To kick off the SME Month celebrations this July, DTI Secretary Gregory L. Domingo is spearheading the signing of a landmark memorandum of agreement between twelve signatory-institutions that will provide micro-enterprises as well as regular SMEs easier access to finance.
Recognizing that MSMEs are the backbone of the Philippine economy since they comprise 99.6% of all businesses in the country, government agencies and financing institutions have committed to support the Philippine Development Program 2011-2016 by addressing the financial needs of MSMEs. Participating in the micro-financing and SME financing initiative are the Department of Trade and Industry (DTI), the Department of Social Welfare and Development (DSWD), the Land Bank of the Philippines (LBP), the Development Bank of the Philippines (DBP), the People's Credit and Finance Corporation (PCFC), the National Livelihood Development Corporation (NLDC), the Trade and Investment Development Corporation of the Philippines (TIDCORP), the Social Security System (SSS), the Quedan and Rural Credit Guarantee Corporation (QUEDANCOR) and the National Anti-Poverty Commission (NAPC). Rounding out the group are the Small Business Corporation (SBC) and the Government Service Insurance System (GSIS).
The agreement marks a distinction between the microfinance requirements of micro enterprises and mainstream SME finance through bank loans by forming both the MSME Financing Program and the SME Finance Program.
To help MSMEs stay on their feet and gain access to the credit needed to keep their businesses afloat, MSMEs will be introduced to mainstream financing through a financial literacy program.
To simplify and harmonize existing policies and cut red tape so MSMEs can easily acquire short-term and long-term funds, representatives from the private sector such as the Financial Executives Institute (FINEX) and the Philippine Chamber of Commerce and Industries (PCCI) will be invited to participate in the MSME Finance Committee meetings to gain a better perspective about access to finance issues.
Loan pricing and loan benchmark rates will be reviewed to improve the sustainability of MSMEs since their individual circumstances should be taken into consideration along with their cost of capital.
Finally, information-sharing mechanisms on the credit status of common clients will be developed, while government financial institutions will increase their MSME lending ratios to take the lead in MSME financing.
The success of the MSME Financing Program will be monitored by the Department of Trade and Industry to serve as indicators for the success of lending and capacity-building programs, and to support policy changes in MSME development initiatives.