NO less than P4 billion should be allocated to the government’s microfinancing program yearly to stop the “5-6” lending scheme preying on micro, small and medium enterprises (MSMEs), the country’s trade chief said on Tuesday.
At the sidelines of the National MSME Summit 2019 in Pasay City, Trade Secretary Ramon M. Lopez said lawmakers should ensure a bill institutionalizing the Pondo sa Pagbabago at Pag-asenso (P3) program will be passed within the 18th Congress, stressing the program’s institutionalization is necessary to secure yearly funding for the program.
“We are proposing [to lawmakers to pass] a P3 bill so that we can institutionalize already the P3 allocation. It will still go through the budget [deliberation process], but at least, there is more certainty that it will get budget allocation every year. In the original plan, it is supposed to be a P4-billion P3 funding for four years,” Lopez said.
Last year the House of Representatives passed House Bill 7446 seeking to institutionalize the P3 program, but the version had no exact allocation. However, it ensured budget as may be necessary will be included in the General Appropriations Act for the seamless implementation of the program.
Lopez said he will ask lawmakers to revert to the original plan and reinstall in the measure the P4-billion annual allocation for the P3 program, as this will inch the government closer to its objective of dismantling the estimated P30-billion market of 5-6 lenders.
“We want to have, hopefully, a specific amount. I’m taking off from the P30-billion target. P30-billion is the estimated amount of 5-6 floating in the system. We want to kill it and put it aside and, therefore, we need to put out an alternative,” Lopez argued.
As intended, the P3 program should replace the 5-6 lending scheme by allowing MSMEs to borrow up to P300,000 depending on business needs and repayment capacity.
Borrowers will be charged a maximum interest rate of 26 percent per annum with no collateral requirement. This rate is lower than the 20 percent per day, week or month interest charged by 5-6 lenders, as well as those applied by most microfinance institutions (MFIs).
The P3 bill slip past the House last year, but its counterpart version, Senate Bill 2017, filed by Sen. Aquilino L. Pimentel III, got stuck in the second reading.
The trade chief is still banking on Pimentel, who was reelected in the midterm polls, to push for the institutionalization of the P3 program in the Senate. On the other hand, he will ask whoever will lead the House Committee on Trade and Industry to file the House version.
As of May, P3.1 billion of loans were released to 88,088 beneficiaries, of which P7.57 million were directed to 457 borrowers in Marawi City, P25.89 million to 335 families of soldiers killed or wounded in action and P3.14 million to 108 MSMEs in Boracay, which was shut down by the government for six-month rehabilitation last year.
Aside from the institutionalization of the P3 program, Lopez wants the Magna Carta for MSMEs amended under the 18th Congress. Amending the law will extend its provision requiring all lending institutions to set aside at least 8 percent for micro and small enterprises and at least 2 percent for medium enterprises of their loan portfolio.
“The proposed amendments to the Magna Carta for MSMEs include provisions such as an extension of the mandatory allocation of credit resources to set aside 10 percent of their loan portfolio for lending to MSMEs,” Lopez said in his speech at the summit.
“This will provide an alternative compliance through lending by MFIs and cooperatives as conduits. The amendments will also strengthen the Small Business Corp. both in terms of capitalization and exemption from the Bangko Sentral ng Pilipinas’s supervisory powers on quasi-banking operations,” he added.
Further, the amended Magna Carta for MSMEs will require private malls and supermarkets to allocate at least 10 percent of their selling area to qualified MSMEs.