A BUSINESS chamber has called on the formal financial institutions to ease loan guidelines for the micro, small, and medium enterprises (MSMEs) to cushion their losses due to coronavirus disease (Covid-19).
European Chamber of Commerce in the Philippines-Southern Mindanao Business Council (ECCP-SMBC) chair Antonio Peralta said the among concerns of the MSMEs are their access to financing to pay for their financial obligations such as credit cards and loan amortizations.
“The MSMEs are the most vulnerable sector here given the size of their business and minimal credit support they get from formal credit institutions. I can just imagine the extreme difficulties that MSMEs face in just trying to keep their business afloat,” he said.
He said that some major banks have already responded to their appeal to extend their payment deadlines.
However, he said, there is still a need for a more favorable and easy access to loans for small businesses.
“There’s still much to be done in terms of addressing the matter of access to credit by MSMEs starting with the easing of stringent loan underwriting guidelines which to date has still been asset based instead of a cash flow based model,” he said.
“These credit gaps have been a viable market for informal lenders and as such have resulted in high interest payments for MSMEs,” he added.
Meanwhile, the Small Business Corporation, an agency under the Department of Trade and Industry (DTI), has made available about P1 billion loan facility.
In a statement on March 24, DTI said Enterprise Rehabilitation Financing (ERF) facility will be implemented after the community quarantine is lifted by the national government and the respective local government units (LGUs).
The agency added, “the ERF loan fund is open to micro and small enterprises with at least one year continuous operation prior to March 2020, and whose businesses suffered drastic reduction in sales during the ensuing epidemic.
The micro businesses with asset size is not more than P3 million may borrow between P10,000 to P200,000.
Small enterprises with asset size of not more than P10 million may borrow funding up to P500,000.
The loan will have an interest rate of 0.5 percent per month. The business owners will start paying their loans as soon as their business recovers. (RAG)