Magna Carta for MSMEs  deemed positive by sector

After President Gloria Macapagal Arroyo signed into law the Magna Carta for micro, small and medium enterprises (MSMEs) that would provide additional financial assistance to the sector, a group of entrepreneurs is looking at brighter prospects of addressing their problems on lack of capital and access to credit.

Rey Calooy, president of the Filipino Cebuano Business Club Incorporated in a phone interview said that their group is elated with this new development in their sector because it seeks to provide solutions to their problems especially in terms of funding.

“With the Magna Carta, there is really a law now that would mandate loan allocation for the sector and now we feel that we already have a right to access funding from lending institutions and banks,” said Calooy.

The Magna Carta or the Republic Act 9501 is an amendment to the present law and it seeks to address problems faced by MSMEs, particularly their lack of capital and access to credit. It was among the bills prioritized for passage during the last Legislative Executive Development Advisory Council which was authored by Senator Mar Roxas.

Under this law, banks and lending institutions are now required to allocate at least 8 percent of their loan portfolio to micro and small enterprises and 2 percent to medium enterprises.

The previous law on the other hand requires banks and lending institutions to set aside only six percent of their loan portfolio to finance micro, small and medium enterprises.

However Calooy said that not most of their entrepreneurs can utilize this increased allocation for loan credit in lending institutions and banks because of the problem on documentation.

He said that banks and lending institutions have stiff requirements for documentation that the MSMEs usually experience a hard time to access and complete.

“Most micro enterprises do their businesses informally and they most of the time do not issue receipts in their transactions but these things are some of the requirements in accessing loans,” he said.

The ratified law will also provide an increase of authorized capital stock for the Small Business Corporation (SBC) to P10 billion. SBC is a government financial institution created to assist MSMEs in their credit requirements.

The law also provided a new definition to the micro, small and medium enterprises sector as it raised the ceiling in terms of its asset side. 

Calooy said that before micro enterprises are defined as those businesses who have an asset of P1.5 million but now it was raised to P1.5 million to P3 million. Small enterprises are now defined as those with total assets of P3 million up to P5 million while medium enterprises fall under those businesses with total assets worth P15 million to P100 million. —Rhia de Pablo