Enterprise Development Program
- 1. ENHANCING CAPACITIES OF MSMEs Philippine Business for Social Progress ENTERPRISE DEVELOPMENT GROUP
- 2. • 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.
- 3. OUR VISION To lead the business sector’s effort to reduce poverty in the Philippines. OUR MISSION PBSP is committed to poverty reduction by promoting business sector leadership in, and commitment to programs that lead to self-reliance. PBSP Board of Trustees
- 4. PBSP’s Major Programs Sustainable Livelihood & Enterprise Development Education Environment Health
- 5. THE WAY TO GO PBSP’s Enterprise Development Program CREDIT BDS Market-based approaches to poverty reduction
- 6. PBSP’s Enterprise Development Program: Goals & Objectives To contribute to reducing poverty in the Philippines To create and grow enterprises, generating jobs and income opportunities for men and women Enhanced institutional capacity of accredited intermediary Increased MSMEs’ access to financial and microfinance financial and business institutions through wholesale development services credit and business support services
- 7. 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.
- 8. 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
- 9. Fund administration SMEC derives policy guidance from the Project Implementation Committee (PIC) composed of representatives from: • Philippine Business for Social Progress • Department of Finance • Land Bank of the Philippines • Development Bank of the Philippines • Chamber of Thrift Banks • Rural Bankers Association of the Philippines
- 10. SMEC Cumulative Accomplishment PhP 4.3 billion MSME loans disbursed 12,737 MSMEs benefited 83,823 jobs generated 21 active partner IFIs/MFIs
- 11. 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 140,853 programmers (1997) MABS replication project (2001) 2.2 million Total Grants 6.35 million
- 12. 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
- 13. Financial Products MSME LOAN Short-Term Facility Medium-Term Facility • 6-11 months • 1-5 years • • Portfolio Financing (Php 1 M min. loan Sub-loan amounts – Php50k to Php1.0 M drawdown) • Portfolio Financing (Php0.5M min. loan • Micro, Small and Medium Enterprises drawdown) (MSMEs) • Micro Enterprises (Asset size – Php150k to • Max. subloan amount - Php10M Php3.0 M) • Funding share (SMEC 80% : IFI 20%) • Funding share (SMEC 80% : IFI 20%) • Cash Advance (90 days liquidation) • Rediscounting (within 30 days) • Term – weighted average life of the • Principal Repayment (balloon at nearest portfolio maturity date) • Quarterly repayment term (Principal + Interest) • Interest Repayment (monthly or quarterly) • Interest Rate: Variable (adjusted quarterly) • Interest Rate: 0.5% lower than variable rate or Fixed • Securities: Assignment of sub-borrowers • Securities: Assignment of sub-borrowers’ PNs, REMs and other underlying securities PNs, REM and other underlying securities
- 14. Financial Products MICROFINANCE LOAN • 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
- 15. 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
- 16. Qualified business Purpose of Loan activities • Trading • Fixed asset acquisition • Light Industrial Manufacturing • For services related to asset • Handicraft acquisition (e.g. equipment • Woodworking installation and commissioning) • Metalworking • Food Processing • Working capital (e.g. raw • Services materials, finished goods, • Agri-processing operating expenses) • Non-traditional agri products
- 17. 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 growth Donor Committee for Enterprise Development, Guiding Principles, 2001
- 18. Types of BDS • Market Access • Infrastructure • Policy/Advocacy • Input Supply • Training & Technical Assistance (including Business Advising) • Technology and Product Development • Alternative Financing Mechanisms
- 19. 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
- 20. PBSP-BAP Accomplishments • 171 assignments Client Distribution by Asset Size involving 507 MSMEs Medium • 82 assignments Small completed Micro benefiting 112 0% 10% 20% 30% 40% 50% 60% MSMEs Micro 65% • 500 VAs Small 35% nationwide Medium 5%
- 21. Profile of Clients Served by PBSP-BAP Client Distribution by Sector Type of Assistance Rendered Services Organization Manufacturing Production Food processing Accounting Agribusiness Tourism Marketing 0% 10% 20% 30% 40% 0% 10% 20% 30% 40% n=299 Tourism 5% Marketing 31% Agribusiness 12% Accounting 25% Food processing 19% Production 24% Small manufacturing 30% Organization 20% Services 34%
- 22. 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)
- 23. 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
- 24. 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.
- 25. “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. Pangilinan Chairman, PBSP & PLDT
- 26. Contact us: The Group Director Enterprise Development Group PHILIPPINE BUSINESS FOR SOCIAL PROGRESS PSDC Building, Magallanes cor. Real Sts., 1002 Intramuros, Manila, Philippines Telephones: (+63-2) 527-7741 to 48 | Fax (+63-2) 527-3751 Email: pbsp@pbsp.org.ph www.pbsp.org.ph