It’s time to heed MSMEs desperate call for help

MANILA, Philippines — This month, Metro Manila will have breached 100 days of quarantine which had eased from being in the enhanced community quarantine mode (where no one was allowed to leave homes unless for emergency needs) to the current relaxed general community quarantine (GCQ) mode.

The National Capital Region (NCR) now under GCQ is something that many are thankful, and not thankful, at the same time. GCQ, as spelled out by the government, is not the same for business before the pandemic, but a costly business operation in the “new normal.”

Small business owners who opened shop as soon as GCQ was declared had to make sure their employees could come to work. Many workers couldn’t, because most public transportation were still unavailable, and they therefore lost their jobs. Others moved nearer to work, but still had to walk to work if they did not own a motorcycle or bike.

For small entrepreneurs, business under the “new normal” may have allowed jobs to resume, but has not generated profits. Sales, they complain, have not been enough to pay for rent and utilities as people now have less money to spend on non-essentials. Worse, loans need to be paid in spite losses.

Too little, too late

The government may be optimistic that business will pick up and “normalize” towards the latter part of the year, but for small and medium-sized companies, saying it but not doing anything may not be enough – or too late.

This time around, government must seriously come up with a plan focused on keeping micro, small, and medium-sized businesses or MSMEs afloat during the rest of the year, and consequently, helping them to keep people employed.

MSMEs, which take up about 99 percent of registered businesses in the country, provide jobs for more than two-thirds of the labor force. Experiences on lockdowns across the world have manifested its harshest impact on MSMEs, with more than 40 percent projected to permanently disappear if concerned governments do not introduce stimulus programs.

In the Philippines, we’re seeing a resumption of business activity among MSMEs, but the promised second phase of the government’s recovery plan in not being felt or seen. In fact, it’s the opposite with news of lenders tightening on requirements for repayment.

Pathetically, the best that the government is doing at this time is in what the Securities and Exchange Commission (SEC) recently did. In a notice on its website dated June 11, the SEC strongly encouraged financing and lending companies, as well as microfinance NGOs, “to adopt measures that will help ease their borrowers’ financial burden.”

The notice comes in anticipation of the expiry of the 30-day mandatory grace period on loans with principal and/or interest due during the ECQ period from March 17 to May 31 under Bayanihan to Heal as One Act, which will be on June 30.

Lenders’ predicament

While some of the big banks have announced their readiness to extend loan payment deadlines, most of them don’t give loans to MSMEs. Lenders that deal with MSMEs have had their own problems during the lockdown, and therefore have become more circumspect about extending loans.

The Bayanihan Act has prohibited lenders from charging interest on interest, fees, and other charges, as well as encouraging them to stagger payment on accrued interest over a longer period, but these have become a burden to lenders.

MSME financing institutions have their own problems, given their exposure to loans that are more at risk of defaults. It would have been useful if a second installment of the Bayanihan Act were to focus on providing rescue packages for MSMEs through small and big banks. Unfortunately, Congress is now in recess, and will be back to work at the end of July.

All of the P355 billion provisioned by the Bayanihan Act were expended during the ECQ period, going to bolstering the health system, as well as providing relief to families forced out of sources of income, including extending salaries of MSME workers. None went directly to helping MSMEs.

Tailor-fit assistance

As we move to further relaxing the GCQ, hopefully next month, MSMEs will need a lot of relief to get back on their feet. Tailor-fit assistance will have to be given to each sector that has suffered most during the quarantine period, more so in the coming months under the “new normal.”

The retail sector, for example, would appreciate a relaxation of rental fees. Similar perks would be necessary for the restaurant business. Those in the logistics sector could do with reduced storage or demurrage costs. The government could do more to encourage local tourism to help in the hotel and travel sectors.

More importantly, more liberal tax benefits would be desirable than allowing affected businesses to just go bankrupt. It would be better for government to lose a little in tax revenues rather than to lose all.

Meanwhile, the government must continue to make sure that the virus spread is contained and avoid a situation where the current easing will revert to another total lockdown. This situation will only force more MSMEs to shutter up, something that could become catastrophic to the whole economy for a longer time.

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