Press Release - Jinggoy seeks better credit assistance for small firms

SENATOR Jinggoy Ejercito Estrada has filed a bill mandating banks to allocate credit resources for micro, small, and medium enterprises (MSMEs) citing the need to keep small businesses afloat.

Estrada's Senate Bill No. 2632 seeks to require all lending institutions to allocate at least 10% of their total loan portfolio to MSMEs. Additionally, compliance will only count if loans are actually given to eligible firms.

The senator said this would mean increased access to financial support for MSMEs, which is the biggest hurdle to the growth of small businesses in the country.

Under the provisions of RA 6977, otherwise known as the Magna Carta for MSMEs, which has since "expired," banks are mandated to earmark 8% of their loan portfolio for micro and small enterprises, and 2% for medium enterprises for a period of 10 years. The 10-year mandatory period is contained in RA 9501, the amendatory law which was enacted on May 23, 2008.

"Access to finance has remained a chronic barrier to MSME growth, and even survival. As of December 2023, compliance with the prescribed allocation of loan portfolio to micro and small enterprises amounted to P200.7 billion or 1.93%, and for medium enterprises was only P301.4 billion or 2.9%," Estrada said.

A University of the Philippines Center for Integrative and Development Studies discussion paper noted that banks have been avoiding meeting the required percentage of loans for MSMEs by various means. These 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, opting 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.

"MSMEs account for 99.59% of the more than a million business establishments in the country. Sila ang bumubuhay ng ekonomiya natin at nagbibigay ng trabaho sa 65.1% ng kabuuang bilang ng mga manggagawa natin. Nararapat lamang na mabigyan sila ng sapat na suporta sa ilalim ng mga umiiral nating mga batas upang lumago at dumami pa sila. Kung madadagdagan ang bilang ng mga namumuhunan