DTI to pilot-run PRRD’s microfund program
Business Mirror
January 11, 2017

FOLLOWING President Duterte’s directive to replace the usurious “56” money-lending system prevalent in the country and provide an affordable microfinancing 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, the Visayas and Mindanao, the country’s trade chief said.

“The P3 is designed to bring down the interest rate at which microfinance is made available to micro enterprises,” Trade Secretary Ramon M. Lopez said.

The 2017 General Appropriations Act has included an initial funding of P1 billion for financial assistance, a part of the planned P19-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 Corp. (SB Corp.) can operate.

An attached agency of the Department of Trade and Industry, SB Corp. shall administer the P3 Program, including the creation of a Program Management Office, 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 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.

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 P300,000, with maximum interest rate of 26 percent per annum with no collateral requirement. This rate is significantly below the 20 percent per day, week or 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.

Minimum loan amount will be P300,000, with interest rate capped at 10 percent per annum, 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 Lopez, adding through the established MFIs, the government will reach even the smallest of entrepreneurs in the country.