SME lending seen to drop by P1 billion this year

MANILA, Philippines - Lending for micro, small and medium sized enterprises (MSMEs) is expected to go down by P1 billion this year when compared to last year as a result of the financial crisis that has hit most of the countries worldwide.

In an interview with The Star, Small Business Corp. (SB Corp.) President Benel Lagua said that they expect borrowing to drop to P3 billion from a high of P4 billion in 2008.

According to Lagua, the 2008 figure was the highest they recorded in the past five years.

“The drop was a result of the crisis. There was a lag in the effect of the crisis. It didn’t hit us last year. We are feeling it this year,” Lagua noted.

He said a number of MSMEs have placed their expansion plans on hold and focused on survival instead because of the global financial crisis.

In fact, he said that there was a drastic plunge in borrowings of export oriented firms. “The decline was very big but we hope to recover next year.”

Borrowings this year was concentrated in the domestic industry which made up 80 percent of the lending. Business that borrowed for expansions belong to the food, services, outsourcing and manufacturing sector.

For next year, Lagua said they are hoping to regain the P1 billion they lost this year. “We are looking at P4 billion in lending for next year.”

He said that the elections will help spur the businesses. Likewise, Lagua said that the change in leadership will increase the confidence in the community as long as the national elections will be orderly and credible.

Aside from this, he said the export sector has also recovered. “Markets are really positive now.”

The government, through the SME Unified Lending Opportunities for National Growth (SULONG) program has released a total of P170 billion in loans to some 150,000 small and medium enterprises and sustained 2.5 million jobs since 2004, based on data released by SB Corp., lead convenor of the SULONG program.

The SULONG program is a flagship program of the Department of Trade and Industry (DTI) through the SB Corp. to increase financing for the SME sector through collaborative efforts of seven government financial institutions (GFIs).