Banks and financial institutions are called upon to extend more financial assistance to micro, small and medium enterprises to enable the sector to innovate and grow and in turn spur the country’s economic development.
Philippine exporters who are members of the Philippine Exporters Confederation (PhilExport) issued this appeal in a recent statement by the Export Development Council (EDC).
The exporters noted that under the Magna Carta (Republic Act 9501) for mSMEs, banks and lending institutions are mandated to allocate a certain portion of their lending resources to the small business sector. This is, however, a policy that has not been strictly enforced nor complied with.
The EDC statement urged stiffer penalties to be imposed on banks and financial institutions that fall short of the mandate.
The law directs lending institutions to set aside at least eight percent for micro and small enterprises and at least two percent for medium firms of their total loan portfolio based on their latest balance sheets. Institutions that are noncompliant, whether in part or in full, will be slapped a penalty of at least P500,000.
However, Bangko Sentral ng Pilipinas (BSP) issued Circular 625 om 2008 prescribing a fine from P180 to P500 thousand, EDC said.
In other words, what the Magna Carta has set as minimum penalty — a P500 thousand fine — the BSP has laid down as maximum sanction.
In its statement, EDC has urged the raising of the amount of the penalty to up to P10 million for large banks, depending on the size of their portfolios and in proportion to the degree of noncompliance, on top of the administrative penalty of P500,000 that may be filed against each officer of noncompliant banks.
The magnitude of the monetary sanction involved would then discourage banks, especially big ones, to violate their mSME lending mandate, as provided by the Magna Carta.
A PhilExport research revealed that half of the total loans extended to small businesses came from government financial institutions, with the rest coming from the private banks. The study further showed that 50 per cent of private bank lending to the sector is attributed to only one bank.
“That means, all other banks are sharing the other half, leading us to the question, ‘how could there be over-compliance when half of the banks do the lending and other half does not?’ The spirit of the law is for each and every bank to comply with the lending provision,” EDC further stressed
Photo: www.digplanet com