MSMEs

Senate Bill No. 354: Secured Transactions Act

Micro, small, and medium enterprises (MSMEs) are critical in the country’s drive to maintain strong economic growth and uplift millions who live in poverty considering that in 2014 they comprised 99.6% of all Philippine businesses, generated 62.8% of all jobs in the Philippines,1and contributed to around 35% to Philippine GDP.2

The challenge is to ensure that microenterprises grow into small business; and small businesses develop into medium-sized enterprises. We must provide these businesses with an enabling environment so they survive, grow, and expand to create better lives for their families and increase job opportunities for other Filipinos. Crucial to their growth is access to financing at reasonable rates.

While there is notable growth in the microfinance sector, there is still a major gap relative to financing small enterprises, whose loan requirements are beyond the scope of microfinance institutions. Despite being a growth area for banks, SME financing is still considered unattractive given the perceived risks, without traditional collateral such as land and other real property. However, MSMEs’ assets are mostly personal in nature (equipment, inventory, motor vehicle, accounts receivable,etc.), making it difficult for MSMEs to meet bank requirements to get loan approvals. 

As early as 1906, the Philippines has in place a secured transactions legal environment, the Chattel Mortgage Law, and a document-based movable collateral registry operated by the Register of Deeds. The current regime recognizes a diverse set of movable assets acceptable as collateral for loan purposes (e.g., motor vehicles, standing crops, like rice, sugarcane, and other agri-aqua commodities, equipment, etc.,); however, these assets are not being fully utilized nor preferred by banks as loan collateral, except motor vehicles, which leaves the law ineffective to increase trade or facilitate access to finance for MSMEs, and underscores the need to modernize these laws governing movable asset lending in the Philippines. 

The Secured Transactions bill seeks to enable financial institutions to rethink how they view collateral and reduce the perceived risks, by providing protection for framework to govern lending transactions that involve the use of personal property as collateral, as well as the design, establishment, and operation of a unified, centralized, online notice-basednational collateral registry to assure banks that the collateral being submitted has not already been utilized for another loan. These reforms have the potential to increase credit access for women and small businesses, reduce the risks of non-satisfaction of debt and thereby lower the cost of borrowing, and reduce the rate of non-performing loans of financial institutions. 

Jurisdictions like Mexico, Vietnam, and China have undertaken similar reforms and have seen their positive impacts. For example, in Mexico, similar reforms led to the creation of a national Accounts Receivable Finance Platform by the government’s development bank, which has supported at least 130,000 SMEs through accounts receivable financing. In Vietnam, the number of collateral registrations (each representing a loan) surpassed 6000,000 cumulatively over a period of four years. In China, loans with movable asset security are now disbursed at about USD 3.0 trillion per year. 

The bill can bring growth to both MSMEs and to our financial institutions, and enjoin our banks to take part in MSME development with less risk. This measure provides us an opportunity to create a win-win, balanced environment for financial institutions and small businesses, which will generate more employment and sustainable livelihood for Filipinos across the country. 

In view of the foregoing, immediate passage of this bill is earnestly sought. 


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Scaling up support

In 2007, I co-founded the Hapinoy program with the goal of helping women micro-entrepreneurs in the Philippine countryside by creating a solid business network through their sari-sari stores, providing them rigorous training and mentorship, and giving them access to financing, markets, and more business, opportunities.

My experience working with them has deeply shaped my principles on poverty alleviation, inclusive growth through business and empowerment through enterprise.

Our nanays were asked to invest time and energy developing their entrepreneurial and financial management skills to be well equipped to seize the opportunities available to them.

Being a witness to their dedication to uplift their lives and of their family members’ as well, I have deep respect and hope for the micro-entrepreneurs in our country.

Watching them make the most out of their new-found knowledge and business network to expand their stores and sales, I was sold to the belief that if we are able to provide the right opportunities and give them the right break, they would do everything with that opportunity to succeed.

I have seen how our fellow Filipinos with humble backgrounds transformed themselves to astute entrepreneurs with the right support mechanisms in place.

Take the example of Nanay Lani Rebong from Laguna. She started with a table and 3,000 to 5,000 pesos worth of diaper supplies and the will to grow her business to make a better life for her two children.

Since joining the program in 2009 and undergoing business training, she has had three expansions and renovations.

She was given the opportunity to run a mobile money business and now offers money remittance and airtime loading – services that attract regular customers and provide more capital for her store.

From a store-front sari-sari operation, she was able to convert the entire first floor of her home to cater to her growing enterprise. Her store has grown to supply other smaller ones in her area.

She was able to buy a house and lot, a motorcycle, and a tricycle. Most importantly, she was able to send her two children to school and provide a comfortable life for her family.

Nanay Lani and many others are evidence that, given proper training and exposure to opportunities, Filipinos have the grit to better their own lives. Given the chance, the poor themselves can overcome poverty.

Considering that micro, small, and medium enterprises (MSMEs) make up 99.6% of all businesses in the Philippines and 91.6% of MSMEs are micro-enterprises, we can only imagine what sort of impact we can generate by growing these businesses and sustaining their success.

Empowering the micro-enterprises around the country is a key to unlocking inclusive growth and shared prosperity.

With this in mind, I authored the Go Negosyo Act, which was signed into law last July 2014. It mandates that a Negosyo Center be established in every municipality, city, and province in the Philippines with the hope of replicating the success of our nanays.

Each Negosyo Center is aimed to be a comprehensive support system for entrepreneurs. Patterned after our experience in Hapinoy, Negosyo Centers will offer training and mentorship, access to financing, and market linkages to help all our small businesses get to a level of sustainability.

This year alone, the Department of Trade and Industry (DTI) is tasked to open one hundred Negosyo Centers around the country, and by 2019, we hope to have over a thousand of these centers equipped to provide valuable support to our MSMEs.

This year, we have already launched Negosyo Centers inDaet, Camarines Norte, Albay, Aklan, Iloilo, Cagayan de Oro, General Santos, Zamboanga del Sur, and Surigao.

There is no better time than now to push for a massive scale-up of MSME support. We have a proven model for success, a policy to back it up, a substantial base of micro-enterprises, and eager Filipinos just waiting, clamoring to develop their skills and grab at any opportunity.

There is no better time than now to push for inclusive growth and to empower our countrymen to climb out poverty through enterprise development.

The Hapinoy nanays have proven that they can become successful, and my hopeful heart is certain that there are more Filipinos out there who yearn to prove to themselves and to the world that they, too, can succeed, given the right push and support.

***

First Published on Manila Bulletin

Go Negosyo Act Passed on 3rd Reading: To Address Massive Unemployment – Sen. Bam

The Go Negosyo Act (SBN 2046), which was passed by the Senate on third and final reading on Monday afternoon, is envisioned boost job creation and cut unemployment.

This was shared by Go Negosyo Act author, Sen. Bam Aquino, as he thanked colleagues in the Upper Chamber for supporting the swift passage of the bill.

“With the Go Negosyo Act, we can boost job creation in many parts of the country, by ensuring the success and growth of micro, small and medium enterprises (MSMEs).”

“Kapag mas maraming negosyo ang nagbukas at lumago, mas marami silang mabibigyan ng kabuhayan at trabaho sa kani-kanilang mga komunidad,” the senator explained.

According to figures cited by Aquino, at least 66 percent of jobs in the labor force are generated by the MSME sector, which in turn comprises 99 percent of all enterprises in the Philippines.

“Sa bawat sari-sari store, bakery, o talyer na magbukas at lumago, halimbawa, kakailanganin nila ng mga empleyado, supplier, at mga partner na magkakaroon rin ng pagkakataong kumita at umasenso. Magkakaroon ng kita’t kabuhayan ang mas maraming pamilyang Pilipino.”

“Sa paglago ng mga maliliit na negosyo, lahat tayo panalo,” Aquino stressed.

The bill mandates the creation of Negosyo Centers, under the Department of Trade and Industry (DTI), in each city and municipality around the country. These Negosyo centers are meant to make it easier for entrepreneurs to register and start up their businesses, as well as gain access to sources of financing.

The Negosyo Centers are also meant to provide courses and development programs, training, give advice on business conceptualization and feasibility, financing, management, capability building, human resources, marketing and other support services.

“With the support of our colleagues in government and the private sector, we can make the Go Negosyo Act a game-changing piece of legislation that can cut unemployment in the country by half–or even more,” Aquino said.

Sen. Bam’s Go Negosyo Bill: Ready, Set, Go!

The Senate has passed on second reading the Go Negosyo Bill, which seeks to address the Philippines’s rising unemployment rate by speeding up the current business registration process and boosting support for micro, small, and medium enterprises (MSMEs).

The latest figures show that 12.1 million or 27.5 percent of Filipinos are unemployed, the highest since August 2011 when the number reached 29.4 percent.

“There is an urgent need to create more jobs in the country. One way to do it is to make it easier for businesses to start up and succeed–which this bill will enable,” said Sen. Bam Aquino, author of Senate Bill No. 2046 or the Go Negosyo Bill, and chairman of the Senate Committee on Trade, Commerce and Entrepreneurship.

The lawmaker believes that by facilitating ease of doing business, potential investors and would-be entrepreneurs will be encouraged to put up their own businesses and boost hiring around the country.

With the bill slated to be tackled again on the floor next week, Aquino encourages fellow senators to join the push for its final approval.

“I call on my fellow lawmakers to join hands and push for the bill’s approval because it will be a big help to the government’s efforts to reduce unemployment and push for inclusive growth,” Aquino stressed.

If enacted into law, the measure will be the first inclusive growth-related act approved by the 16th Congress.

Department of Trade and Industry Secretary Gregorio Domingo welcomed the passage of the bill. “We laud the passage of the Go Negosyo Act on second reading at the Senate. We’re grateful to have a champion in the Senate like Senator Aquino, and we’re confident that with a law like this, we’ll be able to support MSMEs as an engine of inclusive growth,” Domingo said.

According to the bill, the MSME sector is essential and should be given enough attention as it comprises 99 percent of all businesses in the Philippines and at least 66 percent of all jobs in the labor force.

“The numbers show that boosting the MSME sector will help us create more decent, sustainable jobs that can lift many Filipinos out of poverty,” Aquino stressed.

The Go Negosyo Bill is designed to update two existing laws: the Magna Carta for MSMEs and the BMBE Law.

The measure strengthens the Magna Carta for MSMEs by establishing Negosyo Centers supervised by DTI in each city and municipality as a hub for MSME registration and development.

Through the help of the Negosyo Center, registration processes of agencies can be streamlined, making it easier for entrepreneurs to put up their businesses.

The Negosyo Center can also boost the development of MSMEs, by providing information for training, financing, and marketing; creating mentoring programs with the help of private institutions and local chambers; and opening access to grants and other forms of financial assistance.

Senate, House Committees on Trade Seal Cooperation

The chairmen of the Senate and House Committees on Trade and Commerce have agreed to synchronize their respective legislative agenda, to hasten the passage of important measures that will help boost the economy.

In a meeting, Senator Bam Aquino and Las Piñas Rep. Mark Villar agreed to pursue the same direction and fast-track the approval of measures that will help create jobs; boost micro, small, and medium enterprises (MSMEs); and strengthen the government’s push for inclusive growth.

This marks the first time in the history of the two committees that their chairmen have agreed to harmonize their respective legislative agenda to speed up the passage of crucial bills into law.

“It is important for the two committees to pursue the same direction so that we can hasten the passage of bills that will support the MSME sector and open job opportunities,” Sen. Aquino said.

If these crucial bills will be enacted into law, the senator said it will be easier for the government to pursue its inclusive growth advocacy and make the country’s economic growth felt by every Filipino.

The two lawmakers forged the alliance after both saw the need for legislative measures to boost the economy and create additional jobs.

However, they both expressed concern that these bills will not gain ground and gather dust at the committee level.

“Now that the House and Senate have one legislative agenda in terms of trade and commerce, these important bills have a strong chance to be passed into law at the soonest possible time,” Aquino said.

Among the measures that will be prioritized by the two committees are the Go Negosyo Bill, the Fair Competition Bill, the Coastwise Trade Bill, the Exact Change Bill, and the Lemon Law Bill.

The two committees are also planning to pursue amendments in the Consumer Act and Price Act, where it was proposed that construction materials be put under price control during calamities.

The two lawmakers are also planning to conduct a joint oversight committee hearing regarding the challenges of financing small businesses.

Aquino and Villar both have extensive background in business before joining politics. Sen. Aquino is a multi-award-winning social entrepreneur, while Rep. Villar is the son of former senator Manny Villar and present senator Cynthia Villar, who are known as entrepreneurs.

Sen. Bam: Go Negosyo Bill to Boost MSMEs, Inclusive Growth

Senator Bam Aquino has urged fellow lawmakers to pass the “Go Negosyo Bill”, which aims to facilitate ease of doing business; enhance support for micro, small and medium enterprises (MSMEs); and create more jobs to boost inclusive growth.

During his sponsorship speech for Senate Bill No. 2046, under Committee Report No. 10, which he authored, Sen. Aquino emphasized the need for the passage of the Go Negosyo Bill, stressing that it is one of the “foundational bills” needed to achieve inclusive growth.

“The Go Negosyo Bill is a piece of legislation created to help our countrymen out of poverty and towards a path to prosperity. We humbly ask for our esteemed colleagues’ support and consideration,” said Aquino, chairman of the Senate Committee on Trade, Commerce and Entrepreneurship.

The Go Negosyo Bill is one of the inclusive growth bills that Aquino had filed in the Senate.

The lawmaker pointed out that the Go Negosyo Bill provides the framework for delivering services to our MSMEs, especially for the micro enterprises that comprise 92 percent of all businesses and 66 percent of all jobs in the country’s labor force.

“The numbers show that boosting the MSME sector will help us create more decent, sustainable jobs that can lift many Filipinos out of poverty,” Aquino stressed, adding that MSMEs should be looked as a “pipeline for development.”

“We need programs that will enable micro enterprises to enter the formal economy; our goal should be to help them ‘graduate’ into SMEs so that they grow and generate revenue and jobs for our communities,” he added.

Through the Go Negosyo Bill, Sen. Aquino said MSMEs will be provided infrastructure and support at the city and municipal level “so that local government is able to boost MSME growth and provide jobs and livelihood for their constituents”.

The measure also provides MSMEs access to grants and other forms of financing, shared service facilities and equipment, and other kinds of support.

The bill is also designed to build local support networks and establish market linkages for MSME development, support private sector activities relating to MSME development, and organize programs or projects for entrepreneurial development in the country aligned with the MSME development plan.

Mentoring programs for prospective and current entrepreneurs and investors, as well as services on training, financing, and marketing will be offered and organized. This includes mapping out information and services related to key value chains and economic sub-sectors within an LGU’s jurisdiction.

In order to boost youth entrepreneurship, the Go Negosyo Bill also aims to strengthen coordination with schools and organizations on the development of a youth entrepreneurship training program.

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