Sun.Star Economic Forum

ACCESS to finance by the small medium enterprises (SMEs) is not due to lack of funds but reluctance of private banks to lend to SMEs,  said Rafaelita M. Aldaba of Philippine Institute for Development Studies.

Speaking before the Sun.Star Economic Forum Wednesday, Aldaba said the government lending programs are directed mainly to micro-enterprises and livelihood programs.

The Magna Carta for Small Enterprises mandates all lending insitutions to set aside eight percent of their total loan portfolio to SMEs (six percent for small and two percent for medium) and the creation of the small business guarantee and finance corporation for SME financing needs.

Gerardo Butardo of the Bangko Sentral ng Pilipinas during the open forum on the other hand reported that based on their monitoring,  banks have exceeded the eight percent requirement. He said as of December 2008 bank compliance reached 18.44 percent and 16.73 percent as of March 2009.

Another issue faced by SMEs is the high cost of raw materials and inputs, caused by infrastructure and communication problems.

Electronics makes up 63 percent of exports, and it is highly concentrated on semi-conductor products, said Rafaelita Aldaba.

SMEs in garments sector don’t have local raw material supplier, and are dependent on imported products.

SME automotive sector remains underdeveloped; only 10-15 percent of parts locally sourced, added Sun.Star Economic Forum speaker Rafaelita Aldaba.

Trainings conducted by groups on SMEs resulted in output, work flow improvements, Aldaba said.

Aldaba said among the things the government can do for SMEs:

• Develop local suppliers/parts: increase value added of MNCs;
• Design complete package for technical assistance, training, access to & availability of finance;
• Promote outsourcing/subcontracting arrangements;
• Increase government subsidies on clustering activities & other public-private partnerships like EBESE in         automotive including technology upgrading & HRD programs;
• Improve all aspects of competitiveness crucial to create linkages, higher value added;
• Create & maintain SME database;
• Government priority on SMEs that have GPN industries, separate cottage industry microenterprises from         SMEs, designate one agency for SME promotion

Wholesale and retail and manufacturing contribute over 40 percent in employment within SME sector.