November 23, 2017 | MANILA, PHILIPPINES

MSME financing program to see budget rise by P2 billion

THE government’s financing program for micro, small and medium enterprises (MSMEs) is expected to receive more funding next year, Trade Secretary Ramon M. Lopez said, making available up to P2 billion as a direct alternative to usurious “5-6” usurious lending schemes.

“We welcome the additional P2 billion,” Mr. Lopez told reporters on Friday on the sidelines of the ASEAN 2017 MSME Development Summit at the Philippine International Convention Center in Pasay City.

The funding is earmarked for the government’s Pondo para sa Pagbabago at Pag-asenso (P3) financing program, an affordable micro-financing system whose priority beneficiaries include microenterprises and entrepreneurs who do not have easy access to credit.

During the summit, Senator Juan Miguel F. Zubiri also pledged more funding for microfinance as he described the sector as “growth areas for employment.”

“Let’s double your budget for microfinance ... Let’s make it P2 billion next year,” he told participants of the event, addressing his pledge to Mr. Lopez.

He also said policymakers should come up with an environment that supports MSMEs “to start up and grow.” The lawmaker chairs the Senate committee on trade, commerce and entrepreneurship.

This year, the P3 financing program has a budget targeting MSMEs that are accessing credit through “5-6” schemes. The Trade department program was aimed at providing credit to micro-entrepreneurs, market vendors, agri-businessmen and members of cooperatives, industry associations and co-operators who usually fall prey to the high cost of credit via usury.

Under the P3 program, the loanable amount carries interest rates ranging from 20 to 25% per annum with no collateral requirement. The rate is significantly lower than what is being charged by “5-6 loan sharks,” Mr. Lopez has said.

The government hopes that through the P3 program, it will be able to reach and help even the smallest of entrepreneurs in the countryside.

Aside from the bigger funding for microfinance, Mr. Lopez said he wanted to see a bigger budget for shared service facilities, or SSFs, which houses machinery and equipment shared by small businesses.

He said the Trade department was asking for funding of P1 billion for these facilities, but what was being considered for next year’s budget was only P200 million. He said he wanted this raised to at least P500 million.

Mr. Lopez cited the shoemakers in Marikina as asking for more of these facilities in their bid to corner a bigger share of the market for custom-made shoes. He said Mr. Zubiri had given his assurance to support the SSFs with a budget of at least P500 million.

In his speech during the summit, Mr. Lopez said MSMEs account for 95% to 99% of all business establishments and account for 51% to 97% of employment in the Association of Southeast Asian Nations. They also caccount for 23% to 58% of gross domestic product (GDP) and 10% to 30% of exports.

“However, it is important to note that they still do not account for a commensurate share in jobs, output in terms of GDP, and exports,” he said.

“MSMEs are the largest source of domestic employment across all economic sectors in both rural and urban areas, allowing women and the youth to participate in our nation’s development. They far outnumber large enterprises and provide the supplier base that underpins the success and productivity of large international corporations,” Mr. Lopez said.

He also said MSMEs’ full development continues to face difficulties in the form of “structural, fiscal, and non-fiscal issues and challenges.”

“These include capacity building, credit availability, proper information dissemination and standards compliance, and market access, among others,” he said. -- Victor V. Saulon