Higher Penalty for Banks Not Complying with Mandatory Lending to MSMEs Pushed


The House Committee on Small Business is pushing for higher penalty for banks not complying with the mandatory lending provision required in the Magna Carta for micro, small and medium enterprises (MSMEs).

Rep. Teddy Casiño, chairperson of the House Committee on Small Business and Entrepreneurship Development, said that despite the mandatory credit allocation, the banks’ financing for the MSMEs remained inadequate.

The Magna Carta for MSMEs or Republic Act 6977 mandated all lending institutions to set aside eight percent of their total loan portfolio for micro and small enterprises, and two percent for medium firms. Under the regulations, a maximum penalty of P500,000 is imposed on non-compliant banks.

“We want the BSP (Bangko Sentral ng Pilipinas) to revise their IRR (implementing rules and regulations). Instead of a maximum of P500,000, that should be the minimum penalty for those not complying,” he said.

Casiño said the BSP’s reporting system should also detail individual bank’s performance in order to better determine the complied and non-complied banks.

He said an improved reporting system can be used to adjust policy concerning the access to finance of the MSMEs.

Casiño said the oversight committee will hold a meeting with the stakeholders sometime next month to come up with recommendations on how to squarely address this problem.

“The banks are awash with cash; they are required to provide credit to the MSMEs. The BSP is saying they are complying but the feedback we got from the MSMEs is that bank loans are inadequate. So there’s a constraint, there is a problem in monitoring and compliance. And it is more in the IRR rather than in the law,” he noted.

Apart from the proposed revision to the IRR of RA 6977, Casiño said his committee is introducing amendments to the Barangay Micro Business Enterprises (BaMBE) Law.

“We want the micro enterprises to be exempted from local business taxes if their capital is P200,000 and below,” Casiño said, as he also underscored the need to rationalize policy on income tax.

“And we want the approval of the BIR for the incentives need not be forwarded to the national office but the regional office should be able to decide already whether to grant the incentives or not,” he added.

Casiño said they hope to finish an amended bill that will strengthen the BaMBE law by October.

The MSMEs account for 99.6 percent of the total number of firms in the country, and employ 69.9 percent of the labor force.

— Danielle Venz, PHILEXPORT News and Features

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