REY GAMBOA:  TEPID  GROWTH  OF  SMEs

MANILA, December 17, 2004 (STAR) BIZLINKS By Rey Gamboa - Small and medium enterprises have long been hailed as the future hope of the Philippine economy. But while other Asian countries have empowered and successfully raced their small businessmen to the home plate, our economic managers seem to be having problems getting our SMEs even to first base.

The trade and industry department reports that SMEs make up 99.6 percent of all businesses in the Philippines and employ almost 70 percent of the work force. Curiously though, SMEs contribute a mere 32 percent of the country’s gross domestic product (GDP).

In 2002, the government through the Department of Trade and Industry initiated noteworthy moves to spur the growth of SMEs nationwide through its National SME Agenda. The aim was to "expand the SME sector by graduating micro, small and medium enterprises to higher levels of undertakings and provide SMEs with seamless access to comprehensive program of services," including a financing program.

At the core of the National SME Agenda’s financial component is the SME Unified Lending Opportunities for National Growth or Sulong which was relentlessly promoted by then DTI chief and now Sen. Mar Roxas II.

Roxas’s successor, Cesar Purisima, is continuing the program but says that the government is using a more integrated approach, one that aims to increase the SME sector’s productivity and gross value from 32 percent to 40 percent in the next six years.

Sulong woes

Last year, however, loan applicants were disheartened by, of all things, the lack of loan evaluators especially in the countryside. In the Visayas, there were complaints as to why all applicants had to travel all the way to Cebu just to go through the loan application process.

This was eventually solved, but many applicants ran into more frustrating problems largely due to lack of synchronization between the DTI and government financial institutions or GFIs.

Participating GFIs include Land Bank of the Philippines, Development Bank of the Philippines, National Livelihood Support Fund, Philippine Export-Import Credit Agency, Quedan and Rural Credit Guarantee Corp. and Small Business Corp. (SB Corp.).

Apparently, many applications already approved or endorsed by the DTI were stalled or rejected by the GFIs due to inadequate requirements or worse, unqualified applicants.

During a recent trip to General Santos City, Trade undersecretary Nelly Villafuerte was reportedly besieged with complaints from Sulong loan applicants since many GFIs refused to loosen up on their stringent requirements, especially the matter pertaining to collaterals.

Many Mindanao traders are also not satisfied. The Mindanao Business Council estimated that a paltry three percent of the P26.76 billion in Sulong loans was awarded to Mindanao applicants.

The Mindanao applicants, perhaps along with many others from many parts of the country, while lauding the simplified lending requirements of Sulong, lamented that the participating GFIs could not replicate the same.

Small Business Corp. (SB Corp.), one of the conduits of Sulong, although utilizing a more simplified loan procedures and requirements and less stringent conditions, sadly has limited funds for the program.

Finding money to lend

It seems that loan availability continues to be a critical hurdle for the government to achieve its goals for the SME sector. The Sulong finance committee currently is looking at the possibility of tapping private banks for SME loans in a bid to triple the mount of available loans in the next six years. The DTI, under its broad-based level strategy, also aims to improve access to SME loans. A strong partnership with private banks is a key component for this program to get off the ground.

The committee is also advocating that GFIs increase their loan targets by 20 percent. Likewise in the pipeline is the establishment of a credit bureau, which would allow banks, government or privately owned to more effectively and accurately, screen or assess SME loan applicants and lessen the banks exposure to bad loans.

Micro-enterprises not included

While the Sulong program’s aims are commendable, we have noticed that it tends to exclude micro-enterprises. Let’s think here of backyard tilapia or hog raisers, and manufacturers of pastries, trinkets and other similar products.

It is interesting to note that 91.6 percent of businesses are classified as micro-enterprises or backyard home-based businesses. In fact, small enterprises account for 7.6 percent only, while 0.4 percent is considered medium-sized.

The reality is that majority of micro businesses owned and operated by enterprising families do not have more than P500,000 in total assets, and this disqualifies them from getting the more lucrative support under the National SME Agenda.

The government’s commitment to shore up the SME sector’s performance and viability is laudable, but sadly, there are a lot of kinks that need to be addressed pronto to enable even the 700,000 micro-entrepreneurs to join in the move forward.

I recall Thailand’s "Thaksinomics", an economic program centered on empowering small enterprises that brought Thailand back to its feet after the Asian financial meltdown and propelled it to one of Asia’s more exciting markets. And I wonder no end, why can’t we replicate that?

‘Breaking Barriers’ with chairman V. Nañagas, DBP

"Breaking Barriers" on IBC-TV13 (11 p.m. every Wednesday) will feature chairman Vitaliano N. Nañagas of the Development Bank of the Philippines (DBP) on Wednesday, 22nd December 2004.

The avowed primary objective of the Development Bank of the Philippines is to provide banking services principally to cater to the medium- and long-term needs of agricultural and industrial enterprises, with emphasis on small- and medium-scale industries.

Has DBP achieved its mission fully or partially? What factors hindered it from fully achieving its mandate? Considering the extent of government equity in DBP and the financial crisis that government is facing, how can taxpayers be assured that the problems of non-performing loans encountered by the DBP in the late 70s and early 80s are not repeated?

Join us break barriers and gain insights into the views of Vitaliano N. Nañagas II, chairman, Development Bank of the Philippines on the role and contribution of DBP to the growth of the local economy.

Should you wish to share any insights, write me at Link Edge, 4th Floor, 156 Valero Street, Salcedo Village, 1227 Makati City. Or e-mail me at reygamboa@linkedge.biz. If you wish to view the previous columns, you may visit my website at http://bizlinks.linkedge.biz.


Reported by: Sol Jose Vanzi

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