Banks must pitch in to aid MSMEs

Private banks must complement government support in making low-cost financing available to micro, small and medium enterprises, according to Go Negosyo chairperson Joey Concepcion.

Concepcion stressed that the government has been providing soft loans for MSMEs like in the Bayanihan Covid-19 Assistance to Restart Enterprises program which started during the onset of the pandemic in 2020, and the Pondo Para sa Pagbabago at Pag-asenso, facilitated by the Department of Trade and Industry’s Small Business Corporation.

“I don’t think it should always be the government. MSMEs don’t need to be subsidized anymore by the government in that manner, but by banks. Also, access to mentors is as important as access to the market. Also, there is a strong call to step-up digitization. My message for the big retail stores here is to make it more inclusive,” Concepcion said.

President Marcos Jr. during the event promised the revitalization of MSMEs will be among his administration’s top priorities.

“I am assuring that MSMEs will be protected and provided with ample opportunities not only to recover from these extraordinary times but to grow and thrive. I am pleased that the focus of the MSME Summit is the post-pandemic recovery and the promotion of digitization aligned with the priorities of the administration,” the President said.

According to a study by the Asian Development Bank in 2020, access to finance remains a chronic barrier for MSMEs to survive and grow, as their share of total bank credit has been falling to less than 10 percent since 2013.

“Microfinance operations by banks have been expanding since 2016, although compliance with mandatory lending levels to micro and small enterprises has not improved,” the ADB said in a study entitled “Asia Small and Medium-Sized Enterprise Monitor 2020.”

The ADB said the share of MSME loans to banks’ total lending portfolio fell to 6.1 percent, at P588.8 billion, in 2019 from 11.7 percent in 2010 as more lenders failed to comply with the mandatory credit allocation to the sector, preferring to just pay the penalty rather than take on risks associated with lending to small firms.

“Microfinance remains critical for enhancing access to finance for the poor, low-income households, and MSMEs,” the report stated.

Bottom of the pyramid

Meanwhile, Concepcion expressed gratitude to the President and the United States Ambassador to the Philippines Mary Kay Loss Carlson for extending support to local MSMEs.

“I think that’s one of the reasons why he (President Marcos) chose this as his first event to attend because even during the campaigns, he realized that MSMEs are basically at the bottom of the pyramid, especially the micro and small firms. So, how do we eliminate poverty?

MSMEs contribute to 60 percent of jobs generation. Big businesses are only one percent but contribute much smaller. So, the way forward is to really scale them up. That’s the only way,” Concepcion told the Daily Tribune.

The government, through the DTI, has recently formulated and implemented strategic goals for five key business areas benefiting MSMEs which are ensuring a favorable business climate, wide access to business financing, harmonious management, and labor relations, adapting to technology and innovation, and access to the market.

“This multi-dimensional approach will allow us to bring new light to our MSMEs and help them move forward to a more resilient and prosperous future,” Marcos added.

Full U.S. backing

Also, US Ambassador Carlson assured the US government will support efforts to support MSMEs and help local economies transform from the pandemic-induced slowdown.

“The US Agency for International Development has partnered with American companies and non-profit organizations to assist 10,000 Philippine MSMEs during the economic downturn. The USAID also partnered with microfinance institutions to disburse P14 million and micro-grants to 3,500 deserving MSMEs,” Carlson said.

Carlson added her country supports the growth of the digital economy which promises to be a strong driver for job growth and income generation, encouraging MSMEs to participate and take advantage of its benefits.

“As your enduring friend and ally, the US is honored to collaborate with the government and the people of the Philippines to support MSME businesses so that they continue to grow and propel the country’s economic transformation,” Carlson averred.

“To increase the number of jobs we need to help scale up our MSMEs. This is where the public-private partnership with the government is key. We should help our MSMEs become bigger. Any effort here will contribute to creating more jobs. This is the circle of success we create when everyone in the ecosystem grows and where no one is left behind,” according to Concepcion.

During the event, a covenant was signed by 37 business groups that committed them to work together with the government in achieving inclusive economic growth for the country’s businesses, particularly MSMEs but without the signatures of Philippine Exporters Confederation Inc. and Employers Confederation of the Philippines officials.

PhilExport and ECOP president Sergio Ortiz Luiz Jr. said, “we have already issued our own version of support more than a month ago that was widely carried by the media.”

Concepcion also stressed that he personally invited Ortiz Luis Jr. to the event and as signatory of the pact but expressed he “didn’t know what happened.”

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