The Foundation of a New Financial Architecture in the Philippines
The Stock Exchange for Small and Medium Enterprises
With the creation of a Magna Carta for Small Enterprises (R.A. No. 6977 ) in January 1991, and amended by R.A. No.9510- Magna Carta for Micro, Small and Medium Enterprises (MSME) on May 24, 2008, the government finally has recognized the important role of these sectors of the economy in the promotion of economic growth as well as equal opportunity and access to the facilities for its development. The amended law has increased the capitalization of a medium enterprise into a 15-100 Million peso category, and whereas, the micro and small enterprises are classified in the category of 3 million, and 3.001 million to 15m respectively.
This amended law tries to strengthen government assistance to these industries, without making concomittant responsibilites in creating a viable system wherein the MSMEs can thrive, and develop into viable industries. It has created another layer of bureaucracy, the Council, the Bureau and the Small Business Corporation with a capital of 10 Billion pesos, in order to help and promote the growth of these industries.
Furthermore, the target beneficiaries of this corporation has still to be threshed out in a detailed budgetary plan from the Department of Industry to be submitted in the annual budget yet to be deliberated by both Congress and Senate.
For the credit facilities to be developed, the financial institutions involved shall set aside a loan portfolio for this sector within a period of ten years from the effectivity of the amended law.
Lastly, the main focus for the Magna Carta is to assist enterprises engaged in "new technologies". Clearly, the new law does not help much in the development of SMEs, which is supposed to be one of the major source of employment.
In the Philippines, the stock exchange is dominated by big capital in the domestic market scene, as well as incoming foreign fund managers from abroad looking for better returns on their managed funds and, who have come to appreciate the local capital markets due to the strength of the peso.
The current state of the Philippine Stock Exchange (PSE) does not assist in the development of Small and Medium Enterprises. Although it has a Small Cap section for Over The Counter (OTC) transactions, it has very small volume, and most likely, very nil and has no positive impact on the development of SMEs. Initial Public Offerings (IPOs) for SMEs are seldom. Securities brokers prefer blue chip stocks and highly capitalized firms.
Given these conditions, it is therefore necessary to create a new Exchange whereby Small and Medium Emterprises, and Small and Medium Investors will meet, in buying and selling of shares (common and preferred) with Class A ( local ) and B (foreign) in forms of asociation, that is anonymously structured through a computerized system utilizing the latest electronic book-entry settlement system.
This new Exchange shall provide financing for small and medium enterpises in growth areas from small-medium scale mining, new technologies, to agriculture and fisheries, to food production, encouraging clusters of small-medium size industries, cooperatives and enterpreneurs. It shall also have geographic span from Luzon to Mindanao and shall encourage spatial dispersion to rural areas in order to counter act the growing urban congestion in the metropolitan cities.
The rules set by the Exchange shall be determined by the Founding Members and can be amended from time to time depending on market complexity and needs. But the basic rules for settlement and performance shall not be changed so as to ensure the strict compliance of each members of the stock exchange.
The same rules shall apply for issuances of Corporate Bonds whereby the Small and Medium Enterprises who have gained substantially in the Listing, and are in need of bigger financing, and shall then incorporate a bigger expansion plan utilizing the financing mechanism as applicable to placement of Corporate Bonds or Debentures.
This amended law tries to strengthen government assistance to these industries, without making concomittant responsibilites in creating a viable system wherein the MSMEs can thrive, and develop into viable industries. It has created another layer of bureaucracy, the Council, the Bureau and the Small Business Corporation with a capital of 10 Billion pesos, in order to help and promote the growth of these industries.
Furthermore, the target beneficiaries of this corporation has still to be threshed out in a detailed budgetary plan from the Department of Industry to be submitted in the annual budget yet to be deliberated by both Congress and Senate.
For the credit facilities to be developed, the financial institutions involved shall set aside a loan portfolio for this sector within a period of ten years from the effectivity of the amended law.
Lastly, the main focus for the Magna Carta is to assist enterprises engaged in "new technologies". Clearly, the new law does not help much in the development of SMEs, which is supposed to be one of the major source of employment.
In the Philippines, the stock exchange is dominated by big capital in the domestic market scene, as well as incoming foreign fund managers from abroad looking for better returns on their managed funds and, who have come to appreciate the local capital markets due to the strength of the peso.
The current state of the Philippine Stock Exchange (PSE) does not assist in the development of Small and Medium Enterprises. Although it has a Small Cap section for Over The Counter (OTC) transactions, it has very small volume, and most likely, very nil and has no positive impact on the development of SMEs. Initial Public Offerings (IPOs) for SMEs are seldom. Securities brokers prefer blue chip stocks and highly capitalized firms.
Given these conditions, it is therefore necessary to create a new Exchange whereby Small and Medium Emterprises, and Small and Medium Investors will meet, in buying and selling of shares (common and preferred) with Class A ( local ) and B (foreign) in forms of asociation, that is anonymously structured through a computerized system utilizing the latest electronic book-entry settlement system.
This new Exchange shall provide financing for small and medium enterpises in growth areas from small-medium scale mining, new technologies, to agriculture and fisheries, to food production, encouraging clusters of small-medium size industries, cooperatives and enterpreneurs. It shall also have geographic span from Luzon to Mindanao and shall encourage spatial dispersion to rural areas in order to counter act the growing urban congestion in the metropolitan cities.
The rules set by the Exchange shall be determined by the Founding Members and can be amended from time to time depending on market complexity and needs. But the basic rules for settlement and performance shall not be changed so as to ensure the strict compliance of each members of the stock exchange.
The same rules shall apply for issuances of Corporate Bonds whereby the Small and Medium Enterprises who have gained substantially in the Listing, and are in need of bigger financing, and shall then incorporate a bigger expansion plan utilizing the financing mechanism as applicable to placement of Corporate Bonds or Debentures.
