Government financial institution encourages borrowing
The Small Business Corp. wants to lend money to businesses with asset sizes not exceeding P3 million and dissuade entrepreneurs from availing themselves of informal lending services
Micro-entrepreneurs who want to expand their business may opt to approach the government’s Small Business (SB) Corp. for financial assistance.
This is what entrepreneur Maria Elena Teh, owner of ET Printshoppe, did when she learned about SB Corp. in one of the sessions of the Department of Trade and Industry’s (DTI) Kapatid Mentor Me (KMM) program.
She availed herself of financial assistance totaling P1.1 million that was payable in one year. She availed herself of P800,000 capital at first to purchase a laser printing machine and later on added some P300,000.
Teh said she was attracted to the agency’s interest rate of 9.75 percent per annum, better than the private banks’ business loan offers.
“I didn’t know about SB Corp. until I joined KMM. Knowing their mandate that is help us micro entrepreneurs, I grabbed the opportunity,” Teh said, adding that the payment terms of the agency is friendlier to micro businesses.
Teh said that access to finance is one of the factors that hinder micro businesses from growing. She, too, once approached 5-6 lenders just to survive in the business.
“But taas jud kaayo ilang interest. Pati ang profit nimo sila na
ang mukaon (Their rates are too high. They eat up the profits),” she recalled.
Teh has been in the printing business for 14 years. She was part of the pioneering batch of DTI’s KMM in Cebu. Looking forward to future expansions, Teh said she wants to avail herself of more loans through government financing programs.
SB Corp. Visayas Group Head Francisco Buenavides said the state-run financial institution has various programs addressed to help MSMEs improve their businesses.
Fewer requirements
One of the government’s recent lending programs aimed at curbing the practice of borrowing from informal lenders is the government’s Pondo sa Pagbabago at Pag-asenso (P3) program where qualified micro-entrepreneur-borrowers can avail themselves of loans ranging from P5,000 to P100,000, provided they are able to submit some basic requirements.
Buenavides said unlike big lending institutions that require more documents, P3 makes access to capital friendlier to microentrepreneurs.
Borrowers only need to submit an application form, a valid government-issued ID and a copy of a business permit.
But for those who don’t have business registration with the DTI yet, a certificate from the barangay signifying they’ve been in business for at least a year and a certificate from the barangay signifying they’re a resident with no adverse record for a year will do.
According to Buenavides, they’ve been in constant talks with cooperatives, associations and microfinance institutions (MFIs) so they could reach out to micro-entrepreneurs and encourage them to take advantage of the P3 program.
He said they aim to connect the micro business owners into the formal lending sector and divert them from the informal channels, including the popular 5-6 lending scheme.
For the P3 program, Buenavides said they charge a 2.5-percent interest rate per month as opposed to the 10 percent per month interest collected by informal lenders.
SB Corp. Visayas released some P745 million for MSME borrowing, as of June. According to Buenavides, the P3 program has assisted some 7,500 MSMEs during the first semester.
SB Corp. aims to release at least P1.7 billion in P3 loans nationwide by the end of this year.
Micro-entrepreneurs are businesses with assets that are P3 million and below.
SB Corp. is currently polishing its processing and releasing system to make access to finance easier and accessible.
After a visit by SB Corp. staff, it would take five working days for a borrower to access the loan.
“We are aiming to shorten the processing time to accommodate more borrowers and make access to capital really accessible,” said Buenavides.
The government financial institution is also in talks with several remittance and bayad centers, including banks, for easier payment transactions.
At present, most loan transactions are coursed through the Land Bank of the Philippines (LBP) and some private banks, although the state-run lending agency has already started tapping third party payment agents like Cebuana Lhuillier for pilot testing.
Partnership
Last Sept. 19, SB Corp. and LBP agreed to provide fast and efficient alternative payment collection services to MSMEs through the latter’s e-Payment service Link.BizPortal.
Under the memorandum of agreement (MOA), SB Corp will avail itself of Landbank’s e-Payment facility under its Payment Service Provider (PSP).
On the other hand, Landbank, through its Link.BizPortal, will allow SB Corp. clients to transact business or pay monetary obligations to SB Corp. via the internet using any e-Payment models offered by the bank.
The service will only be available to clients maintaining a Philippine peso account, either with Landbank or other banks.
SB Corp. president and CEO Ma. Luna Cacanando, in a statement, welcomed the partnership, saying the agreement is “very timely and useful” for MSME clients, especially with the P3 program going on full gear.
The P3 program released P840.61 million for MSMEs’ borrowing last year.