To RA 9501: Rural banks to take shares if it translates to compliance

CEBU, Philippines – Rural Banks in Cebu are willing to purchase the preferred shares offered to banks by state-owned Small Business Corp. (SBC), as long as doing so will compensate for their non-compliance to Republic Act 9501 or the Magna Carta for Micro, Small, and Medium Enterprises (MSMEs.)

But so far, rural banks in Cebu are complying with the law which mandates banks and financial institutions under the control of the Bangko Sentral ng Pilipinas (BSP) to set aside 10 percent of their lending portfolio for lending to MSMEs, Cebu Federation of Rural Banks (CFRB) Ismael Carolino said.

“Almost all rural banks are complying with this since we are mandated to do so. Otherwise, we will be penalized. (However,) there are times that rural banks are undercomplied (could not loan the entire amount allocated for MSMEs) because only a few beneficiaries can comply with the banks’ collateral requirements,” he told The Freeman.

Carolino said that if BSP has accredited SBC’s offer, then rural banks in Cebu would be willing to participate.

SBC has recently announced that it is offering P 1.6 billion preferred shares priced at P100 per share. Holders will be entitled to a fix annual dividend of four percent per annum. Minimum subscription is 2, 000 shares. .

SBC has been offering banks since last year MSME notes and preferred shares to help them comply with this requirement.

“When after a year, banks are not able to comply (with RA 9501), they can loan us (SBC) the (amount needed to comply with the provision) through the MSME notes, wherein we issue promissory notes or they can buy the shares SBC is offering,” SBC corporate finance specialist Henry Agustin earlier said.

SBC will in turn lend the proceeds of the notes and the shares to the MSMEs.

Meanwhile, Prudencio Gesta, former president of the Cebu Bankers Club, is encouraging banks to lend to MSMEs directly, as this would give them additional income aside from allowing them to take part in helping MSMEs grow.

“(As far as I know,) some banks, especially those that lack the manpower and resources to offer the lending service to MSMEs, are buying the government bonds temporarily for compliance. But once they have the manpower to offer the service, they do so,” he said in a separate interview.

However, banks have also to face the risks that accompany the service of lending to MSMEs, Gesta said. (THE FREEMAN)