DTI pushes amendments to Magna Carta for MSMEs

MANILA, Philippines — The Department of Trade and Industry (DTI) is pushing for legislative measures to amend the Magna Carta for micro, small and medium enterprises (MSMEs) and institutionalize the microlending program Pondo sa Pagbabago at Pag-asenso (P3) under the new Congress.

“For the 18th Congress, we are pushing for the amendment of the Magna Carta for MSMEs and the enactment of a law that will institutionalize P3 program,” Trade Secretary Ramon Lopez said during the National MSME Summit 2019 yesterday.

He said the proposed amendments to the Magna Carta for MSMEs include extending the mandatory allocation of credit resources to set aside 10 percent of their loan portfolio for lending to MSMEs to provide an alternative compliance through lending by microfinance institutions and cooperatives as conduits.

The proposed amendments to the Magna Carta for MSMEs will also include a provision requiring private malls and supermarkets to allocate at least 10 percent of their total selling area to qualified MSMEs for free.

Lopez said the proposed amendments would likewise cover quick payments for MSMEs either upon delivery of goods, or within 15 days at most.

“When payments are made immediately, they will not have capital difficulty and there would be less borrowings,” he said.

As access to financing is among the challenges faced by MSMEs, the DTI is also pushing for a bill to institutionalize the P3 Fund, a program launched to eradicate the “5-6” money lending system which leads many individuals to fall into a debt trap.

While borrowers can secure loans without collateral or any documentary requirement under the “5-6” system, they would have to pay exorbitant interest rates which reach 20 percent or even higher.

Salient features of the P3 bill include institutionalization of the P3 fund, and regular fund sourcing through the General Appropriations Act.

Lopez said the DTI would want a specific amount to be allocated for the P3 program every year under the bill, similar to when the proposed measure was initially being discussed during the previous Congress to be able to replace the estimated P30 billion worth of funds under the “5-6” system.

He said the previous P3 bill initially proposed to allocate P4 billion every year for a period of four years for the program.

“I am taking off from the P30 billion target,  the estimated amount of ‘5-6’ in the system. And we are trying, as mentioned, we want to replace it, kill it, put it aside. The replacement should be quite close to that amount,” he said.

Under the P3 bill, it is also proposed that loans would have a 2.5 percent monthly interest rate, similar to how the P3 program is being implemented at present.

In addition, the grant of authority to the MSME Development Council to exercise oversight function on the utilization and disbursement of the P3 Fund, is being put forward under the P3 bill.

The P3 program which only had a P2 billion funding when it started, is set to get an additional P1.5 billion to be available for lending this year.

As of end-May, DTI’s financing arm SB Corp. has released P3.10 billion worth of loans to 83,088 beneficiaries under the P3 program.

The program allows a microenterprise to borrow P5,000 up to P200,000, depending on the requirement and repayment capacity with no collateral requirement.

“We assure you that the end goal of the enactment of the Magna Carta for MSMEs and P3 bill would be more programs and services to support more MSMEs,” Lopez said.

MSMEs make up bulk or 99.56 percent of all registered businesses in the Philippines, and account for 62.9 percent of the country’s total employment.