Following President Rodrigo Duterte’s directive to replace the “5-6” money lending system and provide an affordable micro-financing for the country’s micro, small and medium enterprises (MSMEs), the government’s Pondo sa Pagbabago at Pag-asenso (P3) program pilots this month in Mindoro, Sarangani and Leyte, among the top 30 poorest provinces, to represent Luzon, Visayas and Mindanao, the country’s Trade Chief said.
“The P3 is designed to bring down the interest rate at which micro-finance is made available to micro enterprises,” said Department of Trade and Industry (DTI) Secretary Ramon Lopez.
The 2017 General Appropriations Act has included an initial funding of PhP 1 billion for financial assistance, a part of the planned PhP 19 billion financing initiative for micro and small businesses in the next five years.
The program’s fund will be lent out in the business centers of the poorest provinces (based on poverty incidence), where the participating microfinance institutions (MFIs) and the Small Business Corporation (SB Corp.) can operate.
Here’s the List of Some 20 Poorest Provinces in the Philippines:
1. Lanao del Sur (ARMM)
2. Sulu (ARMM)
3. Sarangani (Region 12)
4. Northern Samar (Region 8)
5. Maguindanao (ARMM)
6. Bukidnon (Region 10)
7. Sultan Kudarat (Region 12)
8. Zamboanga del Norte (Region 9)
9. Siquijor (Region 7)
10. Agusan del Sur (Caraga)
11. Eastern Samar (Region 8)
12. Lanao del Norte (Region 10)
13. Mt. Province (CAR)
14. Western Samar (Region 8)
15. North Cotabato (Region 12)
16. Catanduanes (Region 5)
17. Leyte (Region 8)
18. Negros Oriental (Region 7)
19. Zamboanga Sibugay (Region 9)
20. Sorsogon (Region 5)
An attached agency of DTI, SB Corp. shall administer the P3 Program, including the creation of a Program Management Office (PMO), which will open a separate back account for the P3 Program, to oversee the management and monitoring of fund.
“Fund delivery to micro-enterprises shall be carried out in either by wholesale lending to non-bank financial institutions like MFI-NGOs, and cooperatives which shall on-lend the fund to beneficiaries or by direct lending by SB Corp,” Sec. Lopez said.
Priority beneficiaries include micro-enterprises and entrepreneurs that do not have easy access to credit, or are accessing credit at very high cost, such as, micro-entrepreneurs, market vendors, agri-businessmen and members of cooperatives, industry associations and co-operators.
Loanable amount per end-borrower can range from PhP 5,000.00 for start-ups to PhP 300,000.00, with maximum interest rate of 26% per annum with no collateral requirement. This rate is significantly below the 20% per day/ week/ month charged by “5-6” lenders. It is also lower than what is charged by most MFIs.
MFIs may opt for portfolio guarantee cover of up to 15% of their P3 loan portfolio from SB Corp at a guarantee fee of 0.4%. The guarantee feature is seen to help MFIs address the P3 Program’s inherent risk. The guarantee fund will be sourced from the P3 fund.
P3 allocates PhP 100 million for direct lending by SB Corp. Target loan beneficiaries are the small enterprises in priority and emerging industries, start-up businesses and technology innovators.
Minimum loan amount will be PhP 300,000.00 with interest rate capped at 10% p.a., with or without collateral cover.
“This alternative funding dedicated for micro and small enterprises is meant to discourage the 5-6 money lending system in our country,” said Sec. Lopez, adding that through the established MFIs, the government will reach even the smallest of entrepreneurs in the country.