By Kris Crismundo
MANILA, (PNA) -– Savings of the national government shall go to projects that will make small and medium enterprises (SMEs) viable, according to a local microfinance institution.
Ma. Lourdes Pineda, president of RCBC’s microfinance arm, Rizal Microbank told the Philippines News Agency Monday that it will be beneficial to fund projects supporting SMEs to encourage people to invest in economic activities.
”If indeed there exists savings from the national government budget, this should be funneled toward providing supportive infrastructure (such as) farm to market roads, post harvest facilities, etc. that could enhance the financial viability of SMEs,” Pineda said.
With this, cost of operations will be reduced as it would be easier for SMEs to deliver their products to the market.
She added that more communities will be engaged to invest in businesses if the government strengthens the MFIs through funding them.
However, lending operations should be left to MFIs according to Pineda.
”When it comes to lending operations, I believe government should leave this activity to the private financial sector (that) are better at providing credit,” she noted.
”Historically, the government has never been very good at providing credit,” she added noting that borrowers tend not to pay credit if the money comes directly from the government.
“It is a common perception on the ground (particularly at the “base of the pyramid”) that when it is government that is providing a loan, there is no need for the said loan to be repaid. In effect, fostering a “dole-out” mentality,” said Pineda.
“This is clearly evident with what happened to the Masagana 99 program in the 70s.”
The Masagana 99 under the Marcos era allowed farmers to access better technology, credit, price support of the product, and lower cost of fertilizers.
However, a significant number of farmers failed to pay their credit obligations.
Thus, allowing MFIs operate the excess money of the government being invested to microfinance will address the national fund to the poorest community, help them to create a living and will soon enable them to generate jobs for other poor communities.
Likewise, the father of microfinance and founder of Grameen Bank Nobel Laureate Muhammad Yunus said in an interview “the Philippines is lucky if you have surplus of national fund. The government must invest to support microfinance for the poor people.”