House approves bill providing financial aid to MSMEs amid COVID-19 pandemic

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Metro Manila (CNN Philippines, February 9) — The House of Representatives has passed on third reading a bill that will help micro, small, and medium enterprises or MSMEs cope with the COVID-19 pandemic.

With 185 affirmative votes, 16 negative votes, and two abstentions, lawmakers on Tuesday approved House Bill 7749, or the proposed Government Financial Institutions Unified Initiatives to Distressed Enterprises for Economic Recovery or GUIDE Act.

The bill seeks to provide an additional ₱35-billion to Land Bank of the Philippines, ₱15-billion to Development Bank of the Philippines, and ₱5-billion to Philippine Guaranty Corporation for expanding their loan assistance programs to MSMEs.

The additional loan programs from Landbank will help MSMEs in agriculture, while those in DBP will be focused on those engaged in the infrastructure, service, and manufacturing industries. The allocation for PGC is expected to be used in increasing maximum loan guarantee coverage per borrower, and reducing guarantee fees and other similar schemes.

The measure also institutionalizes the creation of Accelerating Recovery to Intensify Solidarity and Equity or ARISE Inc., a special holding company that will rehabilitate strategically important firms affected by the pandemic, and will ensure equity participation among qualified businesses.

The establishment of ARISE Inc. also lets DBP and Landbank to enter into joint venture agreements with pandemic-affected companies. The special holding company will enjoy exemptions from procurement and competition laws, and tax privileges.

The passage of the bill comes after the Asian Development Bank Institute published its report on MSMEs in the country. It urged the Philippine government to give more financial support to MSMEs and help them in shifting their businesses into digital operations.

"Given the different abilities of MSMEs to adjust by firm size, the government could pay more attention to a phased approach and differentiate policy measures by firm size and sector. Now is the time to consider an optimal approach that offers targeted assistance yet ensures fiscal sustainability in a post-COVID-19 environment," the ADBI said in its report.

MSMEs comprise 99.5% of business establishments in the country and are employing approximately 63% of the country's workforce, according to the United Nations Philippines. Around 81% of business owners experienced "low consumer demand" during the pandemic.

The proposed GUIDE Act's counterpart bill in the Senate is still pending at the committee level.

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