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Provide incentives to spur MSME sector

05:02 AM July 29, 2019

The most difficult problem for micro entrepreneurs is funding, just like when we started our own venture in 1983-84 on an initial capital of less than P200,000. Our organization of four engineers was technically prepared, we had some solid experience in engineering but only one of us had an MBA degree, yet we were confident enough to micromanage our business as we had customers and suppliers at the outset.

Accreditations with customers were not problematic. Our major supplier and friend gave us unlimited credit, payable after we collect from customers. The problem was funding, which cropped up when we got a big project and had to buy materials from other sources on top of the cash we needed to pay our workers. We did not have a bank credit line, as our new firm had no credit history at all.

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We also did not have a bonding company to issue our surety and performance bonds required by customers. Our company could not take on big projects. So we started small and got small contracts based on our limited financial capacity. It took our company so many long years, using the internal generation of funds, to finance our business.

And because many of the big firms prefer to deal directly with manufacturers and not just traders like us, our growth was slow. Setting up a factory for electrical equipment is capital-intensive.

FEATURED STORIES
OPINION

The existing financial policy of our system will never bring vibrant and rapid growth to the Philippine industry. What should be done to accelerate industry growth and more dynamic economic activity?

Take it from those who experienced the difficulty of nurturing young firms and making them grow in the midst of conflicting and retrogressive policies.

Give incentives to banks supporting micro, small and medium enterprises (MSMEs), like covering lending risks with insurance, motivating banks to provide receivable financing and encouraging MSMEs with incentives for early settlements of credit lines and letter of credit and trust receipt lines.

Provide these incentives also to bonding companies serving MSMEs.

If these are done and implemented well, the private industry will have solid growth and within a very short period, unlike what happened to our business; our struggles took us 30 long years to hurdle. The success of the MSME program will have positive multiplying effects on the Philippine economy.

WILFREDO LUPOS,
[email protected]

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TAGS: Inquirer letters, micro entrepreneurs, Wilfredo Lupos
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