Easier lending for MSMEs

PRESIDENTIAL consultant Jose Maria “Joey” Concepcion III reiterated the call for government, lawmakers, and financial institutions to create a friendlier environment for micro and small entrepreneurs to scale up.

Concepcion, President Rodrigo Duterte’s consultant for entrepreneurship, specifically appealed to banks to find ways to lend money to this sector, despite their lack of collateral.

“If we want to bring down the interest rates of the 5-6 scheme, we need more money in micro and small lending and we don’t need to require collateral up to a certain level of lending,” said Concepcion, who is also the Business Advisory Council (BAC) chairman of the Association of Southeast Asian Nations.

Concepcion said it is about time the private and public sector unite and help the MSME sector.

“I am not a believer of conditional cash transfer, as it leads to useless spending...handing over a check doesn’t make the person productive,” he said.

5-6 lending

“I hope down the road we will be able to convince our legislators and the cabinet to think otherwise; and push that money to our entrepreneurs, especially the micro and small, charge them with interest rates,” said Concepcion, who admitted he is not against the 5-6 scheme. He believes this lending mechanism is a big help to individuals who help themselves, those who wanted to propel their businesses.

He said many of the Filipinos turn to this informal lending system because they get to borrow money without presenting collateral they don’t have. And as more players get involved in the 5-6 scheme, Concepcion said, interest rates in the system will eventually go down.

“The goal here is to bring about inclusive financing. To me, it is not about collateral that is the biggest problem because many of our micro and small entrepreneurs don’t have collateral to scale up. In India and China, I am told they don’t require collateral. The state really helps them and funds them—their ideas, projects, and that is what we have to do,” said Concepcion.

Based on the 2015 statistical data provided by the Philippine Statistics Authority, 99.5 percent of the establishments in the Philippines are MSMEs.

Rural banks

The Go Negosyo founder said he has also reached out to the Bangko Sentral ng Pilipinas (BSP).

“I talked to BSP Governor Nestor Espenilla and told him that the way forward is not to penalize big banks on their loan performance, especially when they lend to the micro and small players,” said Concepcion.

He also urged big banks to acquire rural banks to make lending accessible to the grassroots level. He said acquisitions would empower rural banks and prevent what happened during the last Asian crisis, where more than half of the rural banks were wiped out as a result of worldwide lending not reaching the micro and small level.

Concepcion cited Banco de Oro’s acquisition of One Network Bank as a bold move and he hoped more banks would do the same, or initiate programs that would solely address the financing needs of MSMEs.

The BSP reported that MSMEs in need of capital can have an alternative source of collateral through the Credit Surety Fund (CSF). As of March, the cumulative loan releases by banks covered by the CSF amounted to P3.20 billion, benefiting 16,356 MSMEs.
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