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MANILA - The Department of Trade and Industry is mulling over providing support to banks to boost lending to small and medium enterprises.
Trade Secretary Gregory Domingo told reporters that the agency is proposing to guarantee 5 percent of the loan amount that banks will grant to SMEs based on certain criteria.
The assistance will encourage lending to SMEs as this will allow banks to mitigate the higher cost of processing and credit risk.
"For people to engage in lending to small enterprises, an incentive should be given because they are taking a bigger risk for it. If you will treat them as a regular lender, it won't work so assistance is really needed," said Domingo on the sidelines of the launch of the SMEplus loan portal.
Domingo said a P2-billion assistance in the next three years will generate loans of P120 billion, helping bridge the P60 billion to P180 billion financing requirement of SMEs.
The budget for the planned program may not be included in the 2013 national budget though, because the plan may need to be studied further, he added.
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