Project Title

Workshop on Improving Access to Credit according to International Best Practices 

Project Year

2017   

Project Number

EC 05 2017A 

Project Session

Session 2   

Project Type

Standard 

Project Status

Project in Implementation   
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Project No.

EC 05 2017A 

Project Title

Workshop on Improving Access to Credit according to International Best Practices 

Project Status

Project in Implementation 

Publication (if any)

 

Fund Account

APEC Support Fund 

Sub-fund

ASF: Renewed APEC Agenda on Structural Reform (RAASR) 

Project Year

2017 

Project Session

Session 2 

APEC Funding

149,746 

Co-funding Amount

57,788 

Total Project Value

207,534 

Sponsoring Forum

Economic Committee (EC) 

Topics

Structural Reform 

Committee

Economic Committee (EC) 

Other Fora Involved

 

Other Non-APEC Stakeholders Involved

 

Proposing Economy(ies)

United States 

Co-Sponsoring Economies

Australia; Chile; Hong Kong, China; Indonesia; Mexico; Papua New Guinea; Viet Nam 

Expected Start Date

01/11/2017 

Expected Completion Date

31/12/2018 

Project Proponent Name 1

Mark Walter 

Job Title 1

Deputy Chief of Party 

Organization 1

US-ATAARI 

Postal Address 1

Not Applicable 

Telephone 1

Not Applicable 

Fax 1

Not Applicable 

Email 1

mwalter@nathaninc.com 

Project Proponent Name 2

Mike Dennis 

Job Title 2

Attorney-Adviser 

Organization 2

US Department of State 

Postal Address 2

Not Applicable 

Telephone 2

Not Applicable 

Fax 2

Not Applicable 

Email 2

dennismj@state.gov 

Declaration

Mark Walter, Mike Dennis 

Project Summary

This project aims to promote MSME access to credit by (i) organizing a stand-alone two-day workshop focusing on legal tools for implementation of best practices as well as a capacity building program and (ii) conducting 1-2 economy level capacity building activities.  The workshop will include the results from the study “Assessing APEC Getting Credit Frameworks according to International Best Practices” that was presented to member economies at EC1.  Participating economies will be offered individualized consultations concerning the findings of the study and how it may be used as a springboard for reforms or further modernization.  Following the workshop, capacity building activities for specific economies will be offered to support reform efforts in line with recommendations from the study.

This activity aims to help member economies both achieve their Getting Credit/Ease of Doing Business targets and to implement their RAASR IAPs.  In this last regard, Chile, Chinese Taipei, Indonesia, Papua New Guinea, the Philippines, Thailand, and Viet Nam identify access to credit as an area for improvement in their IAP.  The activity will rely on critical features of a modern secured transactions framework based on international standards reflected in the UNCITRAL Model Law on Secured Transactions and the UN Convention on Assignment of Receivables in International Trade.

Relevance

This workshop and follow-on technical assistance activities aim to assist APEC member economies make further improvements to their economic and legal infrastructure on the EoDB topic of Access to Credit/legal rights, focusing on micro, small and medium-sized enterprises (MSMEs). 

Studies have shown that lack of access to credit is the main obstacle to growth for MSMEs.  The World Bank has found that there are some 400 million MSMEs in developing economies with 50-60% having little or no access to credit.  The total financing gap is estimated at between $2.1 and 2.6 Trillion.[1]  The World Bank has further found that reforming collateral registries for movable assets in a number of economies has led to an 8% increase in access to credit and a 3% decrease in interest rates. The percentage of working capital financed by banks increased by 10%.[2]  

MSMEs have less collateral, guarantees and credit history. The World Trade

Organization reports that “over half of trade finance requests by SMEs are rejected, against just 7% for multinational companies.”[3]  The G20 Action Plan on SME Financing has found that “secured transactions is where the disparity among G20 countries’ performance is the greatest” listing as a priority reform “allow[ing] banks and non-banks to lend to SMEs against movable collateral.”[4]

The Workshop also addresses the APEC Policy Partnership on Women and the Economy (PPWE) first pillar – Access to Credit. Credit reform has an even greater impact on women-owned MSMEs, which generally receive substantially less credit that MSMEs owned by men.

This project directly links to Rank 1 in 2017 APEC Funding Criteria (promoting regional economic integration) given that it contributes to improving the Ease of Doing Business (EODB), implementing the Renewed APEC Agenda for Structural Reform (RAASR), and promoting the competitiveness of MSMEs.


[1] World Bank, Small and Medium Enterprises (SMEs) Finance (2015), http://www.worldbank.org/en/topic/financialsector/brief/smes-finance.

[2] “Collateral registries for movable assets: does their introduction spur firms' access to bank finance?”, Love, Martinez-Peria, Singh (2013).

[3] WTO, Trade Finance and SMEs, at 23 , https://www.wto.org/english/res_e/booksp_e/tradefinsme_e.pdf.

[4] G20 Joint Action Plan on SME Financing, at 6, approved at G20 Leaders’ Communiqué, Antalya Summit, 15-16 November 2015, http://www.mofa.go.jp/files/000111117.pdf.

Objectives

This project aims to assist APEC member economies make further improvements to their business environment, particularly in the area of Getting Credit. The specific objectives of the project include:

·   Improving understanding of international best practices for access to credit, particularly how harmonization of secured lending legal regimes boosts services liberalization and spurs economic growth by making commercial credit more easily accessible and inclusive.

·   Providing evidence of how modern secured lending laws provide a useable and meaningful method of improving access to credit to women and members of disadvantaged groups.

·   Offering individualized consultations for economy participants concerning the results of the study “Assessing APEC Getting Credit Frameworks according to International Best Practices” and how results can be used as a springboard for implementation of structural reform efforts.

Sharing successful approaches in capacity building for purposes of practical learning.  This will include case studies as well as exchanges by individual economy representatives.

Alignment

This workshop and follow on capacity building will directly contribute to the APEC EoDB Initiative under the Economic Committee. In 2015, APEC Leaders recognized the progress made on the EoDB initiative and welcomed the Second EoDB Action Plan for 2016-2018 with a new target of 10% improvement in the existing 5 priority areas by 2018. The workshop is one of the activities included in the EoDB Implementation Plan 2016-2018 in the area of Getting Credit.

In addition, the project responds to the Structural Reform Ministerial Meeting Statement (2015), the 2014 Joint Ministerial Statement and the 2014 Leaders’ Statement, which encouraged a wider use of private international law instruments such as those of UNCITRAL to facilitate cross-border trade and investment, enhance ease of doing business, and therefore contribute to APEC’s regional integration, connectivity, and structural reform agenda. The project directly supports economy level Individual Action Plans (IAPs) under RAASR where a number of economies, including Chile, , Indonesia, Papua New Guinea, the Philippines, Chinese Taipei, Thailand, and Viet Nam identified access to credit as an area for improvement.

It is also consistent with the 2015 Boracay Action Agenda to Globalize MSMEs including through “measures to widen options on financing for MSMEs and further develop the infrastructure to facilitate lending to them [through] . . . secured transactions/movable collateral systems . . . .”

It also builds on the recommendations in the Report on the Workshop on Supply Chain Finance and Implementation of Secured Transactions in a Cross-Border Context, held in Lima, Peru in August 2016. 

Additionally, this project will contribute to work of the EC FoTC on Strengthening Economic and Legal Infrastructure (SELI) which includes within its activities accessing getting credit frameworks according to international best practices (including UNCITRAL texts).

TILF/ASF Justification

This project intends to build capacity of APEC economies to undertake regulatory reforms to help create enabling environments to make is easier for MSMEs to efficiently access credit through secured transactions reform. In many APEC developing economies, MSMEs generally have limited immovable assets (i.e. land) but a wide range of movable assets (e.g., equipment, inventory, crops, livestock, and accounts receivable).  According to the World Bank the value of movable property generally accounts for three-fourths of MSME’s total asset portfolios, yet in many economies banks predominantly accept only land and buildings as the main form of collateral.  A modern secured transactions legal framework increases access to credit by broadening the range of assets (i.e. movable assets) acceptable as collateral, while allowing the borrower to continue to use the asset to generate income to repay the loan.  If the borrower defaults, it gives the creditor the right to repossess and sell the assets in a peaceful manner. Implementation of secured transactions reform will have a transformational effect in APEC economies by increasing access to affordable credit and promoting economic growth, sustainable development, the rule of law, financial inclusion, as well as assisting in combating poverty.  Secured transactions reform is also an essential component of innovative cross-border financing products such as supply chain financing.  Harmonization of secured transactions regimes across APEC economies will increase access to credit across borders and facilitate the development of international trade. 

The proposed workshop will provide economies with the opportunity to discuss the results and recommendations from the study “Assessing APEC Getting Credit Frameworks according to International Best Practices,” concluded in 2017, which aims to assess the degree of alignment of each APEC economies’ Getting Credit frameworks to those best practices, and to identify areas for reform.  The project will provide funding for travel-eligible economies to participate in this workshop, so Project Overseers (POs) will actively engage to promote the participation of relevant experts.

Finally, this project is proposing to provide technical assistance to support one-two volunteer developing economies in implementing reforms in line with these international best practices concerning secured transactions reform. This technical assistance will be tailored to the specific needs and context of the volunteer economies to help them achieve their policy objectives under their RAASR IAPs. The experience and lessons from this technical assistance will then be shared among all member economies, so that APEC as a whole can benefit.

Beneficiaries and Outputs

Outputs: The project will consist of the implementation of a two-day workshop which will be held in late 2017 in Mexico City or 2018. 

This workshop will invite relevant policymakers and government officials responsible for the design and implementation of key EoDB reforms, in particular the development of secured transactions and collateral registries. Relevant agencies will include Ministries of Economy, Finance, Economic Planning, and related affairs. The workshop will also involve representatives from Central Banks and banking regulators, as well as Ministries of Justice to discuss legal and regulatory reforms and the application of international instruments.  We intend to partner with the World Bank on this workshop. The workshop will also invite key experts from relevant international institutions such as UNCITRAL. POs would also consider engaging relevant experts from the private sector including from ABAC (Asia Pacific Financial Forum) or financial services businesses and academia.

The workshop will begin by providing an overview of the importance of making further efforts in improving frameworks for getting credit, in particular to facilitate MSME development and growth.                                                                     

The workshop will then describe relevant international best practices concerning secured transactions reform as reflected in the UNCITRAL Model Law on Secured Transactions and the UN Convention on Assignment of Receivables in International Trade. It will also discuss the findings of the study “Assessing APEC Getting Credit Frameworks according to International Best Practices” to identify areas for possible improvement among APEC member economies, the relevant best practices that can be applied, as well as possible capacity building activities that can support economies to implement them. The workshop will combine presentations from relevant experts from international organizations, economies and representatives from the private sector.  

In addition to the workshop, the project includes the implementation of capacity building activities in one-two volunteer economies interested in pursuing reforms to improve their getting credit frameworks attendant to their RAASR IAPs. This will be in the form of an expert who will work with the interested economy in the implementation of reforms to their getting credit frameworks in line with international best practices. These activities will be tailored to the specific needs of the volunteer economies, so the POs will coordinate with the volunteer economies as well as with the EoDB Champion Economies for getting credit to design the program. Depending on economies’ needs, these capacity building activities may include for example expert review and comment or support for drafting legal reforms, support for the design and implementation of movable collateral registries systems, advocacy activities, etc.   

Outcomes: The goal of this project is to improve the capacity for creating an enabling legal and institutional environment conducive to efficient access to credit through secured transactions reform.  By facilitating implementation of a modern secured transactions regime in APEC economies, this project will contribute to the development and strengthening of MSMEs through access to affordable credit and increased access to international markets. As a result, this project will promote faster growth, greater investment, entrepreneurship and productivity, job creation, and international trade in the APEC region. Gathering economy officials who are directly responsible for or have a working familiarity with the access to credit enabling environment will permit the sharing of ideas and innovations as well as an opportunity for the organizers to gather additional information in a collaborative setting. The project overseers intend to work closely with participants before, during and especially after the workshop to ensure that synergistic collaboration is established and sustained. The process will also allow the project overseers to, together with the participants, develop a running list of reform “opportunities for action” around the that range in implementability and potential impact.

Beneficiaries: Immediate beneficiaries of this project will be the participants who attend the workshop and their organizations, as well as volunteer developing economies that participate in the targeted capacity building activities. In order to maximize the benefits of this project, POs will work to bring relevant experts/officials from economies to participate that could benefit from the training as well as actively engage and contribute to the discussions. For example, invitations for the workshop will suggest economies to consider nominating relevant government officials responsible for the design and implementation of access to credit reforms, in particular, officials or experts who are involved in the development of institutional and regulatory systems designed to make it easier and less expensive for MSMEs to secure financing without traditional collateral such as land. These participants will gain knowledge of international best practices for getting credit through secured transactions reform, and increase their capacity to design and implement reforms to improve their domestic frameworks.    

Long-term beneficiaries will be the firms and entrepreneurs in APEC economies, in particular from developing economies, who will be able to increase their economic participation and reduce business risks through increased access to credit.  In particular, MSMEs who would be able to use movable collateral such as inventory, accounts receivable, equipment etc. to obtain credit for their businesses. 

Beneficiaries of the resultant reforms will be micro, small and medium enterprises in all sectors, particularly those that are traditionally less likely to have access to credit because of a lack of acceptable collateral but that require relatively large capital investments. Credit reform also has an important impact on women-owned MSMEs, which tend to stay in the informal sector and generally receive substantially less credit than MSMEs owned by men. Increased capitalization of their businesses through lending and secured finance will provide them greater business opportunities as well as better access to public services, etc. It will promote movement of women led businesses from the informal to the formal sector.

Dissemination

The workshop materials including agendas and presentations will be distributed to the participants electronically and will be made available through the APEC website (Meeting Document Database). There is no intention to produce any publication as a result from this activity. 

The POs will report the outcomes of the workshop at the EC1 Plenary Meeting in Port Moresby in February 2018.

In addition, the POs will report on the outcomes of the economy level technical assistance activities by EC1-2019.

Gender

POs will work to ensure that both female and male speakers and participants have equal opportunities to attend and actively participate in the workshop. POs will try to identify and invite relevant speakers, both men and women, as far in advance as possible and will send invitations to economies with enough time for them to consider the most suitable participants. In the invitation, POs will encourage economies to consider gender balance in their nominations and will pay attention to the nominations received from economies. POs will include gender information in the sign-in sheets as well as in the evaluations of the workshop to measure the percentage of women participants. Considering previous workshops on similar topics, PO’s would try to achieve at least 35% women participants.

In terms of project objectives, secured transactions reform has an important role in providing increased access to credit for women-led MSMES, and the project will, as appropriate, include a session in the workshop addressing the issues particularly relevant to women.

Work Plan

The project will implement a two day workshop that will build on and integrate the results from the study “Assessing APEC Getting Credit Frameworks according to International Best Practices”, which analyses the degree of alignment of APEC economies to international best practices in access to finance, identifies areas for improvement and provides reform recommendations.  The workshop would take place in Mexico City near the end of 2017 or in 2018. Following the workshop, the POs will work with 1-2 volunteer economies to implement targeted technical assistance activities that contribute to advancing their RAASR IAPs. 

Below are some of the key actions for this project 

-  October/November 2017: POs to review the study on “Assessing APEC Getting Credit Frameworks According to International Best Practices” to identify areas where further capacity building is needed in APEC to help inform the design of the workshop and follow on technical assistance. 

-  October/November 2017: POs will work to develop the draft the agenda for the workshop, identify relevant experts and speakers, and send speaker invitations. 

-  October/November2017: Circulate the invitation and nomination forms for the workshop to APEC economies through the Economic Committee.

-   Late 2017-Early 2018: Implement a two-day workshop in Mexico. Report back on the outcomes of the workshop at the EC1 Plenary 2018. POs will work to identify volunteer economies interested in participating in the follow on capacity building activities.

January - October 2018: POs to work closely with volunteer developing economies to design and implement the economy level capacity building on EODB getting credit reforms. 

-  December 2018: Report on the outcomes of the project to the EC and send completion report to APEC Secretariat. 

- February 2019: Report to EC1.

Risks

In the case of the workshop, the risks may be related to getting good quality speakers as well as relevant participants from all member economies. POs plan to manage this risk by carefully designing the agenda of the workshop and identifying relevant experts in advance. In addition, POs will circulate the invitation to economies as early as possible and provide information of the desired profile of participants to guide economies in the nomination process.

Another risk for the workshop is with regards to possible delays in the development and collection of workshop materials and inputs, including presentations from speakers. For this issue, POs will work closely with speakers to ensure timely submission of their presentations to ensure that the necessary information and analysis is available by the time of the event.

In the case of the economy-level capacity building activities for volunteer economies, one of the main risks is the lack of interest by developing member economies to participate. To mitigate this risk, POs will engage in outreach efforts to potential participating economies and follow up regularly with economies that have expressed interest. 

In addition, there might be challenges in finding appropriate experts to undertake these capacity building activities. To manage this risk, POs will promote coordination between Champion Economies in the area of Getting Credit (Mexico and the United States) as well as consulting with the World Bank to identify possible experts.

Monitoring and Evaluation

POs will regularly monitor the progress of the activities under this project. 

POs will develop participant evaluation forms to collect participants’ feedback for this capacity building workshop. The evaluations will allow participants to assess the quality of the workshop, on the substantive program as well as on the organization and logistics. The evaluations will also try to measure the level of knowledge gained by participants on key issues or topics covered during the workshop. Data disaggregated by gender will be collated to ensure that impacts on women are measured and monitored – this will include the number of participants as well as the number of technical experts engaged as speakers and experts. This information will be reported through the APEC process – via APEC Monitoring and Completion reports.

The POs will use as indicator of gender participation, the percentage of participants who are women. The target for this indicator in this project will be 35%. 

POs will develop an evaluation form/questionnaire to collect feedback from the capacity building activity with volunteer economy. The evaluation will try to assess the quality usefulness of the activity and the benefits gained from it.

Linkages

In addition to the directly linkage to the Economic Committee RAASR and EoDB agenda, this project has implications for other areas of work in APEC including women’s entrepreneurship, MSME development, among others. In order to promote collaboration with other relevant APEC fora such as SMEWG and PPWE, POs will share relevant information about the study, workshop and its outcome. The workshop will also engage non-APEC stakeholders. We intend to partner with the World Bank on this workshop and may seek to bring experts from neighbouring economies/regions to learn and share relevant experiences. Experts from relevant international organizations, such as UNCITRAL will be invited to discuss the best practices and experiences.

The workshop and follow-on capacity building activities proposed in this project will build on the Study “Assessing APEC Getting Credit Frameworks” according to International Best Practices”. It will also build on previous EoDB workshops implemented in APEC such as the “Workshop on Supply Chain Finance and Implementation of Secured Transactions in a Cross-Border Context”, which took place on the margins of SOM2-2016 (U.S., Mexico, Hong Kong, China), and the “APEC Seminar on the Use of International Instruments to Strengthen Contract Enforcement in Supply Chain Finance for Global Businesses” which took place on the margins of SOM1-2017 (Hong Kong, China).

Sustainability

This project is part of the APEC EoDB Initiative and is one of the activities included in the EoDB Implementation Plan 2016-2018. In this sense, there is great support from member economies to continue undertaking further reforms to improve the business environment, in particular to achieve goal of 10% improvement by 2018. In 2018, economies will consider the work done under the EoDB initiative (including this project) and will have to decide the way forward (from 2019).  Assessing APEC access to credit legal frameworks according to international standards (i.e. UNCITRAL texts) is also part of the SELI work plan. 

The workshop will build capacity of member economies to undertake domestic reforms to improve their getting credit frameworks, and will discuss relevant international best practices that economies can consider as a reference. Moreover, in order to support volunteer developing economies who are interested in carrying forward reforms in line with these best practices, the project includes economy-level capacity building activities that will follow the general workshop. This approach is aimed at trying to ensure that the lessons and outcomes from the workshop and the study on getting credit are put into practice.

Moreover, the fact that the technical assistance will correspond to priorities that volunteer economies include as part of their RAASR IAPs, provides greater assurance of their relevance and possible impact and also shows the interest of the volunteer economy to pursue unilateral reforms in this area.

After the project is completed, the POs will provide all relevant information from the workshop (agenda, speaker bios, presentations) to the APEC Secretariat to be uploaded in the APEC website, and will report the outcomes of this activity to the Economic Committee so that future activities can build on this work.

Project Overseers

Mr. Mark Walter is US-ATAARI’s Deputy Chief of Party and Technical Director of the Singapore Office and is a lawyer specializing in the international business enabling environment, commercial dispute resolution, trade policy reform and assessment, and drafting and implementation of commercial law. Prior to joining the US-ATAARI Project, Mark was Managing Director for Nathan Associates’ Trade Policy and Legal and Regulatory Practice. Earlier, Mark was Chief of Party on the USAID-funded Doha Project for WTO Accession in Ethiopia, and on its redesigned successor project, the Ethiopia WTO Accession Plus Program. He has also served as Assistant Director for the Center for International Legal Education at the University of Pittsburgh, Adjunct Professor of Law, as an international legal consultant and as a long term component lead on projects in Ukraine, Serbia, Kosovo and Japan.  He has worked with trade law reform, lectured, and developed commercial law and legal education reform programs in regions across Africa, Eastern Europe and Asia, including Ethiopia, Mongolia, Egypt, Thailand, Indonesia, Ukraine, Serbia, Kosovo, Macedonia, Uzbekistan, Papua New Guinea, and China.

Mr. Mike Dennis is an attorney with the Office of Legal Adviser, U.S. Department of State and the U.S. Representative to the APEC Economic Committee FoTC on Strengthening the Economic and Legal Infrastructure. He is the Executive Director of the Department of State Advisory Committee on Private International Law. He has represented the United States in international fora on public and private international law matters. Most recently, he has served as Representative of the United States at the United Nations Commission on International Trade Law (UNCITRAL) annual sessions and in the working groups on online dispute resolution, secured transactions reform, and on creating an enabling legal environment for micro, small and medium sized enterprises. Additionally, he has served as the Representative of the United States at Hague Conference on Private International Law meetings. He also works with the Department’s Financial Inclusion Working Group, assisting in implementing legal reforms in the Americas and APEC region.

Cost Efficiency

Not Applicable.

Drawdown Timetable

Not Applicable.

Direct Labour

The project proposes to implement one-two economy-level capacity building activities that will provide assistance to volunteer developing economies. In this case, Direct Labour includes the expert consultants that will be in charge of undertaking these activities. 

Considering that these activities are going to be tailored to the specific needs of the volunteer economy, at this point it is not possible to specify the total number of hours/days that would be required and the specific tasks that would be performed by them. The POs will work closely with the volunteer economies to design the capacity building activity in the most efficient and productive way and will keep in communication with the APEC Program Director and Program Executive regarding the details of these activities.

Waivers

Not Applicable.

Are there any supporting document attached?

No 
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