DTI secures P1B for MSME lending

The Department of Trade and Industry (DTI) will make available by February next year an additional P1 billion in funding for micro, small and medium sized enterprises (MSMEs), after it secured approval from lawmakers.

Trade Secretary Ramon M. Lopez said Monday the fund would be administered by DTI’s financing arm, Small Business Corp. (SB Corp.), which will in turn course the loans to MSMEs through microfinance institutions.

“Our budget has been approved in Senate… Hopefully, this (fund) will jumpstart economic activities. The P1 billion will be under the DTI budget and will be held in trust by SB Corp., which will provide to conduit institutions like microfinance institutions and cooperatives, who will lend to the end-clients,” Lopez said.

“We’re studying now the top five microfinance institutions who have the network, and infrastructure that can carry out the lending and collection processes. We’re also doing our homework as to who would be the beneficiaries. We have a preference to provide these loans to the poorest regions, provinces and municipalities so that the assistance of the government will be felt at the grassroots level,” he explained.

Lopez explained that while there might be a few big borrowers who may take out loans worth P200,000 at most, their target was the small borrowers—beneficiaries that are expected to take out loans amounting to around P10,000. That amount can be used by market vendors and tricycle drivers, for example.

According to Lopez, they are looking at more than 100,000 beneficiaries, who will not have to present any collateral to secure the loan.

The proposed interest rate will range from 2 to 2.5 percent a month.

The additional funding sought by the DTI is meant to help address the lack of access to financing, which is deemed one of the biggest hurdles to their growth and expansion.

At the same time, these loans are expected to discourage MSMEs from tapping loan sharks who usually impose an interest rate of around 20 percent a month, Lopez earlier said.

If the rollout of this additional funding will be successful, the target is to make available as much as P18 billion worth of loans for the MSMEs.