Tuesday, July 08, 2008 MSME law teaches small businesses credit discipline
A DEVELOPMENT financing institution believes the new Magna Carta for Micro, Small and Medium Enterprises (MSME) will prompt MSMEs to exercise credit discipline.
Virgilio Angelo, chairman and chief executive officer of Small Business Corp. (SB Corp.), said MSMEs should also realize the importance of maintaining reliable financial books when they want to access bank loans.
Although Republic Act (RA) 9501—also known as the Magna Carta for Small Enterprises—emphasizes the need for banking institutions to reach out to the MSME market, Angelo said small businesses should also learn financial discipline for them to grow into large businesses.
As part of its function, SB Corp. will come up with capacity building programs and trainings to make viable businesses out of the MSME group.
In the meantime, Angelo also said that banking institutions, at present, are still “collateral-oriented.” “We need to temper that,” he added.
With the passing into law of RA 9501, the government has also mandated all lending institutions to set aside a total of 10 percent from its loan portfolio for the MSME sector. Eight percent will be allocated for micro and small enterprises while two percent will be set aside for medium-sized companies.
As required by the Bangko Sentral ng Pilipinas, covered lending institutions include commercial banks and conduit financing
agencies, like micro-financing institutions.
Regional offices
Since SB Corp.’s capitalization was also increased from P5 billion to P10 billion, Angelo said it will put up more offices regionally to reach more recipients, both for its wholesale and retail markets.
In 2010, SB Corp. targets to release a total of P161 billion.
As of the end of 2007, a total of P126 billion was already released in the last six years that SB Corp. has been in operation. This has already benefited 60,000 recipients nationwide.
Under the Department of Trade and Industry’s SME Unified Lending Opportunities for National Growth program, SB Corp. is considered as the third biggest lender.
SB Corp. said the Vi-sayas and Mindanao market have posted the highest growth in terms of loan takeup in the last two years.
“Fresh loans” for the first six months of this year from the Visayas and Mindanao have already reached P950 million. About 3,000 to 4,000 of its 2008 beneficiaries are from the Visayas.
Under its wholesale lending portfolio, SB Corp. allocated P600 million while P130 million are for retail. It allocated P150 million for micro-finance institutions.
The company will also create venture capital funds to promote the MSME sector. (DME)
