COVID-19 MSME Incentives

January 31, 2022 by

While the COVID-19 pandemic has affected every aspect of our day-to-day lives, one of the most impacted sectors includes micro, small, and medium-sized enterprises (MSMEs). With a substantial part of the country on enhanced community quarantine (ECQ), majority of MSMEs will have most, if not all, of their businesses halted, leaving them to depend on their savings and emergency funds. But even those run the risk of drying up before the lockdown ends.

Fortunately, the Philippine government is rolling out several funds, projects, and incentives that are specifically designed to help MSMEs weather the storm of the lockdown. These range from financial aid programs specifically budgeted from the government’s disaster response fund to directives from different government agencies that enable the community to soften the impact of the pandemic to the MSMEs.

This article will focus on three examples of the latter: first, the Department of Trade and Industry’s (DTI’s) rules on residential and commercial rents during the ECQ; second, the Bangko Sentral ng Pilipinas’ (BSP’s) relaxed rules on bank loans; and third, the waived fees on importations applied by various agencies.

Concession on Rents
Even if their physical stores are closed, most entrepreneurs are still using a building, office space, and/or land that they are renting from a lessor. This means that many SMEs will have to pay their rental fees for the months of ECQ out of their savings or emergency funds, as they won’t have the cash flow from normal operations to cover this expense.

This is what the DTI hopes to alleviate with Memorandum Circular 2020-12, titled “Guidelines on the Concessions of Residential Rents; Commercial Rents for MSMEs.” This law requires lessors and landlords of MSMEs to impose a grace period of at least 30 days for any rents that are due within the ECQ period, giving business owners more time to settle their payments while cash flow is severely reduced.

These rents fall under two categories. Residential rents refer to any rental payments made for units such as bedspaces, rooms, dormitories, apartments, houses, and buildings, as long as it is primarily used for housing and residential purposes. Commercial rents refer to any rental payments made for spaces such as shops, facilities, offices, buildings, and land that is used for business and commercial activity.

This 30-day grace period will cover the 30 calendar days after the due date of the rent, provided that the due date falls within the duration of the ECQ. (For example: If a lessee’s due date is on April 15, 2020, the payment will not be due until May 14, 2020.)

Aside from the grace period, the DTI also recommends lessors to apply other considerations that can help MSMEs weather the challenges faced amid the pandemic. These efforts can include: renegotiating the payment terms with the tenant, relaxing the rental fee requirements for payments immediately after the ECQ, and even waiving the rental fees during the ECQ entirely.

Relaxed Requirements for Bank Loans and Funds
The concession on rents was one of the provisions implemented as a result of Republic Act 11469, or more popularly known as the Bayanihan to Heal as One Act. Signed into law on March 25, 2020, this act details all of the measures that the government will take to minimize the impact of the pandemic for the entire country.

One other provision included in the Bayanihan to Heal as One Act that proves to be beneficial to MSMEs is the relaxed requirements on loans from BSP-supervised financial institutions that have payments due within the ECQ period. The law states that just like residential and commercial rents, any loan that is due to be settled during the ECQ will be granted a 30-day grace period.

This means that if an entrepreneur took out a business loan prior to the ECQ and has a principal or interest that is due within the ECQ period, the entrepreneur may settle the payment within 30 days after the due date without applying any additional interest, fees, or charges. This applies to any loan availed from a bank or financial institution regulated by the BSP.

Moreover, the BSP has also relaxed the requirements needed to access their funds within a bank. Specifically, the bank will no longer require the entrepreneur to present a valid ID for the transaction, as long as they provide any proof on why they do not have an ID. Transactions falling under these relaxed requirements cannot exceed Php50,000 per day.

For more information on these relaxed requirements on loans and funds, check out the Implementing Rules and Regulations of this specific provision within the Bayanihan to Heal as One Act.

Waiving of Importation Fees
Another industry heavily impacted by the global pandemic is manufacturing. The distribution and movement of products around the world have severely slowed down due to the closure of businesses and various lockdowns around the world, which in turn are negatively impacting our ability to meet daily healthcare needs.

However, for businesses that provide and import various products that address these shortages, the Department of Finance (DOF) and the DTI have released Joint Memorandum Circular 2020-02, which lists certain products whose importation fees have been waived for the duration of the ECQ. Among the fees waived are import duties, taxes, and fees, as well as the attached fees imposed by the Bureau of Customs (BOC), Food and Drug Administration (FDA), and other related agencies.

A complete list can be found in the joint circular linked above, but among the most notable types of products that fall under this importation fee exemption are:

  • Medicine and medical supplies
  • Personal protective equipment (PPE)
  • Medical, surgical, laboratory and other types of relevant healthcare equipment
  • Raw materials needed to maintain and support the above products

However, not every MSME that imports these products will be able to avail themselves of the waived fees. For the most part, the DOF and the DTI are limiting these exceptions to the businesses that are integral to maintaining the supply chain of these products.

If your business falls under that limitation, you will need to do the following to avail of the waived fees:

  • Apply for an accreditation certificate from the Board of Investments (BOI)
  • Apply for a Tax Exemption Indorsement with the DOF
  • File a provisional Import Entry Declaration with the BOC

Keeping MSMEs Afloat
The COVID-19 pandemic will be a difficult time for MSMEs, and it’s guaranteed that only a few businesses will come out of the ECQ unscathed. As such, regulations like the concession of rental payments, the waiving of importation fees, are the government’s way of lending business owners a hand as the latter figure out their financial plan in these trying times.

These two regulations are only some of the various programs that the Philippine government has rolled out to meet the needs of MSME owners. Many officials and agencies have committed to implementing more policies in the future, as the country adjusts to the new realities brought about by the pandemic.

In the meantime, we at UNAWA will continue to provide resources for business owners who need guidance in these trying times. Join our Telegram Group to connect with other entrepreneurs and to get relevant updates on opportunities that MSMEs can grab while the country continues to deal with the pandemic.

January 31, 2022
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