Roxas urges banks to extend more credit to SMEs

Trade Secretary-designate Mar A. Roxas III has asked banks to adopt measures to make more credit available to small and medium enterprises (SMEs) even as the Asian financial crisis caused lenders to tighten up on loan requirements.

Roxas said that growth of SMEs should not be stymied by excessive prudent policies of banks in granting loans which make it more difficult for SMEs to acquire more capital for their operations.

Banks, he said, have acknowledged having sufficient funds to lend to borrowers. However, they consider small borrowers as high risks and would likely slap higher charges for loans extended to them.

The trade secretary noted that one move to remedy the problem is for banks and government guarantee institutions like the Small Business Guarantee and Finance Corp. (SBGFC) to collateralize SME loans.

Last year, SBGFC facilitated P2.5 billion worth of loans to SMEs either through small enterprise financing, transactional guarantees, short-term direct financing, and micro-financing schemes with commercial banks and lending conduits.

However, Roxas said that banks should be encouraged to open up more credit for small businesses and entrepreneurs to improve their ability to access loans and in paying them afterwards.

"We need to graduate SMEs from government assistance after a certain period of time. SMEs should be able to independently transact their needs to commercial banks," he said.

To this end, Roxas has ordered a review of the existing programs and projects for SMEs in a bid to further energize the sector's growth and enable it to become a strong base for advancing the country's agricultural manufacturing, and services industries.

He said he expects more SMEs to graduate into viable and strong businesses that could become the country's 'second-generation' of large companies conquering markets for Philippine products and industries.

In a meeting last week with the Small and Medium Enterprises Development (SMED) Council, the national policy-making body for SMEs, Roxas said small businesses should be encouraged to take advantage of the opportunities created by the new technologies, market liberalization and the increasing global demand for better products, goods and services.

He said the aim is to make SMEs capable and independent to expand and improve their businesses after getting government assistance for some time.

Under Philippine laws, SMEs are classified according to their capitalization level and number of employees. SMEs are heavily concentrated in the countryside, either as family-owned-and-operated, husband-and-wife managed, and community-based enterprises.