SB Corp urges full implementation of penalties in mSME lending

MANILA, Philippines - The Small Business Corp. (SB Corp.) is asking the Bangko Sentral ng Pilipinas (BSP) to fully enforce the Magna Carta for Micro, Small and Medium Enterprises (mSME) or Republic Act (RA) 6977, particularly the issue of penalties for non-compliance.

SB Corp. president and chief operating officer Benel P. Lagua said that some commercial banks prefer to pay penalties rather than set aside 10 percent of their loan portfolio for mSME lending.

Under the regulations, a maximum penalty of P500,000 is imposed on non-compliant banks. The law states that of 10-percent of the bank’s loan portfolio must find its way to the mSME sector. Of that percentage, eight percent will be offered to the micro- and small enterprises, and remaining two percent to the medium-sized enterprises.

“The problem is in the penalty issue, it is lax and unfair,” Lagua said during its 19th anniversary celebration late Friday afternoon.

He argued that the commercial bank with a loan portfolio of, for example, P50 billion does not have second thoughts about paying P500,000 penalty per quarter or P2 million a year.

The entire banking system at the end of 2009 had an outstanding loan portfolio worth P2.7 trillion.

“If a mere 10-percent of that amount directly goes to the mSME sector, that is P270 billion!!!” the SB Corp. chief operating officer said.

Lagua admitted that they were in constant contact with BSP officials regarding the issue, although nothing definite has been resolved.

“We have been in dialogue with the BSP in terms of changing or revising the implementing rules and regulations (IRR) regarding penalties,” he added.

SB Corp. is likewise proposing a mSME exchange that allows banks to comply with the mSME lending requirements. For example, thrift and rural banks can sell, through the exchange, a portion or the excess mSME lending portfolio to commercial banks. “But that is still under discussion, it is more complicated,” Lagua added.

Meanwhile, the line agency of the Department of Trade and Industry (DTI) extended bank excellence awards to partner banks or banks that extended loans to the mSME sector with SB Corp. acting as guarantor.

Banco de Oro Unibank Inc. (BDO), the Rizal Commercial and Banking Corp. (RCBC), Enterprise Bank, and the Rural Bank of Alabang were conferred an award as partner for credit guarantees.

Bank of Commerce was conferred the Hall of Fame Award for wholesale lending and most distinguished partner in credit guarantees. Planters Development Bank, the first Hall of Fame awardee, was recognized with the title Kaagapay sa Pag-unlad ng mSME award.

Microfinance partner awards were hand over to TPSI Development Corp., the Cooperative Bank of Bulacan, and CARD Bank Inc.