In modern Filipino practice, there has been some revitalization of the lending process: a new credit system is being formed, new credit relations are created between the participants of the credit transaction, reflecting the interests of both parties, new forms of lending are emerging to reduce credit risks, the arsenal of bank loans is updated, the technology of their issuance and repayment is improved. Not only the lending procedures change, the conceptual apparatus itself is updated.
The industry principle of lending replaces to some extent universal schemes for the issuance and repayment of loans. Notions such as:
- “lending for seasonal and off-season productions”,
- “lending for commodity turnover”, “lending on equity basis”,
- “lending to excess inventories and costs,”
etc. have disappeared from practice.
Couple words on short term crediting of enterprises
Some changes occur in the dynamics of credit investments. In the period from 1980 to 1990, there was a tendency to a significant reduction in loan volumes. Recently, in connection with a certain revival of production, credits are beginning to increase in both absolute and relative terms.
The growth of banks’ credit investments in the real economy, including the lengthening of lending terms, is still hampered by a shortage of medium and long-term resources of credit institutions. Long-term liabilities of banks (with a maturity of more than 1 year) in 2001 accounted for approximately 7% of total liabilities of the banking sector. This figure is 1% less compared to the pre-crisis period (as of July 1, 1998). An important role was played by the size of the payment for the loan, which was prohibitively high.
Given the large number of unprofitable production and lack of profitability, we can say that the payment for a loan, along with the continuing level of risk, continues to be a serious obstacle to the development of credit investments of commercial banks in the real economy.
What are the main tendencies in the field of crediting?
Since 1999, there has been a tendency to reduce non-payment of enterprises to banks. Over the last three years, the share of overdue loans has decreased by more than 3.5-3.7 times. This was the result of a certain improvement in the structure of working capital of enterprises, a decrease in the diversion of current assets into buyers ’debt and nonpayments, an increase in the real solvency of Russian enterprises (the ratio of cash in current assets to overdue debts to suppliers).
However, the prevailing share of overdue payments on loans is still far from an acceptable norm, and is still unstable due to the persistence of noticeable problems in the economy and finance of enterprises. Although the share of unprofitable enterprises decreased to 37.2% by August 2001, it still remains at a high level. Substantial sectoral differentiation of financial results remains, which hinders the development of investments in some industries and enterprises, and hence the pace of economic development. It was not by chance that during the first nine months of 2001, the share of overdue debts in all loans not only did not decrease, but even slightly increased, reaching 3.2%.
The reasons for non-payment are not only in the economy, but also within the banking system. The credit risk assessment at the early and subsequent stages of the credit process, the quality of the loan portfolio of a number of banks are not up to par. The modern organization of lending contains a number of noticeable flaws.