Department of Trade and Industry attached agency Small Business Corporation is seeing the financial gap, or the inability of private banks, lending firms, and the government's lending arms to provide loans is now ranging from P300 billion to P400 billion.

"Even if we put together government banking institutions providing loans to entrepreneurs, as well as savings and loans associations and cooperatives, the country's financial gap still lacks from P300 to P400 billion. That's our estimate based on our study," Robert Bastillo, SBCorp president, exclusively told the DAILY TRIBUNE during his interview in the paper's online show, Straight Talk.

Bastillo said this is the main reason why small entrepreneurs have become baits to traditional loan sharks, colloquially known as the "5-6" scheme associated with Indian nationals, instead of formal sources of loans.

They would rather close shop

"This was also the reason why some businessmen opted to stop their enterprises due to this financial gap problem in the country. They would rather close shop. In fact, the International Finance Corporation estimated that the financial gap in the country is from P12 to P13 trillion, but we contradicted that because the economy of the country is not that huge," he said.

Bastillo said the whole portfolio of the banking sector in the country is approximately P8 trillion.

With the huge financial gap, Bastillo said SBCorp's P10 billion budget allocation is indeed not enough to fill in the gap.

He said that's why they have formulated programs to influence the financing sector so that MSMEs will look fundable to financial institutions, just like SBCorp's P3 or the Pondo sa Pagbabago at Pag-asenso program.

The P3 Program is a financing initiative by government to assist micro-entrepreneurs throughout the country by providing affordable and cost-efficient microloans,

"But if the P3 will be coursed through cooperatives, then we give only a 2 percent interest rate per year. Cooperatives can stretch the interest rate by as much as 30 percent per year. But cooperatives nowadays provide only a 2 percent interest rate," according to Bastillo.

Bastillo said that if the P3 is directly availed from SBCorp., they will provide the loan at one percent per month or 12 percent per year, but with a diminishing effect, compared to other private banking institutions.

Good players

MSMEs that are good payers can be rewarded by a lower interest rate of up to 10 percent per annum if they will avail of another loan, Bastillo said.

The scheme is a funding program that will provide an alternative source of financing for microentrepreneurs that is easy and quick to access, and is seen to give a boost to the micro enterprises sector, which comprises the bulk of Philippine micro, small, and medium enterprises.

The program also aims to stabilize informal lending, locally known as 5-6 lending, and prevent micro-entrepreneurs from falling victim to usurious lenders.

Added funding

Meanwhile, Bastillo insisted that if funding for the SB Corp. is added by the government, more microloans will be ushered into MSMEs.

"If the capital of P10 Billion, provided by the Magna Carta for MSMEs, will be raised around P50 to P100 billion, then we will be able to help more borrowers. However, it would take time to realize this, as amendments are needed to the Magna Carta for this request. Right now, it is still at the Committee level at the House of Representatives," according to Bastillo.