Amidst political scandals and the growing disillusionment over the present administration, it is a welcome development to see your government at work. One shining example is the Department of Trade & Industry (DTI), in particular that of Region 11. Another public institution that could give this government some much-needed accolades is the Philippine Export-Import Credit Agency (PhilEXIM — officially registered as Trade & Investment Development Corporation of the Philippines).
Recently, PhilEXIM executives held an orientation seminar in Davao City for the benefit of SMEs, particularly small- and medium-sized I.T. enterprises (SMITEs). As does the DTI, PhilEXIM now has a mandate to focus on the development of the country’s I.T. industry. Before anything else, let me just say that the seminar was more than mere talk. The PhilEXIM executives, led by none other than one of the vice-presidents, were all set to start working with Davao companies.
PhilEXIM is the government’s answer to the years-long clamor by SMEs for affordable and accessible funding windows. Commercial loans from the country’s banks are simply prohibitive and are thus impractical for, say, startup I.T. companies in Davao. Stringent collateral requirements and high interest rates are two of the almost insurmountable challenges facing SMITEs to avail of bank loans. But with PhilEXIM in the picture, SMITEs now have a more feasible alternative for their financing needs.
PhilEXIM concentrates its activities on the export sector exclusively. Direct exporters, as well as indirect exporters — those who act as suppliers of raw materials and services to direct exporters — are able to avail of PhilEXIM’s loan products. I.T. companies, especially those who are in the thick of business process outsourcing and software development, are considered eligible.
To give you a quick idea of how big a business opportunity this is for SMITEs, PhilEXIM’s current interest rates are between 8.5 to 9.5% per annum. The following text is taken from the seminar presentation:
Under the (Short-Term Direct Lending) program, PhilEXIM grants short-term loans, purchases export bills and extends any form of receivable financing to small- and medium-sized exporters to finance their preshipment working capital and postshipment financing requirements.
Let’s drill further down into this Short-Term Program. It is comprised of two types: a Revolving Line of credit, and a Transaction Loan. The former involves a one-year (renewable) credit line with a maximum limit of Php 20 million. Each disbursement must be supported by a promissory note, and will have a maximum tenor of 180 days.
The Transaction Loan type, which also carries the same loan upper limit, might not be suitable for I.T. companies. It is more attuned to the financing needs of exporters of tangible goods.
A Medium- and Long-Term Direct Lending program exists as well. This carries a maximum loan size of Php 40 million. Here’s another quote:
This program provides medium- and long-term loans to small- and medium-sized exporters to finance acquisition of fixed assets, expansion, modernization of production techniques, improvement of production capacity and permanent working capital. Purchase of land / project site is allowed provided only 50% of the loan is used for such purpose.
PhilEXIM is not a bank, but is affiliated with LandBank and the Development Bank of the Philippines. There are also also more than a dozen commercial banks that participate in its programs.
Aside from low interest rates, PhilEXIM has been directed by the government that loan applications must not be denied solely for lack of collateral. It is not my aim here to expound on PhilEXIM loan application requirements, but suffice it to say for now that SMEs will find them very accessible and feasible.
While we may be disappointed — to say the least — in the perceived overall performance of this administration, I daresay it is fulfilling some of its mandate through PhilEXIM. I believe that the activities of PhilEXIM will spell the success of our SME sector. With that, ultimately, we will see a tremendous boost to the national economy.
Unfortunately, PhilEXIM does not yet have a presence in Davao City. Its Visayas and Mindanao operations are currently being managed out of Cebu. But with e-mail and mobile phones, this shouldn’t really be such a big hurdle. The Cebu-based officer-in-charge, Mr. Alex Arabis, has indicated that any request for them to come down for business transactions will be positively received. And with the assistance of DTI-Region 11, access to PhilEXIM will be a cinch.
Furthermore, PhilEXIM is looking to accredit loan-granting conduits in Davao (and other areas). Such conduit could be a non-profit organization. I will discuss this further in another installment. In the meantime, I will welcome any inquiries from I.T. companies or industry associations regarding PhilEXIM’s loan products. Feel free to contact me via this contact form.
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