Interest-free loans, other aid for coronavirus-hit MSMEs

Coronavirus pandemic-hit micro, small and medium enterprises (MSMEs) can gain access to interest-free loans while the manufacturing sector can avail of assistance to meet the needs of the domestic markets and export commitments under the proposed Philippine Economic Stimulus Act of 2020 (PESA).

House Committee on Trade and Industry chair Rep. Weslie Gatchalian said the proposed P1.4-trillion economic stimulus package for businesses and employees affected by coronavirus disease 2019 (Covid-19) prioritizes granting interest-free loans by the Small Business Corporation (SB Corp.) for MSMEs with a provision of a “loan Forgiveness” program.

While the exact amount is not yet final, Gatchalian said it has been proposed that the SB Corp. get a budget of P75 billion to expand its loan programs for MSMEs or enterprises which are out-of-reach of the formal banking industry.

“The loan forgiveness program means that the SB Corp. may waive a maximum of 15 percent of the loan provided that the borrowers pay all their installments on time and according to the payment schedule agreed upon,” he said in a webinar.

Gatchalian said an amount of P50 billion for 2020 and another P50 billion for 2021 are also proposed to be appropriated in favor of the Land Bank of the Philippines (LBP) and Development Bank of the Philippines (DBP).

“This amount will be used to provide a loan program for non-essential businesses to assist and encourage them to continue investing in their businesses,” he added.

Gatchalian said he is still lobbying for additional funds to cover more MSMEs affected by the coronavirus.

Apart from the loan programs, Gatchalian said the PESA bill shall offer grants for the provision of education, training, and guidance to MSMEs.

“The DTI will be providing assistance on innovation of business practices, upskilling, reskilling of workers, identification of new market trends, the management of tele-work, including work-from-home arrangements and other relevant business practices. And most importantly, the utilization of online platforms to facilitate business transactions,” he said.

Moreover, Gatchalian said assistance will be given to business entities engaged in the manufacture of products and supply of services to meet the needs of the domestic market and export commitments.

“Examples of the business entities that will be included in this program are furniture, semiconductors, and electronics parts industry, BPO (business process outsourcing) companies that outsource architectural and engineering services, software designers, freelancers and the self-employed who all export their services abroad,” he added.

Gatchalian further said the PESA bill will also allow the National Development Company (NDC) under the DTI to bail out vital businesses which have been severely affected by Covid-19.

“(The NDC) will be authorized to identify what critically-impacted businesses are. They may extend loans and other forms of financial accommodation and shall be authorized to make equity investments as the capital allocation firm of the government,” he said. “Allowing these businesses to go bankrupt and later on close will translate to more job losses.”

Gatchalian said these programs will be granted to MSMEs under the condition that the entitled firms must retain at least 75 percent of their total employees for a period of one year.

The MSME sector, comprising about 99 percent of all industries in the country, has been identified among the three hardest hit sectors of the Covid-19 pandemic, aside from tourism and transportation.

Gatchalian is optimistic the House will approve on second and third readings the PESA bill early next week so it can be transmitted to the Senate before the end of the week.

“And after that, the ball will be given to the Senate and after that for the President to decide,” he said.

“In the Senate, I’m not sure what will be their timetable but hopefully mabilisan ang pag-apruba nito (this will be approved immediately). Because at the end of the day, I believe it is only the PESA or the stimulus package that can put the country away from a possible recession,” he added.

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