A pro-administration senator has sought to strengthen the capacity of government financial institutions (GFIs) to provide the needed financial assistance to micro, small, and medium enterprises (MSMEs), and other strategically important companies (SICs).
This after Senator Christopher “Bong” Go refiled Senate Bill (SB) 1182, or the proposed Government Financial Institutions Unified Initiatives to Distressed Enterprises for Economic Recovery (GUIDE) Act. “MSME support is a critical job-saving intervention as these enterprises hire approximately nine million people or 63 percent of the workforce,” Go pointed out.
He emphasized that the proposed GUIDE is among the priority measures mentioned by President Ferdinand "Bongbong" Marcos Jr. during the latter’s first State of the Nation Address (SONA).
“We are expecting to overcome the pandemic very soon. While we are doing everything to protect the lives of our countrymen, we also need to look into their livelihood. Let us assist them to fully recover,’’ he said.
“No Filipino should be left behind in our road towards full and inclusive economic recovery,” he added.
The senator from Davao then underscored that providing timely and sufficient support to MSMEs and SICs is crucial to ensuring a strong economic recovery.
Many businesses in the country were hard hit by the ongoing global health crisis and government must step in to provide all necessary assistance for these to fully recover.
Go explained that the GUIDE aims to strengthen the capacity of the Land Bank of the Philippines (LBP) and the Development Bank of the Philippines (DBP) in order to provide much-needed access to credit and financial assistance to distressed businesses, including MSMEs, SICs and other businesses affected by the pandemic.
Under the bill, LBP and DBP are mandated to create a special holding company that shall assist in the rehabilitation of SICs heavily affected by the Covid-19 pandemic.
To ensure that the policies and objectives under the proposed bill are effectively carried out, LBP and DBP are further mandated to maintain at least a majority ownership over the special holding company until such time that they have recovered or will be able to recover their investment.
A special holding company shall be authorized to invest or place funds in equity, execute convertible loans, or purchase convertible bonds and/or other securities, in said SICs.
To ensure that such investments are properly utilized, as well as to ensure the successful rehabilitation of SICs, the measure imposes strict conditions on the investee company such as requiring that the number of employees are not reduced beyond a certain level, limiting its ability to declare dividends, restricting the increase in salary and other benefits of the board and its senior executive officers, and ensuring that investments of LBP and DBP are not diluted and time bound with a definite exit mechanism.
The bill will also help lower the overall cost of borrowing for MSMEs. Government financial institutions shall be mandated to expand their credit programs in order to assist affected MSMEs in meeting their liquidity needs. In particular, LBP and DBP shall expand their loan programs as well as rediscount loans and other credit accommodations to affected MSMEs in the agriculture, infrastructure, service and manufacturing industries.
Go stressed that he has been constantly advocating for sustained government support for MSMEs.
At the height of the pandemic, he was instrumental in the implementation of the Small Business Wage Subsidy program. It provided eligible workers who were unable to work or get paid during the enhanced community quarantine period with two tranches of financial assistance
Go has also filed in the current 19th Congress a measure institutionalizing the Department of Trade and Industry’s (DTI) “One Town, One Product” (OTOP) program to help boost recovery and promote innovation among MSMEs.
OTOP is a government-run program providing assistance for MSMEs and promoting the commodities and products of Filipino towns, cities, and regions.