Since it was first introduced in 2008, the proposed MSME Exchange is still awaiting the approval of the Bangko Sentral ng Pilipinas (BSP). The exchange was supposed to fulfill the lending provisions of Republic Act (RA) 9501, otherwise known as the Magna Carta for Micro, Small and Medium Enterprises (MSMEs). It seeks to increase access to credit for MSMEs to boost economic growth in the face of global economic credit crunch. These are the same MSMEs that kept the engines of growth running during the 1997 Asian financial crisis.
Specifically, RA 5901 states that all banking institutions in the country must allocate eight percent of their total loan portfolio for microfinance and small entrepreneurs, while two percent will be reserved for medium enterprises. Failure to comply with this provision will result in penalties for the banking institution worth PhP 500,000.00 per quarter.
The delay in the implementation of the intent of the law came after the Monetary Board of SBP expressed their reservation over the legality of setting up a MSME Exchange. However, Benel P. Lagua, President of Small Business Guarantee and Finance Corporation (SB Corp.), said that the issue about the legal impediments was already settled when the Office of the Solicitor General have opined that they can proceed with the implementation.
There were also reports that some commercial banks have scoffed at the penalties for not complying with the law and are preparing to pay the meager penalty imposed. Worse, some are prepared to devise ways to ‘go around the law.’
Commercial and thrift banks generally lend to medium-sized firms, but are having difficulty attracting small and micro enterprises because of high interest rates (15 to 24 percent) and voluminous paper requirements. On the other hand, rural banks have an over-compliance of loans to the small and micro sectors, but find it hard to comply with the two-percent loan portfolio requirements for medium-sized establishments.
"If we have a rule and institutions don’t follow them, they should be correspondingly penalized. If all they get is a slap in the wrist, the rule will never be followed and everything that the Magna Carta has envisioned will go to naught," Lagua said.
Specifically, RA 5901 states that all banking institutions in the country must allocate eight percent of their total loan portfolio for microfinance and small entrepreneurs, while two percent will be reserved for medium enterprises. Failure to comply with this provision will result in penalties for the banking institution worth PhP 500,000.00 per quarter.
The delay in the implementation of the intent of the law came after the Monetary Board of SBP expressed their reservation over the legality of setting up a MSME Exchange. However, Benel P. Lagua, President of Small Business Guarantee and Finance Corporation (SB Corp.), said that the issue about the legal impediments was already settled when the Office of the Solicitor General have opined that they can proceed with the implementation.
There were also reports that some commercial banks have scoffed at the penalties for not complying with the law and are preparing to pay the meager penalty imposed. Worse, some are prepared to devise ways to ‘go around the law.’
Commercial and thrift banks generally lend to medium-sized firms, but are having difficulty attracting small and micro enterprises because of high interest rates (15 to 24 percent) and voluminous paper requirements. On the other hand, rural banks have an over-compliance of loans to the small and micro sectors, but find it hard to comply with the two-percent loan portfolio requirements for medium-sized establishments.
"If we have a rule and institutions don’t follow them, they should be correspondingly penalized. If all they get is a slap in the wrist, the rule will never be followed and everything that the Magna Carta has envisioned will go to naught," Lagua said.
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