Helping MSMEs during the pandemic

Better Days

Senator Sonny Angara

During our recent hearing on the 2022 budget of the Department of Trade and Industry, Sec. Mon Lopez noted that 16 percent of micro, small and medium enterprises (MSMEs) were closed due to the pandemic — a significant portion coming from the National Capital Region (NCR).  With over 60 percent of the country’s employment generated by MSMEs, the DTI says around 300,000 to 500,000 jobs were lost and this figure would be even bigger if the unregistered businesses are taken into consideration. There are around two million MSMEs registered with the DTI and an estimated six million unregistered businesses, which includes those from the informal sector.

There appears to be a shift among the small businesses to e-commerce — a natural transition, considering the long period of forced closures in areas under lockdowns and the restrictions imposed on malls and other commercial establishments with regard to foot traffic. Based on the report of the DTI to the Committee on Finance, of which I am chairman, the number of registered MSMEs has gone up to two million from just 1.5 million before the pandemic.

For e-commerce alone, the DTI sees the number of merchants to reach 750,000 by the end of the year from 500,000 in 2020. The emergence of e-commerce as a growing platform for entrepreneurs has helped them to survive and even thrive during this pandemic. Consumers cooped up inside their homes have also developed an increased appetite for shopping online as it offers them a convenient and safe way to get their essentials.

These developments provide us with some degree of optimism about e-commerce and its positive impact on new entrepreneurs and those coping with the pandemic. However, the fact remains that there are many MSMEs who are struggling to keep their heads above water.

The World Economic Forum has noted that what is happening in the Philippines with our MSMEs is also taking place all over the world. Small and medium sized businesses have closed down permanently since the pandemic. These businesses account for two-thirds of private sector employment in developed countries such as the United States and in the European Union. And in emerging economies, they contribute close to 40 percent of the national income.

For most of these MSMEs, accessing credit is difficult. This is where the government has to step in—to provide support to businesses in the red so they can stay afloat and continue paying for the salaries of their employees until the economy in general recovers.

Based on the International Monetary Fund’s Financial Access COVID-19 Policy Tracker, the most common government support measures used by 130 countries to help cash-strapped small businesses are financial assistance such as grants (adopted by 77 percent of countries), public guarantees on loans (50 percent), delays in loan repayments (30 percent), tax relief (28 percent), and lower interest rates (24 percent).

In our case, the government has made available low-interest loans through our government financial institutions (GFIs) namely the Landbank of the Philippines, the Development Bank of the Philippines and the Small Business Corporation (SBCorp) attached to the DTI. Under the Bayanihan to Recover as One Law or Bayanihan 2, we provided a total of P55 billion in capital infusion to the three GFIs and the Philippine Guarantee Corporation for its credit guarantee program. Even though Bayanihan 2 expired last June 30, the credit facilities of the GFIs remain for MSMEs since the funds already became part of their working capital. Credit facilities, particularly the ones provided by SBCorp can go a long way in helping our MSMEs get through the current pandemic.

I have suggested to the SBCorp to make it easier for the MSMEs to secure loans by coming up with an express lane for them, where some requirements are cut down.. This would make it less intimidating for small entrepreneurs such as fish ball and taho vendors who wouldn’t have financial statements or balance sheets to submit to the banks in order to take out a loan.

Government should do its part to help our small businesses during this pandemic. Many MSMEs and start-ups have become the most dynamic and fastest growing enterprises. With the right amount of support, we can help grow more of these small businesses not only for our economy to bounce back, but also for them to become the foundation of our country’s move toward industrialization. 

Sen. Sonny Angara has been in public service for 17 years.  He has authored and sponsored more than 200 laws. He is currently serving his second term in the Senate.

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