Sets up B1-B financing program
Department of Trade and Industry (DTI) on Wednesday said an initial P1-billion financing program for micro and small businesses, aimed at crippling the notorious “5-6” money lending scheme, will be available in the first quarter of next year.
In an interview in Quezon City, Trade and Industry Undersecretary Teodoro Pascua said the fund would be rolled out between January and March 2017.
“We are just in the process of fine-tuning the terms and conditions of the lending facility. But we target to implement this as early as January,” Pascua said.
The fund, called “Pondo Para sa Pagbabago at Pag-Asenso,” is part of the P19 billion financing program by the Duterte administration. It intends to support micro, start-ups and small businesses across the country.
The P1 billion would come from the Office of the President and not from the Department of Trade and Industry’s budget.
“Micro business,” are entities with assets of not more than P3 million.
Earlier, President Rodrigo Duterte said that money lending entities that operate under the 5-6 scheme would not be allowed to conduct business under his administration.
Pascua noted the objective is to ease the difficulties experienced by start-ups and micro and small businesses when their monetary obligations fall due and demandable that they fail to sustain their operations.
“If they have enough time to pay their respective debts, and at a much reasonable interest rate, then it follows that they would likewise be encouraged to offer their products at a more reasonable price. Thus, it would also trickle down to the consumers,” Pascua said.
For, Pascua the DTI is still finding the balance between the rate that would be deemed “very reasonable” for the prospective applicant-debtors and at the same time make the micro-lending system sustainable through the years.
“But definitely the rate would be well within their capacity. Unlike the 5-6 system, which is practically 20 percent above the principal obligation a month, that is more than 200 percent per year,” he said.
“We are also finalizing the requirements and qualifications in order for one to avail of this fund,” he said.
“As a replacement to 5-6, everything will be the same except for the 5-6. In everything, I mean accessibility, no collateral, ease of getting the funding and of course we have to make sure collection will be undertaken so we will have to make use of existing, tried and tested micro financing institutions to partner with us and to implement this project with,” Trade Secretary Ramon Lopez earlier said.
Some five to six established microfinance institutions are being tapped to implement the program.