Chiz Wants Banks to Allocate 10% of Loan Portfolio to MSMEs
To facilitate post-pandemic recovery in the Philippines, senatorial aspirant and incumbent Sorsogon Gov. Francis “Chiz” Escudero is urging banks to ensure that 10% of its loan portfolio goes to micro, small and medium enterprises (MSMEs) financing.
MSMEs, especially in the provinces, are in dire need of financing and capacity-building assistance so they can regain their footing after the COVID-19 pandemic caused business closures, displacement of workers, and pay cuts due to a reduction in working hours.
“What MSMEs need now is a credit line that will allow them to start anew and pump fresh resources into businesses that are barely surviving. Banks have the opportunity and responsibility to help our local entrepreneurs, as dictated by the Magna Carta for Micro, Small and Medium Enterprises,” Escudero said.
Under the Magna Carta for MSMEs Act, or Republic Act 6977, banks must set aside at least 8% of its loan portfolio for micro and small enterprises and at least 2% for medium enterprises. The period covered for such mandate was from 2008 to 2018, although the Bangko Sentral ng Pilipinas (BSP) continues to monitor MSME lending.
In the first quarter of 2021, only 5.2% of banks’ P8.6 trillion loan portfolio went to MSMEs, or around PHP 448 billion as banks continued to be wary of extending loans to MSMEs.
“We should consider reinstating this provision in the Magna Carta if we want to jumpstart the economy as 99% of businesses in the Philippines are MSMEs. There is no recovery without the recovery of the MSME sector,” Escudero said.
An August 2021 joint research by UN agencies in the Philippines found that despite the incentives given to financing institutions in the country, banks tightened credit because of the perceived uncertainty in the business environment.
“The banking industry’s lack of willingness to lend to MSMEs is attributed to the perception that even in normal times, lending to smaller companies is riskier than lending to larger companies. Given the current situation where markets are soft (there are more potential sellers than buyers), it is understandable that banks would be less confident with MSMEs,” said the report, titled “Unlocking Opportunities to Build a Better Normal: Towards Gender-Responsive and Resilient Micro-, Small, and Medium Enterprises in the Food Manufacturing and Processing Sector in the Philippines.”
Around 75% of MSMEs have either suspended or stopped their business operations in 2020 while 60% reported that they have not received any assistance from either the government, private sector or non-government organizations. The MSMEs also identified credit facilities, tax breaks and deferred loan payments as their most pressing needs, according to the UN report.
“Ang pagpapautang sa mga MSMEs o pagbibigay ng ayuda ay hindi naman para ibulsa ng mga may-ari ng negosyo, kundi para may pang-sweldo sila sa kanilang mga empleyado. Sa gayon, hindi na madadagdagan pa ang mga Pilipinong walang trabaho at mga pamilyang walang makain,” Escudero said.
“Kailangan ng mabilis na credit line hindi lang ng mga MSMEs sa Metro Manila o sa malalaking probinsya gaya ng Cebu at Davao, kundi lalo na ng mga nasa maliliit na siyudad. Wala dapat parte ng bansa na maiwan sa ating pag-angat, dapat sabay-sabay tayong makabangon,” he said.
Micro enterprises are those with no more than P3 million in total assets; small enterprises have no more than P15 million in assets; and medium enterprises are those with assets not exceeding P100 million.
Together, MSMEs comprise 99.5% of all businesses in the Philippines, provide 62% of total employment and contribute 35.7% to the economy, according to the Department of Trade and Industry. #
