Philippines eyes US$55M funding for SMEs

A new Philippines government corporation attached to the Department of Trade and Industry (DTI) is looking to provide at least three billion pesos (US$55 million) in financial assistance to small and medium enterprises (SMEs) this year.

The SME Development Group (SMEDG), established in the second half of last year, is also working with the Department of Science and Technology (DOST) through the latter’s flagship project called Small Enterprises Technology Upgrading Program or SET-UP.

DOST itself is providing financial assistance to SMEs under SET-UP, similar to what SMEDG intends to do. As of 2002, SET-UP has provided funding to more than 40 micro, small and medium enterprises (MSMEs) from various industries, notably food processing.

“We are looking at our partnership with DOST as an important strategy for our corporation,” stressed Melvin Abanto, SMEDG vice president. “DOST’s funding budget is limited and we know the entrepreneurs require more and that’s where we come in.”

For 2005, Abanto, in an interview with Computerworld Philippines during the third CWP Executive Briefing held on Feb. 18, said SMEDG is targeting to disburse around P3 billion in approved assistance, part of which would be sourced from various official development assistance (ODA) loan packages.

Among others, he mentioned a US$25-million loan package from the Asian Development Bank (ADB) and another loan package from the German government worth 11 million euros (US$14.4 million).

The partnership between SMEDG and DOST aims to lower the equity SME investors need to put up to establish their business. Under SMEDG’s criteria, a borrower is required to invest a counterpart outlay of as low as 20 pe rcent of the total estimated project cost.

“For projects that have a technology component, we are counting on DOST’s expertise in evaluating which projects deserve funding from both parties,” Abanto said.

SMEDG, like SET-UP, was created in support of the government’s SME initiative. In her 10-Point Agenda she announced during her State of the Nation Address, President Gloria Macapagal-Arroyo promised to help, at least, three million entrepreneurs through various forms of financial assistance packages.

Created via DTI Department Order No.88, SMEDG is mandated to provide assistance in marketing, policy advocacy, product development and training for SMEs. It also acts as a lender to SMEs, from which it earns revenues in the form of loan interests.

“As much as we can make them, our interest rates are market-based,” Abanto noted. “What we’re trying to address here is access to capital for small businessmen who cannot readily borrow from established banks for lack of proper documentation.”