DTI recently launched P3: Pondo sa Pagbabago at Pag-asenso which aims to provide micro, small and medium enterprises (MSMEs) small ticket loans for their business needs. This also presents a viable alternative compared to loan sharks / 5-6 who traditionally lend to this sector without much questions and requirements asked, but in exchange for exorbitant rates (i.e. 20% per month or every 45 days).
According to the DTI website, P3 promises:
- One day processing
- Max of 2.5% interest per month
- Daily / weekly repayments
- Loan amounts of PHP5,000 to PHP100,000
Need a loan for your small business?
To apply for a loan, just go to the nearest Negosyo Center or National Conduits of Small Businesses (SB) Corp. Click here for the detailed listing on where to inquire / apply.
Below is a copy of the P3 flyer from the DTI website. See more details here.
UNTAPPED MARKETS BY BANKS
In another news:
Banks have long ways to go in terms of catering to the financing needs of MSMEs given the lower loan amounts (low profits), lack of financial statements to gauge business income, or other documented proof of income, other documentary requirements such as permits, or lack of attractive payment options for borrowers (usually via PDC, over the counter in bank branches, ADA, payment centers etc.)
On the other side of the fence, MSMEs are also not too keen to approach banks to avail of such financing given the many requirements, which they find tedious, complicated, and not as accessible, or they think they need collateral (not always), they feel like their profile is not the bank’s target market (they think they won’t be approved anyway), and that they still have to go out of their way to repay the loan (like issue PDC or go to payment centers).
As a financial freedom advocate, I believe that access of small businesses, (and basically every Juan) to financing that is fast, easy and cheap is very critical. Critical to this country’s progress. We previously shared out thoughts on this in a previous article titled PH: Too Many Banks Yet Many Pinoys Still Unbanked.
MSMEs find loan sharks / 5-6 as an “easier and ready” alternative since the lenders themselves go to their stores daily or weekly to collect small amounts as repayment. Plus the loan sharks don’t ask for much documents (if at all), they do their KYC (know-your-customer) during their daily rounds in the area riding a motorcycle (sorry, I’m stereotyping).
Either the borrowers are not aware of the uber-big interest they are paying, or they choose to turn a blind eye on the true cost of borrowing since they don’t have better alternatives. With P3, hopefully this slowly changes.
BE MORE CREATIVE!!!
Speaking of change,
Newly-sworn BSP governor Espenilla once again stressed BSPs push to make banking more inclusive, and mentioned that they will not prevent banks in coming up with “creative” means to assess the MSMEs capacity-to-pay as long as it is still within prudent risk management. He wants “credit to flow to credit-starved entrepreneurs”.
So the ball now is in the banks’ court – how to crack the MSME segment and lend to them the non-traditional but safe way.
FINTECH FOR THE FUTURE
Finally, speaking of non-traditional,
Fintech (short for financial technology) is still young in the country (like crowdfunding) but I’ve been hearing more and more about them. Soon enough, fintech will be another competition of banks soon.
Right now fintech is tapping the unbanked much like the market of loan sharks but fintechs do it using technology like apps, or acting as middleman connecting those with extra cash (small amounts) to those with small needs (small loans) a.k.a. peer to peer lending. But eventually, I’m sure they will also find ways to lend to mainstream markets, the salaried, those with documented income and with existing credit history — the usual market of banks.
Other upcoming forms are lending through Facebook (tell me who your friends are and I’ll tell you if I can lend you money) and through Juan’s mobile phone (let me see your phone, check which apps you use, are you organized and all, then I’ll judge your character based on that).
Exciting times for the financial services sector and good news for the untapped markets!
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