DOING RESEARCH on the country’s legal framework for small business during the Holy Week, I confirmed that we have more than ample laws to support the development of micro, small and medium enterprises (MSMEs). Indeed, almost every administration since that of President Corazon Aquino passed legislation in support of small firms. During her watch came Republic Act No. 6810 (the Kalakalan 20 Act) in 1989, and RA 6977 (the Magna Carta for Small Enterprises) in 1991. RA 8289, amending the Magna Carta for Small Enterprises, came in 1997 under the Ramos administration. RA 9178 (Barangay Micro Business Enterprises Act of 2002) and RA 9501 (Magna Carta for MSMEs, in 2008) were enacted during the Arroyo administration. And last year, President Aquino signed into law RA 10644, the Go Negosyo Act spearheaded by his cousin, Sen. Bam Aquino.
Still, small firms continue to face manifold and daunting challenges in this country. I argued last week that it would take nothing less than a well-orchestrated effort to unleash the yet untapped potential of our small firms to foster more inclusive growth. The problem lies not in lack of laws but, as always, in their inadequate implementation. Efforts have been largely fragmented and leaderless, hence ineffective.
This is where I see Japan setting a good example. The SME Agency under the Ministry of Economy, Trade and Industry (Meti) provides comprehensive support to small Japanese firms. As the apex government body for SMEs, its functions cover the whole range of services that small firms require, covering finance, technology upgrading, business stability, research support, fair trade, business management improvement, new business development, support for overseas operations, and even coordination of SME-related tax policies. The government supports three financial institutions for SMEs: Shoko Chukin Bank, established in 1936, focused on SME cooperatives; People’s Finance Corp. (1948), giving small loans to otherwise nonbankable individual borrowers; and Japan Finance Corp. for SMEs (1953), lending long-term funds for plant and equipment needs and other long-term requirements.
As counterpart to Japan’s Meti, we have the Department of Trade and Industry, which has a Bureau of Micro, Small and Medium Enterprise Development (BMSMED). Also under the DTI are the Small Business Guarantee and Finance Corp. (SB Corp); Philippine Trade Training Center; Product Development and Design Center; and Cottage Industry Technology Center. Other relevant DTI agencies not exclusively focused on MSMEs are the Center for International Trade Expositions and Missions, Bureau of Export Trade Promotion, Board of Investments, and Philippine International Trading Corp.
Various other government entities are also responsible for policies and services relevant to MSMEs, such as the Department of Agriculture, Department of Science and Technology, Department of the Interior and Local Government, Department of Tourism, National Economic and Development Authority, Department of Education, and Technical Education and Skills Development Authority, not to mention the local government units themselves.
The 1991 Magna Carta for Small Enterprises created the MSME Development Council (the “M” for micro was a later addition), attached to the DTI, to coordinate and integrate various government and private-sector activities relating to MSME development. Chaired by the trade secretary, it includes the heads of the DA, DOST, DILG and DOT; the chair of SB Corp.; and representatives of the MSME sector, labor, private banking sector, and youth. DTI-BMSMED serves as the council’s secretariat and sets its agenda. But the Magna Carta is silent on how often the council should meet, even as it mentions 24 meetings a year as a limit. In actual experience, MSMED council meetings have been infrequent, putting to question its ability to fulfill its coordinative role.
Planters Bank, which has made a name for itself as a bank for SMEs, has shown what it takes to be truly helpful to small businesses. It simplified its loan documentation process, tailor-fit loans to match SMEs’ cash flow, and made amortization schedules simpler. Where loan collaterals are short, it avails itself of government guarantees schemes. Through time, the bank has managed to create its own SME credit scoring system, which guided improvements in its loan process system. It helps deserving loan applicants prepare feasibility studies and reconstruct accounting records. It also helps borrowers correct business weaknesses identified in the course of project appraisal.
Planters Bank helps link its clients to prospective buyers, potential investors and business partners. Other services offered to SME clients have included cash management services, assistance in marketing, accounting and finance, legal services, human resources management and taxation. It holds regular symposiums and forums that bring together industry players and experts, including those from the academe and regulatory agencies. The bank even established SME.com.ph, an Internet platform to allow its clients to sell their products to local and world markets via e-commerce. Planters Bank, in other words, has provided a holistic package of services, well beyond finance, to its small business clients.
Government support for MSMEs should be no less comprehensive and unified. What we need is an aggressive apex MSME agency with the needed clout, and an influential and effective “MSME czar” to wield the baton—and crack the whip, when necessary—to ensure that all those concerned do their part to foster a truly enabling environment for small firms nationwide.
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cielito.habito@gmail.com