Presidential candidate Ka Leody De Guzman enters the room for ‘The Deep Truth’ interview program by SMNI, held at the Okada Manila on March 26, 2022. PHOTO BY JOHN RYAN BALDEMOR
THE presidential candidates in the upcoming elections all want to help small businesses. This is true even for those leaning left on the political spectrum, such as labor activist Leodegario “Ka Leody” de Guzman. But a careful examination of the different platforms reveals flaws and missing details.
As the candidates rightly pointed out, micro, small and medium enterprises (MSMEs) are vital to the Philippine economy. They represent over 99% of all registered businesses. And the unregistered underground economy businesses, which are important in the Philippines, are also likely small or small.
Moreover, MSMEs are important for employment. The sector represents nearly 63% of jobs, according to the Ministry of Commerce and Industry. He indicated that MSMEs contribute nearly 38% to total value added.
Given these numbers, MSME platforms are relevant as the pandemic has gutted the economy and a robust recovery is needed. The lockdowns that helped contain Covid-19 have also shuttered businesses, many of them permanently. As such, a credible economic stimulus package should include helping MSMEs get back on their feet.
Like Mr. de Guzman, Vice President Maria Leonor “Leni” Robredo promises to offer cash assistance to MSMEs. For Ms Robredo, the amount she promises to offer in loans is 100 billion pesos, while Mr de Guzman wants something a little more.
Similarly, the mayor of Manila, Francisco “Isko Moreno” Domagoso, wants to partner with local governments, if he becomes president. He explained that local governments can offer low-interest loans to MSMEs with the additional funds that will be granted to them as a result of the implementation of the Mandanas-Garcia decision.
Senator Emmanuel “Manny” Pacquiao also wants to offer loans to MSMEs. In addition, Senator Panfilo “Ping” Lacson promises to help this sector. But both offer few details.
Access to funds is good, but what most candidates promise sounds like populist rhetoric. Most aspirants seem to ignore or forget about Republic Law 9501, or the “Magna Carta for Micro, Small, and Medium Enterprises.”
Among its provisions is a mandate for banks to set aside 10% of their loanable funds to MSMEs. In detail, this represents 8% for micro and small enterprises and 2% for medium-sized enterprises. If the magna carta can be fully implemented, MSMEs could have access to much larger funds than the amounts mentioned by the applicants.
In 2021, reports indicated that the total loanable funds of Philippine banks was around 8.6 trillion pesos. But of this amount, only 3.6%, or about P463 billion, was lent to MSMEs. The previous year was better with loans to MSMEs reaching 480 billion pesos. But even with poor implementation, the amounts tapped by MSMEs were already more than four times the figures promised by Ms. Robredo and Mr. de Guzman.
Former Senator Ferdinand “Bongbong” Marcos Jr. also wants to help MSMEs, but his proposal focuses on reducing bureaucracy and the costs of doing business. This sounds interesting, given that many MSMEs apparently prefer to borrow from loan sharks or others with usury rates, rather than going to banks that require tons of paperwork. Also, many small businesses do not have collateral required by banks for loans.
Indeed, the costs of doing business in the Philippines remain high, despite the reforms that have been introduced by current and past administrations. And at the local level, only a few cities have one-stop shops for business registration, and local taxes and fees are generally high.
There are many other factors to consider in helping MSMEs, including the high cost of electricity, poor infrastructure needed in an increasingly digital economy, and relatively low worker productivity resulting from quality of service issues. education. In other words, the problem is complex and unlikely to be solved by simply throwing money at it.
If some applicants still insist on giving more loans to MSMEs, they should also explain how they hope to better implement the magna carta. After all, the president is the one responsible for enforcing the laws.