Small and Medium Enterprise Credit ProgramSmall and Medium Enterprise Credit Program

Nurturing Enterprises, Transforming Communities

Established in 1970, PBSP is the largest corporate-led social Established in 1970, PBSP is the largest corporate-led social development foundation in the Philippines with more than 200 development foundation in the Philippines with more than 200 corporate members.  PBSP is committed to the empowerment of corporate members.  PBSP is committed to the empowerment of the poor by promoting business sector leadership in poverty the poor by promoting business sector leadership in poverty

reduction programs that lead to self-reliance.reduction programs that lead to self-reliance.

PBSP’s Core Programs

Area Resource Management

Enterprise DevelopmentEnterprise Development

Corporate Citizenship

Water and Health

Education

SMEC...

a wholesale lending program that aims to help accredited rural and thrift banks and microfinance institutions increase their loan portfolios to MSMEs.

It also provides business support to accredited financial intermediaries to enhance their lending capabilities to MSMEs

Background

• Established in 1989 thru a US$13M grant from USAID

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

• In 1995 & 1998, KfW (German Dev’t. Bank) augmented funding by P389.7M under a bilateral loan agreement among KfW, Landbank, as the borrower, and PBSP as the Project Executing Agency

Program Goal

To support the growth and development of MSMEs To support the growth and development of MSMEs providing more and decent job opportunities for providing more and decent job opportunities for

men and womenmen and women

Program Objectives

• Enhanced institutional capacity of accredited intermediary financial and microfinance institutions through wholesale credit financing and business support services

• Increased MSMEs’ access to financial and business development services

“The most effective new models (of enterprise development) combine the provision of capital with mentoring, business education, and skills training.”

WRI & IFC, 2007“The Next 4 Billion: Market Size and Business Strategy at the Base fo the

Pyramid”

Small and Medium Enterprise Credit

(SMEC)

CREDITCREDITBusiness Advisory

Program(BAP)

BDSBDS

PBSP’s Enterprise Development ProgramPBSP’s Enterprise Development Program

Market-based approaches to poverty reduction

THE WAY TO GOTHE WAY TO GO

SMEC Framework

Donor support

SMEC

Improved economic and

social conditions

Financial Institutions

Infusion of capital and changes in

financing practices

Increase in capital available to enterprises

Enterprises

Increase in investment by

enterprises

Improved enterprise

performance

Financial Products

Short-Term FacilityShort-Term Facility

• 6-11 months6-11 months• Sub-loan amounts – Php50k to Php1.0 MSub-loan amounts – Php50k to Php1.0 M• Portfolio Financing (Php0.5M min. loan drawdown)Portfolio Financing (Php0.5M min. loan drawdown)• Micro Enterprises (Asset size – Php150k to Php3.0 M) Micro Enterprises (Asset size – Php150k to Php3.0 M) • Funding share (SMEC 80% : IFI 20%) Funding share (SMEC 80% : IFI 20%) • Rediscounting (within 30 days)Rediscounting (within 30 days)• Principal Repayment (balloon at nearest maturity date)Principal Repayment (balloon at nearest maturity date)• Interest Repayment (monthly or quarterly)Interest Repayment (monthly or quarterly)• Interest Rate: 0.5% lower than variable rateInterest Rate: 0.5% lower than variable rate• Securities: Assignment of sub-borrowers PNs, REMs and Securities: Assignment of sub-borrowers PNs, REMs and

other underlying securitiesother underlying securities

Financial Products

Medium-Term FacilityMedium-Term Facility

• 1-5 years1-5 years• Portfolio Financing (Php 1 M min. loan drawdown)Portfolio Financing (Php 1 M min. loan drawdown)• Micro, Small and Medium Enterprises (MSMEs)Micro, Small and Medium Enterprises (MSMEs)• Max. subloan amount - Php10MMax. subloan amount - Php10M• Funding share (SMEC 80% : IFI 20%) Funding share (SMEC 80% : IFI 20%) • Cash Advance (90 days liquidation)Cash Advance (90 days liquidation)• Term – weighted average life of the portfolioTerm – weighted average life of the portfolio• Quarterly repayment term (Principal + Interest)Quarterly repayment term (Principal + Interest)• Interest Rate: Variable (adjusted quarterly) or FixedInterest Rate: Variable (adjusted quarterly) or Fixed• Securities: Assignment of sub-borrowers’ PNs, REM and Securities: Assignment of sub-borrowers’ PNs, REM and

other underlying securitiesother underlying securities

Business Development Services

• Capacity development of accredited intermediary financial and microfinance institutions

• Business advisory services to MSMEs through BAP

• Sponsor participation of MSMEs in productivity and competitiveness conferences, business clinics, trade exhibits

• Provide MSMEs and IFIs access to information critical to their businesses

Institutional Development Support to RBAP

Various trainings P678,075

Research & Policy Analysis P361,350

Computerization & Database Project (1994)

P2.8 million

Hiring & training of additional micro banker programmers (1997)

P140,853

MABS replication project (2001) P2.2 million

Total Grants P6.2 million

Business Advisory Program (BAP)

structured business advise to MSMEs (agribusiness, food processing, small manufacturing and tourism sectors) in any of business areas—accounting and finance, business planning, marketing, production, operations, organization, technology application, etc.

Improved business performance

Increased profitability

Enhanced creditworthiness

what’s in it for you?

resulting in:

Qualifications of Intermediary Financial Institutions

• 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

Accreditation Criteria

Management Capability and Performance

30%

Financial Results50%

Credit Process20%

Industry

Peers

1

2

3

Fund disbursement process

RB

TB

MFI

USAIDDOF

KfW

DBP

Landbank

PBSPSMEC

MSMEs

Eligible MSME sub-borrowers

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

• Duly registered business organization which is 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

Purpose of loan

• 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)

CALABARZON

GenSan

CDO

Zamboanga del Norte

Negros Occidental

Negros Oriental

Expansion Areas

Cebu City

Tagbilaran City

Pampanga

Bulacan

Nueva Viscaya

NCR

Areas Covered

Iloilo City

Dumaguete City

Isabela

Surigao del Sur

Lanao del Norte

Fund administration

• 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 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:

““PBSP aims to combat poverty through enterprise development PBSP aims to combat poverty through enterprise development via job generating programs and by creating and assisting via job generating programs and by creating and assisting

micro, small and medium enterprises through credit and non-micro, small and medium enterprises through credit and non-credit programs. This recognizes the role which enterprise plays credit programs. This recognizes the role which enterprise plays

in development, democracy and in the protection of human in development, democracy and in the protection of human rights.”rights.”

Manuel V. PangilinanChairman, PBSP & PLDT

For more information, please contact:

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: pbsp.org.ph | smec@pbsp.org.ph

Website: www.pbsp.org.ph