MANILA, Philippines – A total of 4.99 billion pesos – more than half of the funds allocated for the distribution of loans to micro, small and medium-sized enterprises (MSMEs) under the Bayanihan to Recover as One Act, or Bayanihan 2 – has not been used since mid-2021 and could have been used for the pandemic response, according to the Commission on Audit (COA).
In a March 2 report, state auditors said Small Business Corp. (SB Corp.), a state-owned company under the Department of Trade and Industry (DTI), through its COVID-19 Business Restart Assistance (CARES) program, 9.08 billion pesos had been allocated to be distributed as interest-free, collateral-free loans to MSMEs.
But the COA said SB Corp. had issued only 4.09 billion pesos, or 45.04% of the 9.08 billion pesos, as of June 30, 2021, at the end of its audit period.
“Given the need for immediate action and the limited resources of the government in general, these unused funds could have been used to fund other emergency measures to deal with the effects of the pandemic,” the COA said. .
SB Corp., however, said the remaining amount was only 2.03 billion pesos as of January this year.
2 main reasons
The COA cited two main reasons why almost 55% of the allocated amount was not used. One was SB Corp’s “insufficient” human resources. and the other was “potential client reluctance” to avail of financial assistance.
The COA said that SB Corp., which normally manages about 1.5 billion pesos for its CARES program, was suddenly given the responsibility of distributing nearly 10 billion pesos, which was “beyond its scope”. normal processing capacity.
In order to cope and instead of making “significant adjustments” in its human resources to handle the huge amount, it opted to adopt an automated system to process the loans, the COA said.
The reluctance to borrow from the loan facility is reflected in the number of MSMEs that benefited from loans from CARES during the audit period of September 2020 to June 2021 under Bayanihan 2.
Of the state-owned company’s 995,745 potential clients, the COA said only 48,010, or 4.82 percent, applied.
“Most of the budget is allocated to the tourism industry. Many tourism-based businesses are reluctant to restart operations due to the multiple imposition of an enhanced community quarantine in the country,” the COA said.
The agency also found that of the 48,010 loan applicants, 4,378, or 9.12%, canceled their application.
The COA said some of the borrowers had canceled their loan applications due to the “long processing time” and lack of updates to their applications.
State auditors said that in the end, the 4.09 billion pesos of CARES program funds went to only 28,222 MSMEs, leaving a total of 4.99 billion pesos unused as of June 30, 2021. .
The COA reported that 1.50 billion pesos went to 23,687 microenterprises (average amount of 63,325 pesos each), 1.46 billion pesos to 3,057 small enterprises (average of 447,592 pesos) and 1.09 billion pesos to 729 medium enterprises (1.5 million on average). He added that 749 “unidentified” companies obtained 45.27 million pesos (average of 60,440 pesos).
The Philippines defines MSMEs based on the number of employees or the value of assets.
A micro-enterprise employs less than 10 people, a small enterprise from 10 to 99 employees and a medium-sized enterprise from 100 to 199 employees.
Based on assets, a micro enterprise is worth up to 3 million pesos, a small one from 3,000,001 to 15 million pesos and a medium one from 15,000,0001 to 100 million pesos.
In its comment submitted to the COA, SB Corp. said it had “fully utilized” all funds allocated to the program under its “sole control”, such as the P1-billion CARES1 and P4.08-billion Bayanihan CARES for multi-sector MSMEs as of December 31, 2021.
He said the 4 billion pesos allocated to tourism MSMEs was based “on the collective wisdom of Congress”.
The COA acknowledged that as of December 31, 2021, 6.28 billion pesos, or 69.16% of the total amount of the CARES program under Bayanihan 2, had been released. He, however, indicated that his deadline for auditing the funds was June 30, 2021.
According to its official website, SB Corp. had partnered with the Ministry of Tourism for its CARES for Travel (Tourism Rehabilitation and Vitalization of Enterprises and Livelihood) program.
The amount loanable under this partnership ranged from P10,000 to P5 million, with a grace period of two years which is also interest and collateral free. The borrower will pay a one-time service charge of 8% for a four-year loan.
SB Corp. said that by the end of January this year, the CARES balance had shrunk to 2.03 billion pesos, money earmarked for tourism MSMEs.
The company’s vice president and spokesman, Bobby Bastillo, told the Inquirer that the state-owned company only received 8.08 billion pesos from the Department of Budget and Management for Bayanihan 2, and that 7.93 billion pesos of this amount was intended for loans.
He said SB Corp. had approved a total of 5.9 billion pesos in loans as of January 31, 2022.
“The balance of 2.03 billion pesos has been set aside for the travel loan program, [which] Congress [had] intended to help the tourism sector especially due to the effects of the prolonged pandemic,” Bastillo said.
“Acceptance of loans from tourist establishments has been very slow due to the series of closures and the general uncertainty that has governed the sector for the past two years,” he said. “We expect an increase in loan applications from the [tourism] as the market opens up, barring major external shocks again.
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