THE Duterte administration’s P19-billion micro-fund scheme will be piloted in three of the country’s poorest provinces this month, according to the Department of Trade and Industry (DTI).
The DTI said the credit facility for micro, small and medium enterprises (MSMEs) will be rolled out in Mindoro, Leyte and Sarangani, which will represent Luzon, the Visayas and Mindanao.
The financing initiative, dubbed as Pondo sa Pagbabago at Pag-asenso (P3) program, will release an initial P1 billion, which was already appropriated in the 2017 General Appropriations Act.
The P19-billion financing initiative for micro and small businesses is seen as an alternative to the “5-6” money lending system and will be spread out over the next five years. “This alternative funding dedicated for micro and small enterprises is meant to discourage the 5-6 money lending system in our country,” Lopez said, adding that, through the established micro-finance institutions (MFIs), the government aims to reach even the smallest of entrepreneurs in the country.
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 and the Small Business Corp.
(SB Corp.) can operate.
An attached agency of DTI, SB Corp. will 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 microenterprises shall be carried out in either by wholesale lending to nonbank financial institutions, like MFI-NGOs, and cooperatives which shall on-lend the fund to beneficiaries or by direct lending by SB Corp.,” Lopez said in a statement.
Priority beneficiaries include microenterprises and entrepreneurs that do not have easy access to credit, or are accessing credit at very high cost, such as microentrepreneurs, market vendors, agri-businessmen and members of cooperatives, industry associations and cooperators.
Loanable amount per end-borrower can range from P5,000 for start-ups to as much as P300,000, with a maximum interest rate of 26 percent, per annum with no collateral requirement.
This is below the 20 percent 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 percent of their P3 loan portfolio from SB Corp. at a guarantee fee of 0.4 percent. 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 P100 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. The minimum loan amount will be P300,000, with interest rate capped at 10 percent per annum, with or without collateral cover.