Mandatory Credit Allocation and Government Guarantee in the Philippines
Mandatory credit allocation is a policy intervention to pressure banks to lend to certain sectors that otherwise unfettered finance would not give access to. While some would argue that mandatory credit allocation results in sub-optimal allocation of resources, it has been shown that such interventi...
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Archīum Ateneo
2024
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ph-ateneo-arc.economics-faculty-pubs-12192024-07-16T08:27:10Z Mandatory Credit Allocation and Government Guarantee in the Philippines Dumlao, Luis F Mandatory credit allocation is a policy intervention to pressure banks to lend to certain sectors that otherwise unfettered finance would not give access to. While some would argue that mandatory credit allocation results in sub-optimal allocation of resources, it has been shown that such intervention results is socially desirable outcome. However, mandatory credit allocation should not be the responsibility of banks only, it must be supported with government guarantees. In the Philippines, there are three sectors in which mandatory credit allocation is given namely the agriculture sector, the micro, small and medium enterprises or MSME sector, and enterprises involved in innovation. In agriculture, the credit allocation is too big and therefore should be reviewed, in MSME too small and therefore should also be reviewed, and in innovation difficult to identify and impractical to implement. In all of these, the banks are left to shoulder the respective mission with practically no government support. Banks either comply or pay the penalty. 2024-04-30T07:00:00Z text application/pdf https://archium.ateneo.edu/economics-faculty-pubs/217 https://archium.ateneo.edu/context/economics-faculty-pubs/article/1219/viewcontent/4322_48_63.pdf Economics Department Faculty Publications Archīum Ateneo bank lending credit rationing financing agriculture financing innovation financing micro Philippines small and medium enterprises (msme) finance Business Economics Social and Behavioral Sciences |
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bank lending credit rationing financing agriculture financing innovation financing micro Philippines small and medium enterprises (msme) finance Business Economics Social and Behavioral Sciences |
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bank lending credit rationing financing agriculture financing innovation financing micro Philippines small and medium enterprises (msme) finance Business Economics Social and Behavioral Sciences Dumlao, Luis F Mandatory Credit Allocation and Government Guarantee in the Philippines |
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Mandatory credit allocation is a policy intervention to pressure banks to lend to certain sectors that otherwise unfettered finance would not give access to. While some would argue that mandatory credit allocation results in sub-optimal allocation of resources, it has been shown that such intervention results is socially desirable outcome. However, mandatory credit allocation should not be the responsibility of banks only, it must be supported with government guarantees. In the Philippines, there are three sectors in which mandatory credit allocation is given namely the agriculture sector, the micro, small and medium enterprises or MSME sector, and enterprises involved in innovation. In agriculture, the credit allocation is too big and therefore should be reviewed, in MSME too small and therefore should also be reviewed, and in innovation difficult to identify and impractical to implement. In all of these, the banks are left to shoulder the respective mission with practically no government support. Banks either comply or pay the penalty. |
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text |
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Dumlao, Luis F |
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Dumlao, Luis F |
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Dumlao, Luis F |
title |
Mandatory Credit Allocation and Government Guarantee in the Philippines |
title_short |
Mandatory Credit Allocation and Government Guarantee in the Philippines |
title_full |
Mandatory Credit Allocation and Government Guarantee in the Philippines |
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Mandatory Credit Allocation and Government Guarantee in the Philippines |
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Mandatory Credit Allocation and Government Guarantee in the Philippines |
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mandatory credit allocation and government guarantee in the philippines |
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Archīum Ateneo |
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2024 |
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https://archium.ateneo.edu/economics-faculty-pubs/217 https://archium.ateneo.edu/context/economics-faculty-pubs/article/1219/viewcontent/4322_48_63.pdf |
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