gets to see its benefits in terms of easier, larger amounts of credit and investment. CreditBPO’s mission is to support this initiative, especially SME access to credit, through affordable financial technology with its innovative CreditBPO Rating Report®.