The leader of the Philippine exporters’ organization called on the government anew to reinvest in micro, small and medium enterprises (MSMEs), which represent 98% of total enterprises and are considered the backbone of the economy.
Sergio Ortiz-Luis, Jr., president of the Philippine Exporters Confederation, Inc. (PHILEXPORT), said in a recent e-forum that despite comprising the overwhelming majority of businesses and accounting for up to 65% of total employment and 30% of GDP, “the Philippine MSME sector is the most ‘under-banked’ sector in the whole of Asia.”
Ortiz-Luis decried that empowering MSMEs is still not taken seriously, with development programs, legislature and laws initiated over the years to assist small enterprises being mostly “token” efforts that have not “even scratched the surface” in terms of MSME development.
As a result, he said the Philippines continues to be a laggard in MSME development. “If you really want to be able to empower our SMEs, the government for once has to take it seriously. We’re still talking about it; our neighbors have done it already.”
He added that after two decades since its passage, the Magna Carta for MSMEs has not achieved its objective, “rendered useless” by measures that prevent MSMEs from accessing affordable loans.
The Magna Carta for MSMEs is a landmark legislation that was passed to help develop the Filipino entrepreneurial spirit by providing a business environment conducive for MSMEs. It was enacted by Congress in 1991 as Republic Act No. 6977, amended by Republic Act 8289 in 1997, and further amended by Republic Act 9501 in 2008.
PHILEXPORT has been calling for the amendment of the Magna Carta for MSMEs to free the Small Business (SB) Corp. from its regulatory accountability under the central bank. The SB Corp. is the Department of Trade and Industry’s (DTI) agency providing financing and other forms of assistance to MSMEs.
Ortiz-Luis stressed that to empower the MSME sector, “the government has to reinvest in it” and should not look at the investment as an “expense,” but as “capital” for MSME development.
“We propose that in the Magna Carta that is being made, at least 20% of the CCT [conditional cash transfer] fund—which we give away for free and we don’t even know what’s the result of that—let’s devote it for lending to SMEs.”
Ortiz-Luis added that lending conditions for MSMEs should not be like traditional bank conditions that require the repayment of 95% to 97% of the loan. Instead they should be based on criteria such as how many workers have been employed or how the business has grown.
“You might not be able to recover 95%-97%—maybe you will only recover 60%—but look at the employment it could create.” He added that as opposed to giving away the money for free under CCT, it can be used to support sustainable businesses and generate employment.