Bill seeks to address the missing middle

While the government is trying to provide all it can to the micro enterprises, there is a segment in the entrepreneurship market that needs attention: the missing middle.

The proposed bill on Credit Surety Fund Cooperative Act is now in the period of individual amendments. This is another measure under Money in what Senator Bam Aquino’s measures to address inclusive growth. The two others being Mentorship and Market. This measure seeks to support small and medium enterprises in accessing credit.

“This targets the missing middle – maybe something applicable to the SMEs,” Aquino said at the P & G SME Leadership College. The missing middle refers to SMEs with loan requirements that range from R500,000 to R5 million will be catered to by the Credit Surety Fund Cooperative Act or the CSF.

“This is what we perceive to be missing in our financing landscape,” he said.

When it comes to micro, there are already the cooperatives and the microfinance institutions. When it comes to the medium and large, the banks are actually quite willing to provide loans.

“But this small enterprise space that we perceive to still be a missing middle will, hopefully, be catered t h r o u g h t h e C r e d i t S u r e t y Fu n d Cooperative Act,” Aquino explained.

The smaller enterprise’s loan needs that range from R500,000 to R5 million are too large for microfinance institutions but still perceived to be too risky for banks. Already passed in Congress, and is expected to be passed within the year.

The CSF will be put up by the local government unit, the cooperative and the government financial institution. So for instance, the LGU, coop and the LandBank (GFI) will contribute R5 million issues to the fund, the Bangko Sentral ng Pilipinas will give ten times multiplier sort of a guarantee depending on the results of risk assessment.

The BSP has been pushing for this kind of measure as part of its mandate for inclusive financing.

Aquino explained that once an enterprise has graduated from micro meaning he has orders already, but he needs to expand capacity but cannot access to credit because he still has to collateral, the CSF can come in provide that financing.

“This is an important piece because this will show a complete financing path,” he explained.

The entire idea is to institutionalize a financing landscape for all the MSMEs.

“So hopefully we’ll be able to provide loans at this space with comparable rates completing the whole financial inclusion supply chain,” he added.