DTI studies proposals to boost lending to MSMEs

The Department of Trade and Industry is studying proposals to allow state financial institutions to provide loan guarantees to exporters, to address one of the biggest hurdles to boosting the competitiveness of local micro, small and medium-sized enterprises (MSMEs).

Trade Undersecretary Ponciano C. Manalo Jr. said proponents seek to enable institutions like Small Business Corp. and Philippine Export-Import Credit Agency (PhilExim) to provide guarantees, to be backed by a working fund, for loans deemed as “high risk” due to lack of collateral or track record.

“(State financial) institutions will give the guarantees and an exporter can pay a premium for that guarantee. There’s a high risk in providing loans to SMEs or exporters, so the government can step in and see how it can help and (mitigate) the risk,” Manalo said.

“A bank cannot lend money without collateral and so institutions like Philexim for instance can act as a guarantor, but the loan can come from any bank. The exporter will then have to pay Philexim a certain fee for backing the loan,” he explained. “This is how the government can spend to enable. It’s an example of how you can support the exporter without having to give a direct subsidy.”

Manalo also cited the need to implement Republic Act 9501 or the Magna Carta for MSMEs in full to help local industries gain access to capital.

But this law, exporters claimed, is not working well as intended, as the much needed financing for MSMEs has not been flowing into the sector.

Sergio R. Ortiz-Luis Jr., president of the Philippine Exporters Confederation Inc. (Philexport), had blamed the law’s faulty implementing rules and regulations.

“We need to replace the IRR so that it can work (for the benefit of MSMEs). Right now, it’s not working. Our neighbors in the Asean have solved their problems in financing the SMEs, but us here in the Philippines, we’ve remained to be in the discussion stage,” Ortiz-Luis said. ” In terms of financing, we’re not ready in the Philippines.”

Apart from financing, Philippine exporters also face a number of other constraints and challenges.

These include cumbersome and sometimes unclear procedures involved in registration, accreditation and certification for businesses; port congestion that continues to pose difficulties for those involved in the import and export of goods; and conflicting policies and regulations imposed by the government. Amy R. Remo