CEO Insights, SB Corporation

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SB Corporation Chairman and CEO Dr. Ramon M. Quesada shares how SB Corp. is giving mSMEs a bigger chance at success through financing and capacity building.

What is the mission of the Small Business Corporation (SB Corp)?

SB Corp. was originally known as Small Business Guarantee and Finance Corporation (SBGFC), which was established by law under RA 6977 Magna Carta for Micro, Small, and Medium enterprises (mSMEs) in 1991. Its legal mandate is to implement policies and programs to assist mSMEs in all areas but its not limited to finance, information, training, and marketing. In 2001, a merger between SBGFC and the Guarantee Fund for SMEs (GFSME) gave birth to the Small Business Corporation.

What are the products and services of SB Corp.?

There are mainly two: Access to Finance and Capacity Building. On Access to Finance, there are: retail or direct lending to mSMEs; wholesale lending (for relending) to partner banks and nonbank institutions such as cooperatives and foundations; Guarantee facilities, and Venture capital. On Capacity Building, SB Corp. has developed among others, a Business Risk Rating model for banks. At the enterprise level, there are trainings in simple bookkeeping, accounting practices, pricing, and software financial systems for the more sophisticated medium-sized firms.

How do you measure performance?

On the Access to Finance, among the performance indicators are: the number of mSMEs financed, value of credit availment, employment generation, and repayment rate. On Capacity Building, the main performance indicators are: applications and benefits to the mSMEs of trainings conducted. We were recently evaluated by PhilRatings and the result was PRS Aa-rating which means a strong capacity to meet its financial commitments relative to that of other Philippine corporations.

What is the supply and demand situation of credit for mSMEs in the Philippines?

The available supply of credit from the banking sector and nonbanks for mSMEs is estimated to be P270 billion. The International Finance Corporation (IFC) study places the unserved demand at over P100 billion. The main reason is that financial institutions are hesitant to engage in risk financing for mSMEs when loans are small, resulting in high administrative costs. Or, when there is an absence or lack of collateral, little or no track record, or borrowers are from inaccessible or unsecured areas.

What specific role does SB Corp. play?

It is a lead convenor for Government Financial Institutions engaged in mSME lending such as DBP and LANDBANK in a program called SULONG. On its own, SB Corp. has concentrated on the unserved high risk financing covering more than 10,000 SMEs and 90,000 microenterprises to date. Lending originations is currently beyond P32 billion cumulatively since inception. SB Corp. also provides up to 70 percent guarantee facilities for high-risk loans in the banking sector. We are proud to be part of the DTI Family and we coordinate with them on matters of overall policies, programs, and projects, particularly on the non-financial activities.

And the private sector?

There is an sSME Council where we consult and coordinate with the private sector and related government agencies. This is a nation-wide activity. We constantly remind ourselves that the private sector is the engine of growth while the government provides regulatory and developmental support.

The international sector?

SB Corp. has loans and grants from ADB, IFAD (Italy), and KfW (Germany) and we have received citations and good ratings from them. Areas for improvement include the convergence of trainings in DTI and financing of SB Corp.

How is our mSMEs compared to other countries?

I was Vice Chairman and Rapporteur of the UNCTAD Geneva Conference on SME Policies and Programs last year and I am proud to say that our Magna Carta, policies, and programs are in place. However, we need more action and financial support. We are way behind for instance in Guarantee facilities – both regulatory (to prevent abuses) and developmental (to provide an insurance mechanism for risk lending). We also need to strengthen and to cluster the backward and forward linkages in our Agriculture, Industry, and Service sectors. Another area worth strengthening is the value chain between small and large enterprises such as outsourcing, sub-contracting, and franchising.

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