Alternative to the 5-6 loan sharks

SBCorp develops loan products that are either financial or social in nature. To balance out the risks associated with socially responsive products, SBCorp has categorized loan amounts vis-à-vis the equivalent asset size.

PURSUING our advocacy for the MSMEs (Micro, Small and Medium Enterprises) is something we just need to do. We know, they comprise 99.9 percent of all businesses nationwide. Unfortunately, Filipino entrepreneurs commonly encounter concerns on where to source the funds needed to get their business going, or to expand the enterprise. Seeing the opportunities for growth but unable to move for a much bigger volume and consequently better profitability for their respective businesses must be frustrating to our MSMEs.

The desire to pursue more business necessarily entails bigger operating capital. But without a better recourse, meaning, an option for lower cost of borrowed money, the entrepreneur is forced to borrow from lenders who are notorious for their 5-6 loan system, which charges a nominal interest rate of 20 percent over an agreed period of time.

Why do our MSMEs accept a 5-6 loan arrangement? Everybody knows that the 5-6 loan sharks are easy to approach and they require no collateral. There’s no paperwork to accomplish or documents to submit.

These lenders would not even ask for a Barangay clearance. So, it’s really easy to borrow money from them.

To get me educated further on the issue of the chronic national concern of MSMEs, having attended an MSME Summit on July 19 at the Manila Hotel, I sought for answers to the problem. At the Manila Pavilion, after the event, I invited Mr. Robert “Bobby” Bastillo, a jolly, good-looking smart guy, best known as a finance and management guru, who is now the President and CEO of Small Business Corporation. Over a cup of coffee, we had a pretty long discussion on the issues and concerns confronting MSMEs and what the GOCC he leads is doing to help them.

The Small Business Corporation

(SBCorp) is a non-bank, governmentowned and -controlled corporation (GOCC) created in 1991 under the Magna Carta for Micro, Small and Medium Enterprises (Republic Act No. 6977, as amended). It is administratively attached to the Department of Trade and Industry (DTI) and is mandated to “implement comprehensive policies and programs to assist MSMEs in all areas including, but not limited to, finance and information services, training and marketing.”

SBCorp has provided financing, financial management and capacity building programs to over 300,000 MSMEs and other businesses. These include the following: a) retail lending to MSMEs; b) wholesale lending to lower-capitalized financial institutions, cooperatives, and foundations; c) venture capital or equity investment financing; and, d) financial management and capacity building programs for rural banks.

More financing efforts are in the pipeline, thanks to the good performing SBCorp governing Board led by Acting Chair and DTI USec Bles Latayona, who is representing Secretary Fred Pascual. Of course, we also commend the other pro-active and industrious members, namely, Directors Manuel Bendigo, Annie

Candelaria, Jude Doctora, Arnulfo Galdo, Elvira Go, Voltaire Magpayo and Jacob Vasquez, in tandem with the SBCorp’s management core headed by EVP Santi Lim and SVP Lito Acupan.

SBCorp develops loan products that are either financial or social in nature. To balance out the risks associated with socially responsive products, SBCorp has categorized loan amounts vis-à-vis the equivalent asset size.

For example, if the nature of the loan is micro social with an asset size of P150,000 to P1.5 million, the loan amount could be in the range of P30,000 to P100,000. If the borrower belongs to the micro and small sector, with an asset size of P1.5 million to P15 million, the applicant can borrow from P300,000 to P3 million.

Micro-social loans are funded using the Pondo sa Pagbabago at Pagasenso (P3) fund, which is a subsidy fund granted to SBCorp via annual appropriations under the General Appropriations Act. Corporate funds are also used to fund other micro-social loans, such as the Enterprise Rehabilitation Financing (ERF) program, which aims to help finance struggling businesses affected by calamities and other disruptive circumstances.

Meanwhile, micro, small, and medium financial loans are exclusively corporate-funded, except for loans covered under the P3 program.

To be continued

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