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SoNA 2020

Empowering MSME

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Economic reboot Jumpstarting the micro, small and medium enterprises will restart the economy.

The micro, small and medium scale enterprises, or MSME, comprise bulk or 99.5 percent of the businesses in the country; hence, the need to constantly empower and equip them to further contribute in the local economy.

During President Rodrigo Duterte’s State of the Nation Address (SoNA) last year, almost 86,000 of the MSME have received over P3 billion loans, through the efforts of the Department of Trade and Industry (DTI).

This year, as the dreaded coronavirus disease (COVID-19) impaled majority of businesses, including MSME, the government have acted swiftly to address their needs through various programs and initiatives to help support the sector.

Trade Secretary Ramon Lopez earlier sought a P30 billion fund from state-run banks, Land Bank of the Philippines and the Development Bank of the Philippines, to accommodate low-interest loan programs for MSME.

Likewise, the agency has allotted P1 billion for its COVID-19 Assistance to Restart Enterprises (CARES) program, the funds for which came from its financing arm, Small Business (SB) Corp.

However, due to the volume of applications received by the DTI, the Cabinet official said they would need more than twice the initial amount.

Lopez said SB Corp. has already received some 22,932 loan applications, translating to over P2 billion.

“The target is to use up this P1 billion by end of July. But since many applied, we’re hoping for an additional budget that would come from the stimulus packages being proposed in Congress,” he explained.

While at it, the Trade chief said they are looking at their portfolio fund amounting to around P3.5 billion to fill the funding gap in their CARES program.

Latest data from SB Corp. shows that some P22 million loans have already been disbursed to 286 borrowers as of 8 July 2020.

For repatriated overseas Filipino workers, the agency has opened a P100 million loan facility to help cushion the impact of the pandemic.

Further, the Bangko Sentral ng Pilipinas (BSP) executed a salvo of rate cuts, both in its key interest and bank deposit reserve levels, injecting the financial system with additional liquidity.

With the additional liquidity available, banks now have an increased lending capacity coupled with lower interest rates, encouraging the public to apply for a loan, especially those affected by the health crisis.

Still, the BSP adopted relief measures to support the MSME sector, including amendments to the regulatory capital treatment of exposures to MSME, which will free up capital and allow BSP-supervised financial institutions to extend more credit to such establishments.

CREATE to support MSME

Meanwhile, the repackaged Corporate Recovery and Tax Incentives for Enterprises, or CREATE, was eyed to help energize the MSME sector, as among its key features was the rationalization of the current incentive program, which favors a select few corporations.

Various MSME groups earlier expressed their support for the reform as CREATE was eyed to attract investments toward the country, helping local businesses to bounce back from the impact of the pandemic, while creating more job opportunities for Filipinos.

Still, the proposed reform intends to lower the current 30 percent corporate income tax rate to just 20 percent over a phased period, the first reduction for which was eyed at five percent and will be implemented immediately upon the lawmakers’ nod for the bill.

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