Battling “5-6” with P3

The DTI's P3 Program will provide new financing opportunities among MSMEs

Department of Trade and Industry (DTI) Secretary Ramon Lopez shared in a Pandesal Forum at Kamuning Bakery Café that DTI  has secured an initial funding of P1 billion this 2017 for its new financing program known as “Pondo Para sa Pagbabago at Pag-Asenso” or P3 that will benefit micro entrepreneurs.

P3, as explained by Secretary Lopez is a funding program that will provide small businesses an alternative source of financing that is easy to access and made available at a reasonable cost. The program provides a boost to the development of the Micro, Small and Medium Enterprises (MSME) sector, particularly the microenterprises that comprise about 90 percent of registered enterprises in the country. Priority beneficiaries include microenterprises and entrepreneurs that do not have easy access to credit, or are accessing credit at very high cost, such as, start-up entrepreneurs, market vendors, agri-businessmen and members of cooperatives, industry associations and co-operators.

Secretary Lopez noted that P3 is part of the P19 billion financing program of President Rodrigo Duterte, which aims to offset the “5-6” lending scheme and to give micro vendors an alternative option wherein borrowers will be charged with a minimal interest rate of only 2.3 to 2.5 percent per month, much lower than the 20 percent interest rate usually collected by loan sharks in a span of two to three months.

The program’s fund will be lent out in the business centers of the poorest provinces (based on poverty incidence), where the participating microfinance institutions (MFIs) and an attached agency of DTI -- Small Business Corporation (SB Corp.)  can operate. SB Corp. shall administer the P3 Program and shall oversee the management and monitoring of fund through the Program Management Office.

Secretary Lopez added the fund delivery to microenterprises shall be carried out either by wholesale lending to non-bank financial institutions like MFI-NGOs, and cooperatives which shall lend the fund to beneficiaries or by direct lending from SB Corp. Borrowers may loan P5,000 up to P300,000 annually with 26 percent interest only, lower than the 20 percent per day or weekly from 5-6 lender. The maximum loan amount which is at P300,000 has an interest rate capped at 10% per annum with or without collateral cover.

According to Secretary Lopez, a total 92 micro-borrowers were initially identified to receive loan grants. Lopez added that the program has recently began its rollout in Mindoro, Sarangani and Leyte, among the top 30 poorest provinces, to represent Luzon, Visayas and Mindanao.

Photo courtesy of Go Negosyo