SBC encourages rural banks to avail of preferred shares

State-owned Small Business Corp. (SBC) is encouraging rural banks in Cebu to purchase the preferred shares SBC is offering to the banks to help them comply with the mandatory lending provision of Republic Act 9501 or the Magna Carta for Micro, Small and Medium Enterprises (MSMEs).

RA 9501 requires banks and financial institutions under the control of the Bangko Sentral ng Pilipinas to set aside 10 percent of their lending portfolio for lending to MSMEs. The eight percent should be lent to micro and small while the remaining two percent to medium enterprises.

To help banks comply with this requirement, SBC has offered banks since last year the MSME notes and the preferred shares, SBC corporate finance specialist Henry Agustin said.

“When after a year, banks are not able to comply (with RA 9501), they can loan us (SBC) the (amount needed to comply with the provision) through the MSME notes, wherein we issue promissory notes or they can buy the shares SBC is offering,” he told The Freeman in a phone interview.

Agustin said SBC in turn, will lend the proceeds of the notes and the shares to the MSMEs. Most banks in Cebu prefer the MSME notes since they have shorter maturity of six months and one year while the minimum tenure of the shares is three years. The shares however are tax-free and have a higher rate than the notes.

If banks avail of the MSME notes and shares, they are said to have complied with the law for the duration of the financial instruments they have subscribed, he said.

SBC has recently announced that it is offering P 1.6 billion preferred shares priced at P100 per share. Holders will be entitled to a fix annual dividend of four percent per annum. Minimum subscription is 2, 000 shares.

The preferred shares will be cumulative, non- voting, non-convertible nonparticipating, and does not have preemptive rights or the right granting shareholders the first crack to buy a new issue of stock. They are redeemable, as and if declared by the Issuer’s Board, on the fifth anniversary from the Listing Date (Optional Redemption Date) or on any Dividend Payment Date thereafter. Redemption will be in whole, at a price equal to the issue price plus accrued and unpaid dividends for all dividend periods up to the redemption date.

Proceeds from the preferred share issuance will support the Corporation’s capacity building programs for MSMEs and financial institutions servicing MSME financing requirements.