Private sector to put up P500-million guaranty fund for MSMEs

MANILA, Philippines - The private sector is putting up a P500 million guaranty fund to help micro small and medium sized enterprises (MSMEs) obtain loans from commercial banks.

Philippine Chamber of Commerce and Industry (PCCI) Chairman Sergio Ortiz-Luis Jr. said yesterday the private sector will be setting up a P500 million guaranty fund that will be available before the end of the year.

Ortiz-Luis likewise encouraged government financial institutions (GFIs) to match their guaranty fund by putting up another P500 million to help the MSMEs.

According to Ortiz-Luis, they would like to get a GFI partner. Surprisingly however, he noted that there is much interest from big commercial banks. “We are currently in talks with large commercial banks and they are very interested in the project.”

Right now, he said that the members of the PCCI committed to P100 million but they expect the figure to go up further. “I don’t think getting money will be a problem because this is part of their (corporate social responsibility,” Ortiz Luis added.

He said they are still ironing out the details of the project. He said they will be coming out with the criteria very soon. He said there is no maximum amount of guaranty right now because medium enterprises require big capital.

Currently, Ortiz-Luis said there is no mechanism that gives guaranty to MSMEs. “In Thailand, the government guarantees 30 percent of MSME loans,” Ortiz Luis said. For this project, he said the guaranty will not be for the full amount of the loan.

Ortiz-Luis said the problem of MSMEs is that banks do not want to lend to them because financial institutions are risk averse. “Especially now that there is a credit bureau it is harder for some people to borrow money for them to start a business.”

He said that the business sector would like to help people put up their business and approach banks to get start up loans. “The weakness in MSME lending is that commercial banks are afraid to lend,” he said. The government has not been able to address this particular problem even with the Phil Guaranty because that particular agency has very small capital.