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In addressing the issue of loan repayment, the government may consider the option of providing some sort of interest rebate for timely payment of loan amortization or guarantee for access to higher credit. From a business point-of-view, this will mean higher bottom line for MSMEs and a significant encouragement to repay the loan on time and in full. After all, the government is obviously implementing this program not to earn from loan interests but to serve those in the MSME sector and boost our country’s economic growth.
The timely and full repayment of loans extended by the government under the P3 program will mean more MSMEs benefitting from the program and higher amounts of loans that the government can extend.
The success of this program will certainly limit the market of loan sharks to those who seek loans for personal or non-business purposes. It may also make loan sharks rethink their “business model” and compete directly with the government in the “business” of extending loans to MSMEs.
Such thing happening will definitely be good news because it may also drive the interest expense of MSMEs down.
While the P18 billion fund allocated by the Duterte Administration for this program is a sizeable amount, it will certainly be not enough for the capital needs of MSMEs particularly because of the sector’s growth.
If the government can demonstrate that it can effectively manage the public fund for this program and successfully implement the same, it will not be difficult for the government to encourage private sector participation in it.
The government can certainly raise more fund for the program (and benefit more MSMEs and hasten the growth not only of the sector but the economy as well) by making the program fund an investment option for the private sector, just as government sells treasury bills.
Since the government is not into this program to earn, it can offer the interest earned from loans to MSMEs as return for those who will invest in the P3 fund. If the government will make this offer and add to it a government guarantee, the government can surely raise more fund for the program. Private individuals and groups will find this offer attractive because they can earn more from it than what they will earn from bank deposits.
Government initiatives like the Pondo para sa Pagbabago at Pag-asenso requires the people’s support and participation. After all, its success will not only be for MSMEs but for all Filipinos.
(Dr. Ramon Ricardo A. Roque, CESOI, Diplomate)