A proposed measure was filed in the Senate on Thursday urging banks to allocate credit resources for micro, small, and medium enterprises (MSMEs) in the country.
Citing the need to keep small businesses afloat, Senator Jinggoy Estrada filed Senate Bill No. (SBN) 2632, which seeks to require all lending institutions to allocate at least 10 percent of their total loan portfolio to MSMEs.
Additionally, compliance will only count if loans are actually given to eligible firms.
Estrada said the measure provides for increased access to financial support for MSMEs, which he noted would solve the biggest hurdle to the growth of small businesses in the country.
He lamented that the provisions of Republic Act 6977 or the Magna Carta for MSMEs have since “expired.”
It is supposed to mandate banks to earmark 8 percent of their loan portfolio for micro and small enterprises, and 2 percent for medium enterprises for 10 years.
The 10-year mandatory period is contained in RA 9501—the amendatory law, which was enacted on 23 May 2008.
Estrada said the access to finance has remained a chronic barrier to MSME growth and even survival.
As of December 2023, Estrada noted that the compliance with the prescribed allocation of the loan portfolio to micro and small enterprises amounted to P200.7 billion or 1.93 percent, and for medium enterprises was only P301.4 billion or 2.9 percent.
The University of the Philippines Center for Integrative and Development Studies, in its research paper, noted that the banks have been avoiding meeting the required percentage of loans for MSMEs by various means, which include giving most SME funds to larger firms pretending to be medium-sized, depositing the required amount with the Bangko Sentral ng Pilipinas (BSP), instead of lending to SMEs.
These banks opted to pay fines rather than setting aside funds for MSME lending, or investing in preferred stocks issued by Small Business Corp. (SBC) as an alternative way to support MSMEs.
Estrada stressed the MSMEs account for 99.59 percent of the more than a million business establishments in the country.
“They are building our economy and provide employment to about 65.1 percent of the country’s total workforce,” he said.
