P1-B investment fund for SMEs eyed

A P1-billion investment fund for small- and medium-sized enterprises will be put up before the end of the year. The fund will invest between $50,000 and $1 million (roughly between P2.5 million and P50 million at the exchange rate of P50 to the dollar) in each identified company.

Priority will be given to exporters and companies engaged in information technology capitalized at no more than P100 million, the ceiling for medium-sized companies in the Philippines.

Department of Trade and Industry data show that SMEs account for more than 80 percent of the country’s total businesses and are a major provider of employment.

"This is a funding alternative for SMEs which want to expand but do not want to borrow from the banks," said Planters Development Bank chairman Jesus Tambunting.

Plantersbank and Washington-based Small Enterprises Assistance Fund (SEAF) are in the process of putting up a separate company to manage the investment fund, which has received funding commitments from multilateral lending institutions like the World Bank.

"If we’re successful and invest the entire P1 billion, we can put up another company to manage another P1-billion fund," said Tambunting.

Operating like a venture capital, the fund will take a minority equity position in the company and will exit after a specific number of years. Since most SMEs are family owned, the fund can either sell back its shares to the majority stockholder or list in the small board of the Philippine Stock Exchange.

"Participating SMEs will benefit in two ways. One, the money it raises for expansion will be cheaper than borrowing. Two, it will have access to the know-how of SEAF, which has operated similar funds in countries like Eastern Europe and Africa," said Tambunting.