MSMEs running out of working capital during lockdown

A SECOND lockdown would devastate the micro, small and medium enterprise (MSME) sector because their working capital has been depleted with the shutdown of most businesses as banks grow more reluctant to lend because of the heightened bad-loan risk, Presidential Adviser for Entrepreneurship Jose Maria A. Concepcion III said.

“We have to make sure this lockdown succeeds. Because if it fails then the country cannot afford a second lockdown. If we continue with the lockdown of course mas malaking problema para sa mga MSMEs natin kasi ‘yung working capital nila ubos na (It will be a bigger problem for MSMEs because their working capital has been wiped out) in this first round and then ‘yung funding galing sa mga bangko ay wala pa diyan kasi nahirapan din ang bangko na mag-lend kasi baka lumaki ‘yung exposure nila (bank funding will dry up because of the heightened exposure to bad loans),” he said in a radio interview Thursday.

Mr. Concepcion added that the main problem of MSMEs during the COVID-19 outbreak is that they cannot obtain additional funding from banks.

“Ang bangko kasi, once confidence starts to (weaken), baka may mag-collapse din na bangko (Banks are worried about a loss of confidence which could collapse the system) so that’s what we don’t want to happen. So (the banks), because of fear, (are) pulling back. They’re not lending and they’re doing selective lending so talagang matatamaan itong mga MSMEs (the MSMEs are really going to take a hit),” he said.

Mr. Concepcion noted that employees are afraid to work because of the fear of contracting the virus.

“Many are not sure if they can be tested. Fear is really moving around very strong as they see the cases moving higher, mas lalo silang natatakot (the more the fear spreads),” he said.

“They may have one to two months’ leave and support from the government pero pagkatapos nu’n, wala na silang maipambibili para sa pagkain (when that runs out, they won’t have anything left to buy food),” he added.

Mr. Concepcion said the Republic Act 11469 or the Bayanihan to Heal As One Act will help the Executive Department define priorities for stimulus.

“What would happen here is that the Secretary of Finance can now work on the current budget and reallocate and prioritize what is more pressing which is ‘yung mga nawala sa trabaho, itong mga contractual employees natin. (the lost jobs, particularly among contractuals) So the program of this administration right now is to focus really on the supply of food. They are looking at expanding the cash transfers. Those are what’s considered urgent (right now),” he said.

The second phase of the government’s efforts will be to revive businesses, Mr. Concepcion added.

“That stimulus package is going to be important to revive, to reenergize the business community,” adding that MSMEs are critical because ”they connect all the way down to the poor,” he said.

Mr. Concepcion said it was important that the current “lockdown” succeeds.

“So within this one month, you will know who is sick and who is not sick. We have to prevent a second lockdown from happening (because) by this Sunday it will be the end of two weeks so makikita natin siguro maraming cases lalabas ‘yan (so we will see a lot of cases emerging). But before four weeks end, (maybe) things should be stabilized,” he said.

Once the lockdown ends, Mr. Concepcion said that the government should focus on reviving the manufacturing sector.

“Once we are over this lockdown, the most important thing is we have to go back to manufacturing. We have to run our plants because this is what will give the people jobs. We cannot lock down again because then nobody will have jobs, the government cannot continue giving money, giving food because we will run out of that,” Mr. Concepcion said. — for every percentage-point contraction in economic growth.

Separately, Mr. Dominguez also urged his fellow governors at the Asian Development Bank (ADB) to give President Masatsugu Asakawa more leeway as the multilateral lender addresses its member-countries needs during the global health crisis.

“Extraordinary times call for extraordinary measures. A certain degree of discretion ought to be provided to the President on administrative matters, such as allocating the Bank’s budget and authority to approve crisis-related programs and projects, within reasonable limits,” Mr. Dominguez said in his letter to the other 67 ADB governors.

The government rolled out an initial P27.1-billion economic stimulus package to help virus-affected sectors while the recentlysigned law allows the government to realign as much as P275 billion from the national budget and make off-budget outlays to the emergency subsidy program.

The World Bank has committed to provide a $100-million loan to the Philippines while the ADB has extended a $3-million grant.

Economic planners expect losses of between P428.7 billion to P1.355.6 trillion in gross value added, equivalent to 2.1-6.6% of gross domestic product, due to the economic impact of COVID -19. —