Bankers’ club eyes financial literacy sessions for SMEs

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Saturday, July 12, 2014


THE newly-elected president of Cebu Bankers’ Club said he will initiate programs for small and medium enterprises (SME) to improve their financial literacy.

Cebu Bankers Club president Gino Gonzales, in an interview, said an inadequate level of financial literacy is a major constraint to the growth of SMEs. He believes bank organizations like theirs play a major role in boosting financial awareness in this sector to encourage them to participate in formal banking.

Gonzales plans to come up with roundtable discussions to be participated in by banks and the SME sector in Cebu, not only to create linkages but to boost financial literacy, especially in terms of cash management and access to credit.

“The SME sector needs to know that banks are here to help them grow their business.

One way to address the gap is to sit down together, discuss concerns and come up with solutions,” said Gonzales.

Extra liquidity

He quickly added that banks these days have come up with customized products that are “SME-friendly.”

Gonzales, who is the Area head for Central Metro Cebu of the Philippine National Bank, said the banking industry is eager to reach out to this sector because of the excess liquidity in the financial system, which they expect will be taken advantage of by the small and medium players.

However, the informality of documentation has so far prevented banks from lending much to this sector.

“There are general requirements that banks ask: credit history, collateral and financial records, which many of the SMEs don’t have or aren’t aware of, which we will address during the roundtable discussions,” said Gonzales.

Cebu Bankers Cebu has about 40 member-banks.

Under Republic Act 9405 or the Magna Carta for MSMEs, banks are required to allocate 10 percent of their credit portfolio for small businesses. Specifically, eight percent of their loan portfolio should be set aside for micro and small businesses, while two percent should be allocated for medium-sized firms.

Banks will be fined up to P500,000 for non-compliance.

But even with this law, a study of the Asian Development Bank (ADB) revealed financial resources for this sector are still scarce.

They’d prefer fines?

ADB said large commercial banks would rather pay the annual P500,000 fine than set aside funds for lending to borrowers deemed risky such as MSMEs.

“Most of Asia’s smaller firms are faced with difficulties in obtaining finance,” ADB Office of Regional Economic Integration Deputy Head Noritaka Akamatsu said. “SMEs need to be able to tap a wider range of non-bank financing options in addition to bank loans, including capital markets, if they are to realize their potential.”

MSMEs make up 99 percent of the total business enterprises in the Philippines. Sixty percent of the country’s labor force works in this sector.

The ADB generally defined SMEs as enterprises with a small workforce or low assets.

They make up 98 percent of all businesses and provide jobs for 66 percent of the labor force in Asia, but they represent only 38 percent of the region’s gross domestic product.

Published in the Sun.Star Cebu newspaper on July 12, 2014.

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