GFIs, PCCI set up P1-B fund for SMEs

The National Government has agreed to put up with the Philippine Chamber of Commerce and Industry (PCCI) a P1-billion fund for small and medium enterprises (SMEs).

The fund will be managed by the PCCI, which will raise P250 million as its counterpart fund. Three government financial institutions (GFIs) will pool resources to raise P600 million – the Development Bank of the Philippines (DBP), Lank Bank of the Philippines (LBP) and Small Business Guarantee and Finance Corp. (SB Corp).

The remaining P150 million will come from a pool of SMEs already accredited by the PCCI. "Somehow they must partly shoulder the burden of the fund. It is not a doleout of the National Government," said PCCI president Donald Dee.

The GFIs will tap the Industrial Guarantee and Loan Fund (IGLF), a policy-based financing program currently administered by the DBP. It is also among the financing facilities of the government funded in turn by official development assistance (ODA) lending.

The IGLF allows accredited participating financial institutions (PFIs) to draw from the facility for relending to target beneficiaries.

Dee said that any SME can tap the fund although these have to undergo scrutiny for its economic viability.

"Initially, we have not set any ceiling for lending amounts per SME," he said, adding that interest rate will probably be 11 percent for short-term loans or lower than the prevailing commercial rate of over 15 percent.

He explained that the fund is necessary to assist SMEs needing credit, or for SMEs requiring more funds but are unable to tap commercial loans.

Aside from the fund, the three government agencies have their own separate SME lending facilities but are governed by certain conditions dictated by the international funding agencies.

DBP, for example, has P57 billion in ODA funds to support investments in priority sectors such as healthcare, education and housing, production infrastructures especially for the road roll-on, roll-off terminal system, bulk grains highway, and other logistical products, including environment management.

Meanwhile, the PCCI will tap the Bureau of Treasury (BTr) for a P1-billion zero-coupon bond as cover for the fund while the Philippine Export-Import Credit Agency (PhilEXIM) will guarantee the IGLF-sourced funds.

"That, in effect, could raise the fund to P2 billion," the PCCI said.