Author Topic: Magna Carta for Micro, Small, and Medium Enterprises (MSMEs)  (Read 865 times)

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Magna Carta for Micro, Small, and Medium Enterprises (MSMEs)
« on: October 17, 2008, 08:16:11 AM »
By Ted P. Torres
Philippine Star

The SB Corp. is introducing new options for banks to comply with the mandatory lending provisions of Republic Act (RA) 9501, otherwise known as the Magna Carta for Micro, Small, and Medium Enterprises (MSMEs).

SB Corp., (also known as the Small Business Guarantee and Finance Corp.) is a line agency of the Department of Trade and Industry (DTI) and the agency mandate by RA 9501 to look for better compliance alternatives for financial institutions for lending to MSMEs.

RA 5901 states that all banking institutions must allocate eight percent of its total loan portfolio for microfinance and small entrepreneurs, and another two percent for medium enterprises, or a total of 10 percent of the institution’s total loan portfolio.

However, banks are finding it difficult to actually comply with the law. Commercial banks generally are awash with loans to the medium-sized entrepreneurs but find it difficult to comply with the eight-percent requirement for lending to small and micro-enterprises.

Thrift banks too find it difficult to comply with the eight-percent portion of the law. Both commercial and thrift banks are not designed to deal with lower valued but numerous in quantity small and micro-enterprises.

In contrast, rural banks have an over-compliance of loans to the small and micro sectors, but find it extremely difficult to comply with two-percent loan portfolio for medium-sized entrepreneurs.

Failure to comply is greeted with a penalty of P500,000 per quarter as banks are required to report compliance to the law on a quarterly basis.

To answer the banks compliance with the law, the Bangko Sentral ng Pilipinas (BSP) offered alternatives such as the SBGFC promissory notes, which are non-interest bearing notes.

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