Creating jobs through financial reform

Our weak capital market is part of the reason why business creation and job generation in our country are slow. We do not have enough strong and effective financial vehicles to mobilize and capture people's savings, which largely explains our low savings rate. That also largely explains why financing for business and entrepreneurs come mostly from banks.

In contrast, many countries in the West, Japan, Korea and Taiwan enable enterprising inventors or entrepreneurs to go to the stock exchange or bond market, and raise capital. This is how many multi-million dollar enterprises started.

Financial institutions take the risk of bankrolling talented young entrepreneurs based on the potential of their talent or invention. This has made billionaires out of the inventors of Microsoft, Yahoo, Google, Facebook and other such pioneering online enterprises. Bill Gates did not start out rich nor did he have a huge inheritance from his parents. But he was able to leverage his bright ideas and access the capital market.

That is what's lacking in our financial system – that one can go to the equities market, get his new company's shares listed or borrow from the bond market. We lack effective vehicles to mobilize and put into the financial system all the loose money just sitting in "bauls".

The Senate Committee on Banks and Financial Institutions, which I chair, has outlined a 7-point financial reform agenda that aims to strengthen our capital market.

This includes pooling together and making available to creditors a comprehensive credit information system on borrowers through the Credit Information System Act; creating a regulatory framework for lending companies through the Lending Companies Act; setting up a private pension scheme to supplement the government-funded retirement scheme through the Personal Equity and Retirement Account (PERA); reviving the preneed industry while protecting planholders through the Pre-Need Code; making insolvency procedures easier for ailing companies through the Corporate Recovery Act; allowing flexibility in mutual funds through the Collective Investment Schemes Law (CISL); and allowing real estate owners to register income-generating property in the exchange market through the Real Estate Investment Trust (REIT) Act.