TWO developments last week gave impetus to poverty reduction and employment creation in our economy. These are the expected increase in no-collateral loans to small businesses, which was announced by the Bangko Sentral ng Pilipinas (BSP), and the filing of a bill in the House of Representatives that seeks to fast-track government support for social enterprises.
These two initiatives will benefit the 940,886 micro, small and medium enterprises (MSMEs) operating in our economy. These enterprises are in serious need of financial assistance to improve their productive capacity, for while in 2012, they made up 99.58 percent of all producers in our economy (accounting for 65 percent of the total number of the employed), they contributed only 35.7 percent of value added, which indicates both their low labor productivity and potential for employment creation.
It is well-known fact that the majority of prospective entrepreneurs are frustrated by a lack of capital with which to get their enterprises going. The no-collateral loaning program will enable them to overcome this deficiency. The social-enterprise assistance program, on the other hand, will give hope to the poor people associated with these enterprises that they are not being left behind.
As announced by BSP Monetary Board Member Alfredo C. Antonio, no-collateral loans, as extended through the BSP-created Credit Surety Fund (CSF), have already reached P1.3 billion as of September, benefitting 10,442 MSMEs. The BSP hopes to increase these loans to P1.5 billion by the end of the year.
The CSF pools cash contributions from cooperatives, local government institutions and other partner-organizations to serve as security for loans extended by banks to member-MSMEs. CSFs charge lower interest rates to borrower-MSMEs, as compared to those charged by other loaning agencies. They give free training in financial and risk management, entrepreneurship and business management, and credit appraisal and monitoring to interested MSMEs.
On the other hand, the filed measure—House Bill 1331, by Party-list Rep. Cresente Paez of Coop-National Confederation of Cooperatives—will provide social enterprises—defined as socially oriented microenterprises—wider access to no-collateral windows (such as CSFs), comprehensive insurance coverage to reduce vulnerability to climate change/calamities, and resources for comprehensive capacity development.
The initiative is supported by the Institute for Social Entrepreneurship in Asia, whose president, Dr. Marie Lisa Dacanay, said social enterprises are innovative and are one of the most effective means to reduce poverty and inequality in our country.
We know that, in the context of the dependency syndrome that our politicians have created in our people, the possibility of the MSMEs and social enterprises failing to comply with their obligations under the programs through which they are assisted, on the ground that the government is committed to assist them, anyway, is real. But we are optimistic. We are certain that obstacles will be hurdled.
Let’s hope that the two allied programs make a contribution to the eradication of poverty in our country.
Image credits: Jimbo Albano