SBCorp forecasts 30% default rate in micro loans

Published November 14, 2021, 6:40 PM

by Bernie Cahiles-Magkilat

SB Corporation (SBCorp), the government’s micro-lending arm, expects its overall default rate to double at 30 percent from 15 percent pre-pandemic.

SBCorp President/CEO Maria Luna E. Cacanando said at the virtual ceremonial launch of its 13TH month loan facility. Borrowers suffered financial difficulties brought about by the lockdowns since last year as they had to close shops temporarily.

Cacando noted that before the pandemic, SBCorp experienced a default rate of 12-15 percent only, similar with other micro lenders. She acknowledged that default in loan payment is part of doing business in any lenders.

With the pandemic, SBCorp expects a higher default rate at 30 percent.

In consideration of their micro and small enterprises, she said, SBCorp continued to implement relief by extending the grace period and moratorium measures as provided for under the Bayanihan 2 law from March to December 2020.

She said that several of their borrowers have asked for relief and longer grace period. She vowed that SBCorp will continue to provide relief measures to their borrowers, but they will also implement legal processes like serving demand letters. She stressed that loans cannot be left unpaid by borrowers, stressing they are also answerable to the Commission on Audit.

“Nobody is spared from the legal process,” said Cacanando. Thus, she urged borrowers for cooperation to avoid reaching to such situation.

Trade and Industry Secretary Ramon M. Lopez, who is also chairman of SBCorp, noted that in this time of crisis, all the micro borrowers need is extension of grace period and relief.

Lopez noted that prior to the pandemic, other regular micro lending programs of the DTI like the P3 or the Pondo sa Pagbabago at Pag-Asenso have marginal default rate.

As of Friday, Nov. 12, SBCorp has approved a total of 25 applications for the 13th month loan facility aimed at helping micro and small enterprises fund the mandatory 13th month pay of their employees.

SBCorp reported it has received 77 loan applications of which 25 have been approved with combined loan amount of P5.05 million.

The agency opened the applications since Nov. 2 this year for micro and small enterprises that have been registered with the Department of Labor and Employment. The cut-off date in the filing of loan application is on Dec. 7. There are over 11,000 DOLE-registered firms that had been adversely affected by the pandemic and have availed of the flexible working arrangement from March 16, 2020 to October 15, 2021.

Of this figure, approximately, 8,000 registered micro and small firms with potential employees of 200,000 are qualified under the program. Only those under the DOLE database will be eligible for the 13th month pay loan facility, which has an available fund allocation of P500 million.

Aside from raising the loan fund to P500 million from the original P200 million funding from the Bayanihan 2, the agency has also increased the coverage to 40 employees per company from 20 employees. The loanable amount is computed at P12,000 per employee, multiplied by the number of employees. This means that if a company borrower has 40 employees, its maximum loan amount is PP480,000.

Trade and Industry Secretary Ramon M. Lopez, who is also SBCorp chairman, said that those who cannot be accommodated under the facility can apply for the regular CARES Program. The CARES Program allows loans for working capital requirements of enterprises affected by the COVID-19.

Cacanando said they are committed to release all approved loan amounts in December or before Christmas. Cacanando vowed to facilitate the processing of loan applications, which all filed online, noting that they have been able to process 2,000 to 3,000 loan applications in a month for their regular programs.

Enterprises are urged not to wait until deadline, Dec. 7, to file their applications to avoid clogging the SBCorp website and ensure release of employees’ 13th month pay in time for the Christmas celebration.

The 13th month loan facility carries zero interest but borrowers have to shoulder a 4 percent service fee. Borrowers have to pay the loan within 12 months, inclusive of a 3-month grace period.

 
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