Enterprise Development Program

ENHANCING CAPACITIES OF MSMEs

Philippine Business for Social ProgressENTERPRISE DEVELOPMENT GROUP

• The largest corporate-led, non-profit, social development foundation in the Philippines.

• Founded in the 1970s by 50 business leaders; now has 255 corporate members.

• PBSP is at the forefront in the fight against poverty through trailblazing corporate social responsibility (CSR) or corporate citizenship programs.

OUR VISIONTo lead the business sector’s effort to reduce poverty in the Philippines.

OUR MISSIONPBSP is committed to poverty reduction by promoting business sector leadership in, and commitment to programs that lead to self-reliance.

PBSP Board of Trustees

PBSP’s Major Programs

Environment

Sustainable Livelihood & Enterprise Development

Health

Education

PBSP’s Enterprise Development ProgramPBSP’s Enterprise Development Program

THE WAY TO GOTHE WAY TO GO

CREDITCREDIT BDSBDSMarket-based approaches to poverty reduction

PBSP’s Enterprise Development Program: Goals & Objectives

To contribute to reducing poverty in the Philippines

Increased MSMEs’ access to financial and business development services

Enhanced institutional capacity of accredited intermediary financial and microfinance

institutions through wholesale credit and business support

services

To create and grow enterprises, generating jobs and income opportunities for men and women

Small and Medium Enterprise Credit (SMEC) Program

SMEC is a wholesale lending program that aims to increase credit access of accredited rural and thrift banks and microfinance institutions for lending to micro, small and medium enterprises (MSMEs).

Alongside Credit, SMEC provides business support to accredited financial intermediaries to enhance their lending capabilities to MSMEs.

SMEC Background

• 1989 – established SMEC thru a US$13M grant from USAID

• 1995 – ownership of the fund was transferred to DoF, held in trust by DBP

• 1995 & 1998 – KfW (German Dev’t. Bank) augmented funding by PhP389.7M under a bilateral loan agreement among KfW, Landbank, as the borrower, and PBSP as the Project Executing Agency

• 2008 – DoF approved the extension of SMEC until 201x

Fund administration

SMEC derives policy guidance from the Project Implementation SMEC derives policy guidance from the Project Implementation Committee (PIC) composed of representatives from:Committee (PIC) composed of representatives from:

• Philippine Business for Social ProgressPhilippine Business for Social Progress• Department of FinanceDepartment of Finance• Land Bank of the PhilippinesLand Bank of the Philippines• Development Bank of the PhilippinesDevelopment Bank of the Philippines• Chamber of Thrift BanksChamber of Thrift Banks• Rural Bankers Association of the PhilippinesRural Bankers Association of the Philippines

SMEC Cumulative Accomplishment

PhP 4.3 billion MSME loans disbursed

12,737 MSMEs benefited

83,823 jobs generated

21 active partner IFIs/MFIs

Institutional Development Support to RBAP

Various trainings 847,450

Research & Policy Analysis 361,350

Computerization & Database Project (1994) 2.8 million

Hiring & training of additional micro banker programmers (1997)

140,853

MABS replication project (2001) 2.2 million

Total Grants 6.35 million

Qualifications of IFIs/MFIs

• Rural Bank, Thrift Bank, or Microfinance Institution

• Operating for at least three years• Asset Size: TB=P100M up; RB=P50M up;

MFI=P300M up• Committed to MSME development• Financially stable• Governed by sound credit policies• Demonstrated management capability and

performance

Financial Products

Medium-Term Facility • 1-5 years• Portfolio Financing (Php 1 M min. loan

drawdown)• Micro, Small and Medium Enterprises

(MSMEs)• Max. subloan amount - Php10M• Funding share (SMEC 80% : IFI 20%) • Cash Advance (90 days liquidation)• Term – weighted average life of the

portfolio• Quarterly repayment term (Principal +

Interest)• Interest Rate: Variable (adjusted quarterly)

or Fixed• Securities: Assignment of sub-borrowers’

PNs, REM and other underlying securities

Short-Term Facility

• 6-11 months• Sub-loan amounts – Php50k to Php1.0 M• Portfolio Financing (Php0.5M min. loan

drawdown)• Micro Enterprises (Asset size – Php150k to

Php3.0 M) • Funding share (SMEC 80% : IFI 20%) • Rediscounting (within 30 days)• Principal Repayment (balloon at nearest

maturity date)• Interest Repayment (monthly or quarterly)• Interest Rate: 0.5% lower than variable rate• Securities: Assignment of sub-borrowers

PNs, REMs and other underlying securities

MSME LOAN

Financial Products

• 6-11 months • Sub-loan amounts – Php150k &

below• Minimum loan drawdown of

Php0.5M • Funding share (SMEC 80% : IFI

20%) • Rediscounting (within 30 days)• Repayment (monthly / quarterly)• Interest Rate: 8.5%-9.0% p.a.

variable rate + 2% for fixed rate• Securities: PDC

MICROFINANCE LOAN

Eligible MSME sub-borrowers

• The principal business owner is a citizen or permanent legal resident of the Philippines

• Duly registered business organization, at least 60% owned by Philippine nationals

• Have their principal place of business in the Philippines

• Must be 100% privately-owned with total assets of not more than P15 million at the time the loan is granted

Qualified business activities

• Trading• Light Industrial

Manufacturing• Handicraft• Woodworking• Metalworking• Food Processing• Services• Agri-processing• Non-traditional agri

products

• Fixed asset acquisition

• For services related to asset acquisition (e.g. equipment installation and commissioning)

• Working capital (e.g. raw materials, finished goods, operating expenses)

Purpose of Loan

What is BDS?

• Business Development Services (BDS) refers to the wide range of services used by entrepreneurs to help them operate efficiently and grow their business with the broader purpose of contributing to economic growth, employment generation, and poverty alleviation.

• Studies have shown that BDS increases the survival of small-scale enterprises, and contribute to their growthDonor Committee for Enterprise Development, Guiding Principles, 2001

Types of BDS

• Market Access

• Infrastructure

• Policy/Advocacy

• Input Supply

• Training & Technical Assistance (including Business Advising)

• Technology and Product Development

• Alternative Financing Mechanisms

PBSP-Business Advisory Program

• PBSP-BAP delivers business advice and technical assistance to MSMEs by engaging Filipino professional experts as Volunteer Advisers

• It covers almost all dimensions of business such as Accounting and Finance, Marketing, Production, and Organizational Management

PBSP-BAP Accomplishments

• 171 assignments involving 507 MSMEs

• 82 assignments completed benefiting 112 MSMEs

• 500 VAs nationwide

Micro 65%

Small 35%

Medium 5%

0% 10% 20% 30% 40% 50% 60%

Micro

Small

Medium

Client Distribution by Asset Size

Profile of Clients Served by PBSP-BAP

Tourism 5%

Agribusiness 12%

Food processing 19%

Small manufacturing 30%

Services 34%

Marketing 31%

Accounting 25%

Production 24%

Organization 20%

0% 10% 20% 30% 40%

Tourism

Agribusiness

Food processing

Manufacturing

Services

Client Distribution by Sector

0% 10% 20% 30% 40%

Marketing

Accounting

Production

Organization

Type of Assistance Rendered

n=299

Results of BAP’s Assistance

• 73% reported higher income and sales

• 95% improved access to market

• 58% hired more workers to cope with increased demand

• 27% maintained employment level

• 9% were able to avail of financing from various sources

CESO-BAPII End-of-Project Evaluation Report (2008)

Integrating Business Advising with Financing

• Improve loan repayment; loan quality• Enhance the financial performance and credit-

worthiness of MSME-clients• Improve business of MSME-clients, thus

expanding demand for financing• Strengthen MSME-client relations

• Improve the bank/MFI’s social performance

Financing, coupled with BDS, can be a unique expression of Corporate Social Responsibility of Financial Institutions—a business solution to addressing poverty.

“If we can spend the early decades of the 21st century finding approaches that meet the needs of the poor in ways that

generate profits and recognition for business, we will have found a sustainable way to reduce poverty in the world.”

Bill Gates (2008), Davos.

“PBSP aims to combat poverty through enterprise development via job generating programs, and by creating and assisting micro, small and medium enterprises through credit and non-credit programs. This

recognizes the role which enterprise plays in development, democracy and in the protection of human rights.”

Manuel V. PangilinanChairman, PBSP & PLDT

Contact us:

The Group DirectorEnterprise Development Group

PHILIPPINE BUSINESS FOR SOCIAL PROGRESSPSDC Building, Magallanes cor. Real Sts.,

1002 Intramuros, Manila, Philippines

Telephones: (+63-2) 527-7741 to 48 | Fax (+63-2) 527-3751Email: [email protected]

www.pbsp.org.ph