Targeted Assistance for MSMEs Advised Instead of Government Loans and Subsidies

Asian Development Bank Institute (ADBI), a Tokyo-based think tank, believes that small businesses should receive targeted support rather than loans from government financial institutions as the pandemic continues.

“Given the different abilities of MSMEs (micro, small and medium enterprises) for coping with the pandemic and quarantine measures, the government should pay more attention to implementing policy measures that are differentiated by firm size, type, location, and sector and devising an optimal approach that neither impedes national revenue nor increases the budgetary burden post-COVID-19,” said Manila-based Asian Development Bank (ADB)’s senior economist Shigehiro Shinozaki.

“Instead of subsidies, having more public-private sector coordination and a market-based approach would be worthy of consideration for business support programs,” Shinozaki expressed in a blog posted by ADBI on Friday.

From mid-March to May last year, the government helped MSMEs by providing small businesses wage subsidies (SBWS) to cover the salaries of small business workers. Likewise, the government also offered loans through the COVID-19 Assistance to Restart Enterprises and injected capital into state-run lenders under the Bayanihan 2 law for MSME lending.

Over the previous week, Trade Secretary Ramon Lopez said that MSMEs had been apprehensive of securing loans for fears of their inability to pay them back.

“Instead of capital injections to banks, the government could encourage banks to strengthen their self-funding such as through the issuance of asset-backed securities based on MSME loan assets,” Shinozaki explained.

“Assistance for MSMEs to adapt to digital platforms is also a policy priority as traditional business models require physical and personal contact,” he added, noting how small businesses have made the shift to offering their goods and services online.

According to a report by the World Bank, a survey among Philippine firms in July 2020 presented that smaller firms suffered the largest drop in sales compared to large corporations. The figures showed 58% among microenterprises and 60% among SMEs, compared to the 51% posted by large corporations.

Source: Inquirer