Favila says government may launch new credit scheme for SMEs

MANILA, Philippines – Trade Secretary Peter B. Favila said yesterday the Department of Trade and Industry (DTI) is working on launching a new credit instrument to be issued by Small Business Corporation (SBC) which may replace the mandatory Micro, Small and Medium entrepreneur (MSME) lending.

Instead of lending to MSMEs, Favila explained that banks may choose to buy this credit instrument. Favila said this is still a proposal.

Favila said that they are looking for ways to also help banks. Favila said there is a need for this credit instrument because there are times wherein the demand for credit by MSMEs is low.

He said it is unfair to penalize banks if there are no MSMEs borrowing money from them.

However, early this month Bangko Sentral ng Pilipinas Deputy Governor Diwa Guinigundo said that as much as 60 percent of the financing needs of MSMEs were unmet. MSMEs are estimated to account for 99.6 of the enterprises in the country.

Favila said MSME lending has gone up this year when compared to last year.

From 2004 to April 2009, MSME lending through the Sulong Program of the government stood at P175 billion and a total of 2.5 million jobs have been created.

For his part, Jose Ma. A. Concepcion, Presidential Consultant on Entrepreneurship said it is important to make banks realize that it is beneficial to them to lend to MSMEs. However, he said it is a given that banks do not lend to micro and small businessmen.

“They lend to micro and small businesses through conduits,” he said.

The problem, he said is the qualification of borrowers. “This is where the challenge is.”