Performance Audit Report
PAO-2021-01
COVID-19 ASSISTANCE TO
RESTART ENTERPRISES
(CARES) PROGRAM
SB Corporation Assisted Thousands of
MSMEs But Was Unable to Maximize
Its Reach Primarily Due to Identified
Challenges on the Loan Availment
From the Tourism Sector Impacting
the Full Utilization of Funds
Audit Highlights
Why COA Did This Study
With the outbreak of COVID-19 in the Philippines in
2020, the government imposed Enhanced
Community Quarantine (ECQ) over certain parts of
the country to contain the spread of the virus. This
measure included business closures, which affected
Micro, Small, and Medium Enterprises (MSMEs).
According to an Asian Development Bank (ADB)
Survey, an average of 73.1% of MSMEs were
forced to close their businesses during the ECQ.
According to the Philippine Statistics Authority
(PSA), there are a total of 995,745 MSMEs
representing 99.5% of the total business
establishments operating in the country.
February 2022
COVID-19 ASSISTANCE TO RESTART ENTERPRISES (CARES) PROGRAM
SB Corporation Assisted Thousands of MSMEs But Was Unable to Maximize
Its Reach Primarily Due to Identified Challenges on the Loan Availment From
the Tourism Sector Impacting the Full Utilization of Funds
What COA Found
The SB Corp extended collateral free and 0% interest loans to thousands of MSMEs
but it was unable to maximize its reach after utilizing only 45.04% of the funds made
available under the Bayanihan laws as of June 30, 2021. Of the ₱11 billion allocation
to the CARES Program, a total of ₱9.08 billion was released for its implementation.
Of this amount, the SB Corp used ₱4.09 billion to extend loans to 28,222 MSMEs. Of
the 28,222 MSMEs, a total of 23,687 are micro enterprises, 3,057 are small
enterprises, 729 are medium enterprises and 749 are unidentified enterprises.
Distribution of the 28,222 MSMEs Served by the Program
To support the businesses affected by the
economic impact of the pandemic, the Department
of Trade and Industry (DTI) through its financing
arm – the Small Business Corporation (SB Corp),
rolled out the CARES Program to extend loans,
initially, to all micro and small enterprises with at
least one year continuous operation prior to March
2020, and whose businesses suffered drastic
reduction in sales during the ensuing pandemic.
Later on, the program also covered medium
enterprises. A total of ₱11 billion was allocated to
the CARES program through the Bayanihan 1 and 2
laws.
In view of the materiality and significance of the
program, this Commission conducted this
performance audit to determine the following: (1)
the extent the CARES Program assisted MSMEs
during the pandemic; (2) the challenges, if any, in
implementing the program; and (3) the extent the
DTI, the SB Corp and other concerned agencies
administer the program in accordance with
established policies and procedures.
In conducting the audit, COA reviewed the program
documents and accomplishment reports; analyzed
loans granted during the effectivity of Bayanihan
laws; conducted survey of selected MSME
beneficiaries; interviewed key management officials;
and assessed the extent of coordination with other
stakeholders in the implementation of the program.
What COA Recommends
In view of the ongoing implementation of the
program, COA recommends that SB Corp: (1)
incorporate in its Performance Scorecard a set of
metrics and performance indicators for program
assessment; (2) fast track the development of ITenabled Account Monitoring Module; (3) conduct
monitoring visits and update relevant information of
MSME borrowers; and (4) establish/integrate
relevant MSME databases. Moving forward for
implementing similar program, there is a need for
risk-assessment, among others, on capacity of the
implementing agency, needs of the clients and type
of funding (equity or subsidy). Stakeholder analysis
should be conducted to pinpoint responsibilities
through policy and agreement and avoid
fragmentation.
A total of ₱4.99 billion or 54.96% of the released budget of the program remained
unutilized as of end of Bayanihan 2. We identified several major challenges, which
may have led to this scenario: the first major challenge is insufficiency of human
resources. Prior to the pandemic, the SB Corp already implements this program but
under a different name, which is Pondo sa Pagbabago at Pag-asenso (P3). It
normally operates within the budget of ₱1.5 billion. So, when the Bayanihan 1 was
enacted and the CARES program was created, SB Corp was able to utilize about
98.84% of the initial ₱1 billion budget, which covers the processing of 20,043
applications. The ₱10 billion allocation for CARES under Bayanihan 2 was beyond
the normal capacity of the SB Corp to process and release to MSMEs within the
effectivity of the Bayanihan 2. We checked whether there were significant
administrative adjustments made by SB Corp in light of the massive infusion of
funds. We found that the SB Corp adopted an automated system to process loans,
however, there were no significant adjustments in human resources. Despite this
challenge, the SB Corp utilized ₱4.09 billion, which is 273% higher than its usual
budget of ₱1.5 billion for its regular program. The second major challenge is
hesitancy of potential clients to avail the assistance. Of the 995,745 potential clients
of SB Corp, only 48,010 MSMEs applied. That is an availment rate of only 4.82%.
We noted, however, that the total budget allocated for the program will not be able
to accommodate all MSMEs. In spite of the lower number of potential beneficiaries
that can be served by the program, still the SB Corp was unable to serve them. One
major reason for this is that the bulk of the budget is allocated for the tourism
industry. Many tourism-based companies are hesitant to restart their business due
to the multiple imposition of ECQ in the country.
We also found deficiencies and gaps in the administration of the program. Out of the
48,010 loan applications, a total of 4,378 or 9.12% borrowers cancelled their
applications. Result of our survey revealed that some of the respondents cancelled
their loan applications because of the long processing time, and non-communication
of the status of their applications. We also noted the existence of fragmentation of
functions among the stakeholders, which is primarily caused by lack of a policy,
specifying the roles and responsibilities of the stakeholders. Lastly, the SB Corp has
yet to develop a mechanism to check whether the loan proceeds were used for the
intended purpose.
COVID-19 Assistance to Restart Enterprises Program
Contents
Background ................................................................................................... 3
What is the CARES Program? ..................................................................... 3
What are MSMEs? ....................................................................................... 4
How much can MSMEs loan from the SB Corp under the CARES Program?
.................................................................................................................... 5
What are the program’s objectives? ............................................................. 6
CARES assisted thousands of MSMEs during the pandemic but more
than half of the budget remained unutilized ................................................ 7
Extent the program assisted the MSMEs during the pandemic .................... 7
Fund Source and Utilization ......................................................................... 9
No data on the total number of clients, which remained in operation .......... 11
The SB Corp made favorable program adjustments for its clients, consistent
with the provisions of the Bayanihan laws .................................................. 11
Lower effective lending interest rate ....................................................... 12
Higher available loanable fund ............................................................... 15
Higher maximum loanable amount per borrower .................................... 15
Reduced documentary requirements ...................................................... 17
Extended loan terms .............................................................................. 18
More available financial technologies for the clients ............................... 19
Allowed flexible use of the loan proceeds ............................................... 19
CARES Program objectives were not assigned with specific performance
indicators in order to measure the program’s success ............................... 21
More women borrowers than men.............................................................. 22
Challenges encountered which contributed to the underutilization of the
funds ............................................................................................................ 24
Massive infusion of funds beyond the usual operations of SB Corp but it was
able to adjust due to automation ................................................................ 25
Automation of loan processing at the start of the pandemic ....................... 25
Borrower Registration System ................................................................ 25
Credit Standing Assessment .................................................................. 26
Borrower Information Assessment .......................................................... 27
Financial Performance Assessment ....................................................... 28
Loan Release ......................................................................................... 29
The audit team tested the controls and found that all four process modules
are working effectively ............................................................................... 30
With the enhancements, SB Corp was able to operate despite the pandemic
.................................................................................................................. 31
Insufficiency of Human Resources ............................................................. 32
Hesitancy of potential clients to secure a loan............................................ 33
Low Availment Rate under the Tourism Sector .......................................... 34
General Hesitancy among MSMEs to secure a loan ............................... 35
SB Corp tapped various partners to reach-out to its clients .................... 35
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Contents
Despite various enhancements, presence of deficiencies and gaps in the
implementation of the CARES program were still observed/ noted ........ 39
Long processing time ................................................................................. 40
Late or lack of status notification to applicants ........................................... 44
Fragmentation as a result of not having a clear policy identifying the roles
and responsibilities of key stakeholders ..................................................... 45
Inconsistencies between the Operational Policies and Guidelines (OPG)
and CARES Program Primer may have deprived eligible MSMEs
opportunity to avail SB Corp’s services .................................................. 46
Inadequate Coordination with the Philippine Information Agency ........... 48
Non-use of the Philippine Statistical Authority data................................. 49
SB Corp and DTI Negosyo Center partnership in the CARES Program
was not formally established .................................................................. 51
Non-coordination with the DTI affected compliance with the prioritization
set out in the OPG .................................................................................. 52
Conclusions ................................................................................................. 57
Recommendations ...................................................................................... 57
Agency Comments ...................................................................................... 59
Appendix I: Objectives, Scope and Methodology ..................................... 60
Appendix II: SB Corp Media Monitoring Report ........................................ 62
Appendix III: P3 CARES/CARES 1 Program Primer .................................. 64
Appendix IV: CARES 2 Program Primer .................................................... 65
Appendix V: Example of Social Media Advisories and Announcements 66
Appendix VI: Survey Methodology and Results ........................................ 67
Appendix VII: SB Corporation’s Profile and Performance........................ 72
Appendix VIII: COA Contact and Staff Acknowledgments ....................... 78
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Contents
List of Figures
Figure 1: CARES Program Timeline ................................................................ 4
Figure 2: Distribution of the 28,222 MSMEs Served by the Program ............... 7
Figure 3: Total No. of MSMEs, Applicants and MSMEs with Released Loans
as of June 30, 2021 ......................................................................................... 8
Figure 4: Budget Breakdown ........................................................................... 9
Figure 5: Budget Utilization ............................................................................. 9
Figure 6: Sex Disaggregated Data of the Business Owners Served by the
CARES Program per Region ......................................................................... 23
Figure 7: System Overview – Online Application to Releasing Process ......... 26
Figure 8: Status of Applicants as June 30, 2021 ............................................ 32
Figure 9: Status of Loan Applications in Bayanihan 1 & 2 combined as of June
30, 2021 ........................................................................................................ 39
Figure 10: P3 CARES vs. B2C Average Loan Processing Time per Region .. 41
Figure 11: Walkthrough Presentation on P3 CARES Loan Processing: Loan
Amount Criteria ............................................................................................. 47
List of Tables
Table 1: Corresponding Asset Size per MSMEs .............................................. 5
Table 2: Maximum Loanable Amount per MSMEs ........................................... 5
Table 3: Average Loan Amount Released per Enterprise Category ................. 8
Table 4: Total Loan Applications and Fund Released under Bayanihan 1 and 2
...................................................................................................................... 10
Table 5: Lowered Effective Lending Rates under Bayanihan 1 and 2 ............ 13
Table 6: Processing Fee................................................................................ 14
Table 7: BSP Reported 2018 and 2019 Highest and Lowest Philippine
Domestic Lending Rates ............................................................................... 14
Table 8: Comparison on the Maximum Loan Amounts per Borrower under P3
and the CARES Program .............................................................................. 16
Table 9: Basis for Loan Limit Determination: BIR-filed FS of Loan Applicant . 16
Table 10: Proposed increase in Loan Ceiling per enterprise category for
CARES Travel ............................................................................................... 17
Table 11: Comparison of Documentary Requirements under P3 and the
CARES Program ........................................................................................... 17
Table 12: Extended Loan Terms under Bayanihan 1 and Bayanihan 2 ......... 18
Table 13: Comparison of Utilized Financial Technologies under P3 and the
CARES Program ........................................................................................... 19
Table 14: Comparison on the Use of Loan Proceeds under P3 and the CARES
Program ........................................................................................................ 20
Table 15: Credit Standing Assessment Criteria ............................................. 27
Table 16: Financial Performance Assessment Criteria .................................. 28
Table 17: List of Disbursement Channels Offered to Borrowers .................... 29
Table 18: Result of Test of Control on Selected Samples from Loans Released
...................................................................................................................... 31
Table 19: Number of Personnel Assigned for Each Loan Process Module .... 32
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Contents
Table 20: Total Loan Applications and Fund Released for Tourism as of June
30, 2021 ........................................................................................................ 34
Table 21: Target Marketing Partners ............................................................. 37
Table 22: Comparison of Reported Ave. Loan Processing Time vs COA
Computation .................................................................................................. 40
Table 23: P3-CARES under Bayanihan 1 Standard vs. Average Net Actual
Processing Time as of June 30, 2021 ............................................................ 42
Table 24: CARES under Bayanihan 2 Standard vs. Average Net Actual
Processing Time as of June 30, 2021 ............................................................ 43
Table 25: Links and Dates of Published News Articles by PNA and PIA related
to CARES Program ....................................................................................... 49
Table 26: Top 3 Most Affected Regions vs Regions Served by the CARES
Program ........................................................................................................ 53
Table 27: Top 3 Most Affected Industries vs Industries Served by the CARES
Program ........................................................................................................ 53
Table 28: Availment Rate from Top 3 Regions Most Affected by Pandemic .. 54
Table 29: Availment Rate from Top 3 Industries Most Affected by Pandemic ....
...................................................................................................................... 54
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Acronyms
ADB
AMM
AOs
AQM
ARTA
ASA Ph
ASKI
BAPCB
Bayanihan 1
Bayanihan 2
BIA
BRAVE-ESP
BRS
BSP
B2C
CARES Program
CI
COA
COVID-19
CreCom
CSA
DC in Process
DBM
DOH
DOT
DTI
DV
ECQ
EIR
EMA
EMI
ERF
FPA
FS
GAA
GCG
GOCC
ICSPPS
ISSAI
IT
JMC
LBP
LDS
LR
LRP
Page v
Asian Development Bank
Account Monitoring Module
Account Officers
Audit Query Memorandum
Anti-Red Tape Act
ASA Philippines Foundation
Alalay sa Kaunlaran Incorporated
Bankers Association of the Philippines Credit Bureau
Bayanihan to Heal As One Act
Bayanihan to Recover As One Act
Borrower Information Assessment
Baguio Revitalization Actions for a Vibrant Economy –
Economic Stimulus Package
Borrower Registration System
Bangko Sentral ng Pilipinas
Bayanihan 2 CARES
COVID-19 Assistance to Restart Enterprises Program
Credit Investigator
Commission on Audit
Coronavirus Disease 2019
Credit Committee
Credit Standing Assessment
Data Correction in Process
Department of Budget and Management
Department of Health
Department of Tourism
Department of Trade and Industry
Document Verifier
Enhanced Community Quarantine
Effective Interest Rate
Electronic Money Account
Equated Monthly Installment
Enterprise Rehabilitation Fund
Financial Performance Assessment
Financial Statements
General Appropriation Act
Governance Commission for GOCCs
Government-Owned and/or Controlled Corporation
Internal Control Standards for the Philippine Public
Sector
International Standards of Supreme Audit Institutions
Information Technology
Joint Memorandum Circular
Land Bank of the Philippines
Loan Drawdown Sheet
Loan Release
Loan Releasing Process
PAO-2021-01
COVID-19 Assistance to Restart Enterprises Program
Acronyms
ManCom
MIS
MOA
MOU
MSMEs
NC
NCR
NEDA
NFIS
OFW
OPG
OTP
PCCI
P/CEO
PCOO
PDCs
PhilExport
PIA
PNA
PRU
PSA
PT
P3
RA
ROG
SB Corp
SEC
SDG
SME-PPE
SQ
ST
TAT
WAIR
Page vi
Management Committee
Management Information System
Memorandum of Agreement
Memorandum of Understanding
Micro, Small, and Medium Enterprises
Negosyo Center
National Capital Region
National Economic and Development Authority
Negative File Information System
Overseas Filipino Worker
Operational Policies and Guidelines
One-time password
Philippine Chamber of Commerce and Industry
President and Chief Executive Officer
Presidential Communication Operations Office
Post-dated checks
Philippine Exporters Confederation, Inc.
Philippine Information Agency
Philippine News Agency
Public Relations Unit
Philippine Statistics Authority
Processing Time
Pondo sa Pagbabago at Pag-asenso
Republic Act
Regional Operations Group
Small Business Corporation
Securities and Exchange Commission
Sustainable Development Goal
Small and Medium Enterprises – Personal Protective
Equipment
Survey Questionnaire
Stop Time
Turnaround Time
Weighted Average Interest Rate
PAO-2021-01
COVID-19 Assistance to Restart Enterprises Program
Republic of the Philippines
COMMISSION ON AUDIT
Commonwealth Avenue
Quezon City
February 21, 2022
MARIA LUNA E. CACANANDO
President and Chief Executive Officer (P/CEO)
Small Business Corporation (SB Corp)
Dear P/CEO Cacanando:
In line with its vision to become an enabling partner of the government in
ensuring a better life for every Filipino, the Commission on Audit (COA)
conducts performance audits to help government agencies better perform their
mandate and achieve program goals and objectives more economically,
efficiently, and effectively. This Commission identified the COVID-19
Assistance to Restart Enterprises (CARES) Program as one of the priority
programs that will be subjected to a performance audit due to its materiality
and significance.
We prioritized the audit of this program in view of the important role of Micro,
Small, and Medium Enterprises (MSMEs) in the Philippine economy. MSMEs
help reduce poverty by creating jobs. Assisting the MSMEs, especially during
the pandemic, directly contributes to the achievement of Sustainable
Development Goal (SDG) 8: promote sustained, inclusive and sustainable
economic growth, full and productive employment and decent work for all.
In view of the above considerations, we designed the audit to determine the
following: (1) the extent the CARES Program assisted MSMEs during the
pandemic; (2) the challenges, if any, in implementing the program; and (3) the
extent the Department of Trade and Industry (DTI), the SB Corp and other
concerned agencies collaborated to administer the program in accordance with
established policies and procedures.
In conducting the audit from February to December 2021, COA reviewed the
program documents and accomplishment reports, analysed loans processed
and granted during the effectivity of Bayanihan laws; conducted survey of
selected MSME beneficiaries, interviewed key management officials, and
assessed the extent of coordination with other stakeholders in the
implementation of the program. Certain audit procedures had to be undertaken
virtually or online in view of the implementation of alternative work
arrangements and health protocols due to COVID-19 pandemic.
We conducted this audit in accordance with the International Standards of
Supreme Audit Institutions (ISSAI) 3000 or the Performance Audit Standard.
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COVID-19 Assistance to Restart Enterprises Program
ISSAI 3000 requires that we plan and perform the audit to obtain sufficient and
appropriate evidence to provide a reasonable basis for our findings and
conclusions based on our audit objectives. We believe that the evidence
obtained provides a reasonable basis for our findings and conclusions based
on our audit objectives.
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COVID-19 Assistance to Restart Enterprises Program
Background
With the outbreak of Coronavirus Disease 2019 (COVID-19) in the Philippines
in 2020, the government imposed Enhanced Community Quarantine (ECQ)
over certain parts of the country to contain the spread of the virus. This
measure included business closures, which affected MSMEs. According to an
Asian Development Bank (ADB) Survey, an average of 73.1% of MSMEs was
forced to close their businesses during the ECQ.1 According to the Philippine
Statistics Authority (PSA), there are a total of 995,745 MSMEs in 2019
representing 99.5% of the total business establishments operating in the
country.2
To support the businesses affected by the economic impact of the pandemic,
the DTI through its financing arm – the Small Business Corporation (SB Corp),
rolled out the CARES Program to extend loans, initially, to all micro and small
enterprises with at least one year continuous operation prior to March 2020,
and whose businesses suffered drastic reduction in sales during the ensuing
pandemic. Later on, the program also covered medium enterprises. The
Legislature allocated a total of ₱11 billion to the CARES program through the
Bayanihan 13 and 24 laws. The Bayanihan laws are the laws enacted by the
Legislature to provide emergency powers to the President to enable him to
adopt emergency measures to address the issues brought by the COVID-19
pandemic.
What is the
CARES Program?
CARES Program is an interest-free and collateral-free financing program that
aims to assist MSMEs recover from the adverse effects of the pandemic. The
borrower MSMEs will only need to pay a one-time service fee, which is set at a
maximum of 8% for a 4-year loan term.5
This program is an off-shoot of an existing program of SB Corp called the
Pondo sa Pagbabago at Pag-asenso Enterprise Rehabilitation Fund (P3-ERF).
The P3-ERF is a financing initiative of the government to assist micro
entrepreneurs throughout the country by providing affordable and cost efficient
micro loans with 2.5% monthly interest. It aims to stabilize informal lending,
______________________________________________
1
ADB, Covid-19 Impact on Micro, Small, and Medium-Sized Enterprises Under The Lockdown:
Evidence From a Rapid Survey in the Philippines, Introduction (February 2021)
2
Defining Philippine Micro, Small and Medium Enterprises (MSMEs) available at
https://dtiwebfiles.s3-ap-southeast1.amazonaws.com/BSMED/MSME+2019+Statistics/2019+Philippine+MSME+Statistics+in+Brief.
pdf (last accessed: December 20. 2021).
3
An Act Declaring the Existence of A National Emergency Arising from the Coronavirus Disease
2019 (COVID-19) Situation and a National Policy in Connection Therewith, and Authorizing the
President of the Republic of the Philippines for a Limited Period and Subject to Restrictions, to
Exercise Powers Necessary and Proper to Carry out the Declared National Policy and for other
Purposes, [Bayanihan 1], Republic Act 11469 (2020)
4
An Act Providing for Covid-19 Response and Recovery Interventions and Providing
Mechanisms to Accelerate the Recovery and Bolster the Resiliency of the Philippine Economy,
Providing Funds Therefor, and For other Purposes, [Bayanihan 2], Republic Act No.11494
(2020)
5
BAYANIHAN CARES: FINANCING ASSISTANCE TO HELP BUSINESSES RESTART
available at https://SB Corp.gov.ph/programs-and-services/bayanihancares/ (last accessed:
December 20, 2021).
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COVID-19 Assistance to Restart Enterprises Program
locally known as “5-6” 6 lending, and prevent micro entrepreneurs from falling
victim from these usurious lenders. The program provides an alternative source
of financing that is easy and quick to access for micro entrepreneurs.
According to the SB Corp, upon the enactment of the Bayanihan 1 law, the
National Government determined which of the existing government programs
can help struggling businesses during the pandemic and the P3-ERF was
included in the list of the programs identified. SB Corp reformulated the P3ERF to suit the needs of the MSMEs affected by the pandemic. The result of
this reformulation is the CARES program, which is the subject of this audit. The
CARES program underwent several adjustments, with the enactment of the
Bayanihan 2 law. Shown below is Figure 1, which is a timeline documenting the
different transformations of the CARES program.
Figure 1: CARES Program Timeline
Source: SB Corp
What are
MSMEs?
The Magna Carta for MSMEs7 defines MSMEs “as any business activity or
enterprise engaged in industry, agribusiness and/or services, whether single
proprietorship, cooperative, partnership or corporation whose total assets,
inclusive of those arising from loans but exclusive of the land on which the
______________________________________________
6
“5-6“ is a lending scheme, which imposes an exorbitant interest of 20 percent per month. The
term “5-6” was coined based on the premise that, under this scheme, if a borrower borrows five
pesos, he has to pay six pesos.
7
An Act To Promote Entrepreneurship By Strengthening Development And Assistance
Programs To Micro, Small And Medium Scale Enterprises, Amending For The Purpose Republic
Act No. 6977, As Amended, Otherwise Known As The “Magna Carta For Small Enterprises” And
For Other Purposes, [Magna Carta for Micro, Small and Medium Enterprises], Republic Act No.
9501 (2007)
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COVID-19 Assistance to Restart Enterprises Program
particular business entity’s office, plant and equipment are situated, must have
value falling under the following categories (see Table 1):”
Table 1: Corresponding Asset Size per MSMEs
Categories
Asset Size
Micro
Small
Medium
Not more than ₱3,000,000
₱3,000,001- ₱15,000,000
₱15,000,001- ₱100,000,000
Source: RA No. 9501
How much can
MSMEs loan from
the SB Corp under
the CARES
Program?
Under the Bayanihan 1, micro enterprises may secure loans from ₱10,000 to
₱200,000 while small enterprises may apply for loans up to ₱500,000. Medium
enterprises were not yet included in the program. An initial amount of
₱1,000,000,000 was allocated by SB Corp from its unexpended CY 2020 P3
Program funds pursuant to the authority granted under the Special Provisions
of the General Appropriations Act (GAA) to fund the CARES Program.
The SB Corp introduced several adjustments to the program upon the
enactment of the Bayanihan 2. Under this law, micro enterprises may secure
loans up to ₱600,000 while small enterprises can apply for loans up to
₱3,000,000. Medium enterprises were included and allowed to get a loan of up
to ₱5,000,000 (see Table 2). An amount of ₱10,000,000,000 was allocated by
the Legislature as an equity infusion to the SB Corp to fund the CARES
Program.
Table 2: Maximum Loanable Amount per MSMEs
Particulars
Enterprise Category
Micro (not more than
₱3,000,000)
Small (₱3,000,001 ₱15,000,000)
Medium (₱15,000,001
- ₱100,000,000)
Bayanihan 1
CARES 1
CARES 2
Bayanihan 2
Bayanihan 2
CARES (B2C)
₱10K – ₱200K
₱600K
Up to ₱500K
₱3M
₱5M
Source: SB Corp data
According to SB Corp, of the budget under Bayanihan 2, an amount of
₱6,000,000,000 was allocated for the tourism sector. This amount is intended
to help Department of Tourism (DOT) and Local Government Unit (LGU)Page 5
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accredited tourism-related enterprises through the program “CARES for
Tourism Rehabilitation and Vitalization of Enterprise and Livelihood” or
“CARES for TRAVEL”.8
What are the
program’s
objectives?
Pursuant to its operational policies and guidelines9, the program aims to
achieve the following objectives:
1. To protect Filipino workers by saving jobs (Save Employment);
2. To capitalize on opportunities created by the health crisis by
encouraging innovation and effective strategic decision making
(Encourage Innovation); and
3. To prepare for an immediate rebound by providing the urgent relief
needed to restart micro and small businesses (Restart MSMEs). 10
______________________________________________
8
BAYANIHAN CARES, Supra note 5.
Small Business Corporation, SB Corporation COVID-19 Assistance to Restart Enterprise
Program Operational Policies and Guidelines of Section 7.6 COVID-19 P3 ERF
(DA/DBM/DILG/DOF/DSWD/DTI Joint Memorandum Circular No. 1, Series of 2020), § 1 (2020)
10
Ibid
9
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CARES assisted
thousands of
MSMEs during the
pandemic but more
than half of the
budget remained
unutilized
In this Chapter, the discussion will focus on the following:
1. The extent the program assisted MSMEs during the pandemic;
2. Fund source and utilization; and
3. Adjustments made by the SB Corp, in compliance with the Bayanihan
laws.
The SB Corp extended collateral free and 0% interest loans to thousands of
MSMEs but it was unable to maximize its reach after only utilizing 45.04% of its
released budget under the Bayanihan laws.
Extent the
program assisted
the MSMEs during
the pandemic
The CARES Program received ₱11 billion allocation of which ₱9.08 billion was
made available for its implementation. The SB Corp used ₱4.09 billion or
45.04% of the available funds to extend collateral free and 0% interest loans to
28,222 MSMEs as of June 30, 2021. Of the 28,222 MSMEs served by the
program, a total of 23,687 are micro enterprises, 3,057 are small enterprises,
729 are medium enterprises and 749 are unidentified enterprises (see Figure
2).
Figure 2: Distribution of the 28,222 MSMEs Served by the Program
Source: COA Analysis of SB Corp data
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For the same period, out of the total 995,745 MSMEs in the Philippines, only
48,010 MSMEs applied for a loan (see Figure 3). Of this, only 28,222 MSMEs
or 58.78% received the money loaned. SB Corp explained that there is
hesitancy among MSMEs to secure a loan due to the multiple impositions of
protracted ECQs. In-depth discussion on this matter is presented in the next
chapter.
Figure 3: Total No. of MSMEs, Applicants and MSMEs with Released
Loans as of June 30, 2021
Source: COA Analysis of SB Corp data
Micro enterprises received an average loan amount of ₱63,246, small
enterprises at ₱477,770, and medium enterprises at ₱1,489,687 (see Table 3).
The audit team was not able to get the data on the actual average asset size of
the MSMEs, which applied for a loan because of some missing information.
Hence, we could not conclude on the sufficiency and adequacy of the loan
granted to the approved applicants.
Table 3: Average Loan Amount Released per Enterprise Category
Enterprise Category
Total Number
with Released
Loans
(a)
Micro (not more than
₱3,000,000)
Small (₱3,000,001 ₱15,000,000)
Medium (₱15,000,001
- ₱100,000,000)
Loan Amount
Released
Average
Loan
(b)
(c=b/a)
23,687
₱1,498,115,663
₱63,246
3,057
1,460,542,603
477,770
729
1,085,982,000
1,489,687
Source: COA Analysis of SB Corp data
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Fund Source and
Utilization
As discussed in the background, the CARES Program has a total allocation of
₱11 billion. The initial ₱1 billion, which funded the CARES Program by virtue of
the Bayanihan 1 law, came from the remaining unreleased fund of SB Corp for
the P3-ERF under the FY 2020 General Appropriations Act (see Figure 4). This
was pursuant to section 4(v) of the Bayanihan 1 law, which directed the use of
unobligated appropriations to fund COVID-19 response measures. The ₱10
billion came from the Bayanihan 2 law which served as an equity infusion to the
SB Corp and has specific funding provisions for each response measure.
Paragraph 4 of section 10(e) of the Bayanihan 2 law allocated ₱10 billion as an
additional fund for the CARES Program and for its other lending programs,
which includes interest subsidy for MSMEs.
Figure 4: Budget Breakdown
Source: COA Analysis of SB Corp data
As of June 30, 2021, SB Corp utilized 98.84% of the allocation under
Bayanihan 1 law and 31.02% of the allocation under the Bayanihan 2 law. We
noted, however, that about 19.19% of the allocation under the Bayanihan 2 law
remained unreleased to SB Corp (see Figure 5).
Figure 5: Budget Utilization
Source: COA Analysis of SB Corp data
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The Department of Budget and Management (DBM) notified the SB Corp that it
will no longer release the remaining allocation of the CARES Program
amounting to ₱1.92 billion. The SB Corp filed an appeal but it was denied. The
DBM was constrained from favourably considering the request since SB Corp
still had an available cash balance that may cover the disbursement
requirement for CARES Program until June 30, 2021.
Shown below is a table summarizing data discussed above. In total, the
CARES has a released budget of ₱ 9,080,098,000. Of this, about 45.04% or
₱4,089,911,265 were utilized while 54.96% or ₱ 4,990,186,735 remained
unutilized as of June 30, 2021.
Table 4: Total Loan Applications and Fund Released under Bayanihan 1 & 2 as of June 30, 2021
Particulars
Released Budget
(a)
(b)
Total No.
of Loans
Released
(c)
(d)
Total Loan
Amount Released
(e)
20,043
14,821
₱
988,353,000
Micro Enterprise
17,182
13,580
₱
700,162,000
Small Enterprise
1,344
1106
280,559,000
Blank
1,517
135
7,632,000
27,967
13,401
₱ 3,101,558,265
Micro Enterprise
13,186
10,107
₱
Small Enterprise
2,568
1,951
1,179,983,603
990
729
1,085,982,000
11,222
614
37,639,000
48,010
28,222
₱ 4,089,911,265
BAYANIHAN 1
(CARES 1 and 2)
BAYANIHAN 2
(B2C)
₱ 1,000,000,000
Total No. of
Applications
Received
8,080,098,000
Medium Enterprise
Large Enterprise
₱
11,647,000
₱ 4,978,539,735
797,953,663
1
Blank
Total
Total Unutilized
Fund
(f=b-e)
₱ 9,080,098,000
₱ 4,990,186,735
Source: COA Analysis of SB Corp data
The SB Corp commented that it was able to fully utilize all funds allocated
under the CARES Program that are within its sole control, i.e, the ₱1 billion
CARES 1 and the ₱4.08 billion Bayanihan 2 CARES (B2C) for multisectoral
MSMEs as of December 31, 2021. However, the team could no longer validate
its claim as the cut-off date of our audit is only up to June 30, 2021.
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The SB Corp added that the decision to allocate ₱6 billion (with only ₱4 billion
eventually funded) to tourism MSMEs is based on the collective wisdom of
Congress as reflected in the Minutes of the Bicameral Conference Committee
Meeting. The only reason for the significant slippage in the budget utilization
under the CARES Program umbrella is because tourism enterprises in general
are still risk-averse to tapping loans with the future of the tourism industry still
very volatile and highly uncertain. It is the audit team’s position, however, that
the significant share of unutilized funds coming from the CARES for TRAVEL
program (discussed in the next chapter of this report), which is seemingly
beyond the control of SB Corp will still be part of the report since the audit team
is looking on the overall performance of the CARES Program as a whole and
not on the sole performance of SB Corp alone. Besides, the CARES for
TRAVEL program was funded under the ₱10 billion fund allocation of
Bayanihan 2 Act for the CARES Program, of which ₱8.08 billion was actually
downloaded to SB Corporation.
No data on the
total number of
clients, which
remained in
operation
There was no data on the total number of SB Corp’s clients which remained in
operation. According to SB Corp, they will start collecting payments by midyear of CY 2022; this activity will include checking the status of the businesses
of their clients. SB Corp admitted that, at the moment, their main concern is to
provide assistance to struggling MSMEs. SB Corp has yet to develop a
mechanism to monitor other indicators to determine the success of the
program. Hence, there is no data yet on the extent the program helped save
jobs; the extent the program encouraged innovation and effective strategic
decision-making; and the extent the program helped MSMEs rebound or restart
businesses. We noted, however, that there was a previous attempt on the part
of the SB Corp to include in its Governance Commission for GovernmentOwned and/or Controlled Corporations (GCG) score card social indicators.
However, currently, it is not yet included in its current GCG-approved score
card.
The SB Corp
made favorable
program
adjustments for its
clients, consistent
with the provisions
of the Bayanihan
laws
Consistent with the provisions of the Bayanihan laws, the SB Corp tailor-made
the CARES Program to support struggling MSMEs by doing the following:
1.
2.
3.
4.
5.
6.
7.
Lower effective lending rate;
Increase available loanable fund;
Increase maximum loan amounts per borrower;
Reduce documentary requirements;
Extend loan terms;
Utilize financial technologies; and
Allow the use of loan proceeds for payroll costs
Shown below are the relevant provisions of the Bayanihan laws discussing the
various emergency measures identified by the government to help struggling
MSMEs during the pandemic. First is section 4(n) of the Bayanihan 1 law,
which provides:
n. Ensure the availability of credit to the productive sectors of the
economy especially in the countryside through measures such as,
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but not limited to, lowering the effective lending rates of
interest, and reserve requirements of lending institutions11
(emphasis supplied).
Next is Sec. 4(z) of the Bayanihan 2 law, which provides:
z. directing the Small Business Corporation (SB Corp) to expand
its existing loan programs for MSMEs, cooperatives, hospitals,
tourism and Overseas Filipino Workers (OFWs) affected by the
COVID-19 pandemic and by other socioeconomic reversals,
through a combination of increasing available loanable funds,
reducing documentary requirements, increasing maximum
loan amounts per borrower, reducing interest rates, extending
loan terms, utilization of financial technologies to expand
reach and increase access and set fast turn-around loan
processing time; and allow the use of the loan proceed for
payroll costs, materials and suppliers, mortgage payments, rent,
utilities, including fuel and storage, creation of new supportive
businesses, re-purposing of existing business capital, any other
business debt obligations that were incurred before the covered
period or acquisition new technologies and systems to adjust
business processes for resiliency12 (emphasis supplied).
Review of the various issuances related to the CARES Program revealed that
the SB Corp followed the provisions of the Bayanihan laws up to the extent that
it is administratively possible.
Lower effective
lending interest
rate
To make the payment of loan manageable, the SB Corp lowered its effective
lending interest rate from 30% per annum under the regular P3-ERF program to
3.2% - 6% per annum under the Bayanihan 1 law. The SB Corp made slight
adjustments in Bayanihan 2 law making the effective lending interest rate to 2%
- 4% per annum.
What is effective lending interest rate?
The effective interest rate is the usage rate that a borrower actually pays on a
loan. According to the Bangko Sentral ng Pilipinas (BSP), in determining the
effective lending interest rate, the following charges should be included:
a. interest;
b. service charge/processing fee; and
c. other charges/fees incidental to the extension of credit (e.g. documentary
stamps, notarial fees, appraiser’s fee, etc.)13
______________________________________________
11
Republic Act No. 11469, § 4 (2020)
Republic Act No. 11494, § 4 (2020)
13
Bangko Sentral ng Pilipinas, Frequently Asked Questions on BSP Circular No. 730 Truth and
transparent loan pricing and disclosure version 2, § 6
12
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For the CARES Program, the effective lending interest rate is computed by
adding the interest rate and the processing fee.
Under the regular P3-ERF program of SB Corp, the interest rate is 2% per
month while the processing fee is 0.5% per month. Hence, the effective lending
interest rate is 2.5% per month or 30% per annum. Under the CARES
Program, the SB Corp reduced the interest rate to 0%. However, it imposed a
one-time processing fee of 6-8% under the Bayanihan 1 law and 4-8% under
the Bayanihan 2 law (see Table 5).
Table 5: Lowered Effective Lending Rates under Bayanihan 1 and 2
Particulars
Regular
Program
P3-ERF
Effective Lending Interest
Rate per annum
Interest Rate
Bayanihan 1
CARES 1
CARES 2
Bayanihan 2
B2C
30%
3.2% - 6%
2%-4%
2%/mo
0%
0%
0.5%/mo
6-8%
(one time)
4-8%
(one time)
Processing Fee
Source: COA Analysis
The processing fee depends on the loan term applied for by the MSME. In
Bayanihan 1 law, if the loan term does not exceed 18 months (inclusive of the
6 months grace period), the processing fee is a one-time fee of 6% of the loan
amount. But if the loan term exceeds 18 months, the processing fee is a onetime fee of 8% of the loan amount. Under the Bayanihan 1, the maximum loan
term is 30 months (inclusive of the 6 months grace period).
Under the Bayanihan 2, if the loan term is 1 year, the processing fee is 4%; 2
years – 6%, 3 years – 7.5%, and 4 years – 8%.
To compute the rate of the Bayanihan 1 processing fee on a per annum basis,
the audit team divided the processing rate by the loan term, which is in months,
then multiplied it by twelve. The audit team had to do this since the rate was
fixed in months. For the Bayanihan 2 processing fee, the audit team divided the
processing rate by the number of years to pay.
The audit team converted the effective lending interest rate on a per annum
basis to compare the current effective lending interest rate under the CARES
Program and the average lending rate in the industry.
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Table 6: Processing Fee
Effective Lending
Rate
Rate per annum
2.5%
30%
one-time payment
Formula:
(Processing fee / loan term in
months) x 12
≥ 18 months
6%
4%-6%
< 18 months – ≥ 30 months
8%
3.2%-5%
one-time payment
Formula:
(Processing fee / loan term* in
years)
1 year
4%
4.0%
2 years
6%
3.0%
3 years
7.5%
2.5%
4 years
8%
2.0%
Loan Term
P3-ERF
Per month
Bayanihan 1
Bayanihan 2
* Inclusive of grace period of three (3) months or six (6) months at the option of the loan
applicant; and may be extended to nine (9) months or twelve (12) months for certain industries
such as Tourism, or as seen fit by the Credit Committee.
Source: COA Analysis
Based on the BSP data, the highest weighted average lending rates for CYs
2018 – 2019 ranges from 7.109 to 8.018, while the lowest ranges from 4.575 to
5.497 (see Table 7). As presented, the effective lending interest rate of the
CARES Program is lower than the average lending rate in the industry.
Table 7: BSP Reported 2018 and 2019 Highest and Lowest Philippine Domestic Lending Rates
PHILIPPINE:SELECTED DOMETIC INTEREST RATES
weighted average in percent per annum
for periods indicated
2018
2019
2020
2019
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Lending Rates
High
Low
7.109
8.018
-
8.249
8.380
8.486
8.615
8.525
8.383
8.103
7.778
7.628
7.367
7.348
7.350
10.894
10.78
4.575
5.497
-
5.500
5.686
5.797
5.899
5.844
5.708
5.603
5.444
5.263
5.092
5.075
5.051
6.072
6.00
Source: BSP
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The Management commented that while the team showed that the effective
interest rate (EIR) under the CARES Program is significantly lower than the
overall mean weighted average interest rate (WAIR) of the banking system, the
more appropriate comparative data for the CARES Program should have been
the WAIR for MSME loans covering the pandemic period, i.e. beginning March
2020. We commended the management for the extensive research made on this
matter. However, the audit team noted that the WAIR presented by SB Corp
fluctuates over time and the team cannot use the data since the respective
WAIR for the Small and Medium Enterprises were combined. It would be hard
for the team to separate the said WAIR for comparison since CARES under
Bayanihan 1 only catered the Small and Micro Enterprises.
Despite being lower than the industry rate, still, there were respondents in the
audit team’s survey, who expressed hesitancy in continuing with their loan
applications due to the processing fees.
During the exit conference, the SB Corp had the opportunity to share the reason
why it had to maintain the payment of processing fees. According to them, the
budget allocated to the CARES Program through the Bayanihan laws are in the
nature of equity infusion. This means that any funds received by the corporation
will form part of its capital. Since it is equity and not a subsidy, SB Corp had to
manage their potential losses. The processing fee covers the administrative
costs of processing the loan applications. Non-inclusion of the processing fees
would obliged the SB Corp to absorb the administrative costs, thus, resulting in
additional expenditures.
Higher available
loanable fund
With the actual equity infusion of ₱8.08 billion from the Bayanihan 2, the SB
Corp has more available loanable funds for MSMEs.
Higher maximum
loanable amount
per borrower
The SB Corp significantly increased the maximum loanable amount per
borrower. Under the regular P3 program, a micro enterprise with at least one
employee may avail up to ₱200,000 worth of loans. Under Bayanihan 1, micro
enterprises may still avail up to ₱200,000 but it included small enterprises and
allowing the same to a maximum loan amount of ₱500,000. Under Bayanihan 2,
the allowable loan amount to qualified micro, small and medium enterprises is
set at the amount equivalent to not exceeding 15% of its annual sales and 20%
of its asset size per BIR-filed Financial Statement (FS). For those entities without
FS, the maximum loanable amount is set at ₱200,000 (see Table 8) provided
that the owners can produce pictures and videos that clearly demonstrate that
the asset size of the enterprise is more than ₱500,000.
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Table 8: Comparison on the Maximum Loan Amounts per Borrower under
P3 and the CARES Program
Regular
Program
Particulars
Bayanihan 1
Micro Enterprise
₱200,000
CARES
2
₱200,000
Small Enterprise
-
500,000
Medium Enterprise
-
-
P3-ERF
CARES
1
Bayanihan 2
B2C
With BIR
filed
Financial
Statement
(FS):
₱ 600,000
(3 million x
20%)
3,000,000
(15 million
x 20%)
₱5,000,000
Without
BIR
filed
FS:
₱200K
Source: SB Corp Data
To allow smaller enterprises access to a bigger loan size, the SB Corp’s Board
approved in December 15, 2020 the rationalization of loan limits under the B2C
Program. Presented below is the approved loan limits based on Management
Committee (ManCom) Resolution No. 2020-1207-001.
Table 9: Basis for Loan Limit Determination: BIR-filed FS of Loan Applicant
Enterprise
Category
Medium
Enterprises
Small
Enterprises
Micro
Enterprises
1/
Overriding
Limit
Not more
than 15% of
annual sales
and not
more than
20% of
asset size
Existing Policy
Automated
Higher
Loan Limit
Loan Limit
(Php)
subject to
Crecom
approval
(Php)
1.0 million
3.0 million
500.0
thousand
1.5 million
200.0
thousand
300.0
thousand
Proposed Policy Change
Automated Loan
Higher Loan Limit subject to
Limit (Php)
Crecom Approval and to the
Overriding Limit (Php)
Not more than
15% of annual
sales and not
more than 20% of
assets size but
not to exceed
P2.0 million
Loans exceeding P2.0 million up
to P3.0 million shall be for
Crecom decision; go as high as
P5.0 million subject to Board
notation
Not applicable
1/
20% of the P3.0 million asset size limit for micro enterprises is just P600.0 thousand.
Source: SB Corp Data
On December 1, 2020, the SB Corp’s Governing Board approved the proposed
increase in the loan ceiling per enterprise category for CARES Travel under the
CARES Program as endorsed by the Mancom. Presented below is the
approved loan limit under Bayanihan 2 CARES for DOT accredited MSMEs.
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Table 10: Proposed increase in Loan Ceiling per enterprise category for
CARES Travel
Enterprise
Category
Small Enterprises
Medium
Enterprises
Existing loan
limit (Php)
1.5 M
DOT-Proposed Loan Limit (Php)
3.0 M
5.0 M
3.0 M
Source: SB Corp Data
Reduced
documentary
requirements
One of the crucial features of an emergency measure is that it should simplify
existing processes to help its target beneficiaries get access to the aid. Hence,
the Bayanihan 2 law expressly required implementing agencies to reduce the
documentary requirements. Shown in Table 11 were the significant changes
made by SB Corp in the documentary requirements of the CARES Program
after the enactment of Bayanihan 2.
Table 11: Comparison of Documentary Requirements under P3 and the CARES Program
Particulars
Documentary
Requirements
Regular Program
Bayanihan 1
P3-ERF
CARES 1
CARES 2
Common Requirements of P3-ERF, CARES 1, and CARES 2
a. Fully-accomplished Loan Application Form and Signature Card
b. Business Certificate /Permit
c. Government issued ID with picture
d. Proof of permanent business address
e. DTI/SEC business registration
f. Mayor’s Permit
g. Audited/In-house 2019 FS
h. Post-dated checks (PDCs)
i. BIR Certificate of Registration
Loan specific requirements (applicable to CARES 1 and 2 only)
i.
For those with loan exceeding ₱10,000, applicants should show
proof that they have simple physical assets (e.g. food cart,
equipment, inventory);
ii.
For those with loan exceeding ₱50,000 to ₱150,000, a DTI/SEC
business registration is required;
iii.
For those with loan exceeding ₱150,000 to ₱200,000, Mayor’s
Business Permit, Post-dated checks are additional requirements;
iv.
For those with loan exceeding ₱200,000 to ₱300,000, Audited/Inhouse Financial Statements is another additional requirement;
v.
For those with loan exceeding ₱300,000 to ₱500,000, BIR
Certificate of Registration is also required aside from the
preceding additional documentary requirements.
Changes under CARES 2
 Loan not exceeding ₱50,000: Barangay Business Permit dated within
CY 2019 and CY 2020
 Loan exceeding ₱50,000: Mayor’s Business Permit dated with CY 2019
Page 17
Bayanihan 2
B2C
With BIR filed FS:
a. Government issued ID
b. Bank or EMI account
details
c. BIR filed FS
d. Secretary’s Certificate for
Partnership and
Corporation authorizing the
application for a loan and
specifying the authorized
signatories
Without BIR filed FS:
a. Government issued ID
b. Bank or EMI account
details
c. Secretary’s Certificate for
Partnership and
Corporation authorizing the
application for a Corp loan
and specifying the
authorized signatories
d. Video and pictures of the
business that will clearly
aid the financial
performance assessor to
determine asset size of the
business
e. 2019 and 2020 Barangay
PAO-2021-01
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and CY 2020, or official receipt of payment for renewal of Mayor
Business Permit
 Optional Fastrack Window for fully registered enterprises :
a. Proof of payment to SSS of employee’s benefits with last quarter
2019
b. BIR filed FS for CY 2019
Permit or 2020 Mayor’s
Permit for sole
proprietorship
Source: SB Corp Data
As per Board Resolution No. 2020-09-2975, business documentary
requirements and loan release-related documentary requirements were
streamlined in the CARES Program under the Bayanihan 2. For business
documentary requirements, there is no need to submit business registration
documents if with BIR-filed FS, and no need to submit pictures and videos if
with business website or adequate online footprints. While for loan releaserelated documentary requirements, only government-issued ID of business
owner or of P/CEO of enterprise is required. In the case of corporations,
Secretary’s Certificate identifying name of P/CEO and an authority to borrow
from SB Corp and bank account of business owner or of corporation where the
loan release will be made by SB Corp are the only documents required from
the enterprise.
Extended loan
terms
SB Corp also extended the loan terms. From the daily or weekly repayments
under P3-ERF, SB Corp extended it up to 30 months, including the grace
period provided under the Bayanihan 1. Borrowers with loan below ₱50,000
can repay their loans up to 18 months inclusive of the 6 months grace period
while those with loan above ₱50,000 can repay up to 30 months inclusive of 6
months grace period. In effect, loan offered under CARES 1 and 2 could be
repaid within 1-2 years term, exclusive of the maximum 6 months grace period
granted.
Further, per Board Resolution No. 2020-09-2975, the loan terms under B2C
was extended up to 48 months or 4 years instead of just 30 months, inclusive
of the grace period. Also, the grace period could be extended up to 12 months
instead of just 6 months (see Table 12) for certain industries such as Tourism,
as seen fit or determined by the Credit Committee (CreCom).
Table 12: Extended Loan Terms under Bayanihan 1 and Bayanihan 2
Particulars
Regular
Program
P3-ERF
Loan Terms*
Grace period
Daily/weekly
repayments
None
Bayanihan 1
CARES 1
CARES 2
18-30 months
3-6 months
Bayanihan 2
B2C
12-48 months; multiple of 6
months
3 or 6 months at the option of
loan applicant; 9 or 12 months
for selected industries
* inclusive of grace period
Source: COA Analysis
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More available
financial
technologies for
the clients
To be able to expand its reach, SB Corp offered various disbursement
channels to loan applicants, including the following:
1.
2.
3.
4.
5.
Check;
Instapay or Pesonet;
Landbank Cash Card;
Cebuana Lhuillier; and
Fund transfer to borrower’s Land Bank of the Philippines (LBP) account.
In addition, with the implementation of CARES 2, loan requests amounting to
not more than ₱30,000 were allowed to use electronic money accounts (EMA)
and financial technologies such as GCash and Paymaya (see Table 13) as
disbursement channels as long as the accounts are updated and fully
verified.14
Table 13: Comparison of Utilized Financial Technologies under P3 and
the CARES Program
Particulars
Regular
Program
Bayanihan 1
P3-ERF
Financial
Technologies
No data
CARES 1

offered various
disbursement
channels to
loan applicants
(e-banking,
Fund transfers,
Cash Card, etc)
Bayanihan 2
CARES 2


B2C
offered various disbursement
channels to loan applicants (ebanking, Fund transfers, Cash
Card, etc);
utilized the services of
electronic money accounts
(GCash and Paymaya) in
releasing loans
Source: SB Corp Data
Allowed flexible
use of the loan
proceeds
The Legislature recognized the need for flexibility in the use of the funds to
help MSMEs manage the adverse economic effects of the pandemic. Hence, in
developing Bayanihan 2, they inserted a provision allowing for the flexible use
of loan proceeds. In compliance with this mandate, the SB Corp made
adjustments in the CARES Program to allow flexibility in the use of the funds.
Under the regular P3-ERF program, the loan purpose is exclusively used for
business or solely for working capital. Under Bayanihan 1, the purpose of the
loan was expanded to include the following:
1. working capital replacement to ensure liquidity of firms - including but
not limited to the payment of non-deferrable and/or fixed operating
______________________________________________
14
Small Business Corporation, Creation of Ad Hoc Credit Checking and Documents Verification
Team under the CARES – 2 Program and Work Guidelines, Special Order No. 44 Series of 2020
[SO No. 44 s. 2020] (August 18, 2020)
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costs incurred, such as payroll, rent, and utilities as well as the
replacement of inventories damaged or consumed during the
community quarantine period; and
2. mortgage updating or anti-foreclosure assistance to ensure job
protection –not limited to the financing of amortized capital expenditures
such as equipment, other fixed assets and public transport vehicles.
Finally, under Bayanihan 2, SB Corp further expanded its use. Please see the
details below (Table 14).
Table 14: Comparison on the Use of Loan Proceeds under P3 and the CARES Program
Particulars
Regular
Program
P3-ERF
Usage of Loan
Proceeds
Exclusively used
for business
(enterprise’s
expansion and/or
additional
supplies of the
business)
Bayanihan 1
CARES 1
Bayanihan 2
CARES 2
 For working capital
replacement to
ensure liquidity of
firms
 For mortgage
updating or antiforeclosure
assistance to ensure
job protection
B2C









Payroll cost
Material and supplies
Mortgage payments
Rent
Utilities including fuel and storage
Creation of new supportive businesses
Re-purposing of existing business capital
Any other business debt obligations that were
incurred before the covered period
Acquisition of new technologies and systems
to adjust business processes for resiliency
Source: SB Corp Data
An example of the concrete benefit, which resulted from this adjustment is the
payment of 13th month. In order to assist MSMEs to comply with their 13th
month pay obligations to their workers/employees, the SB Corp’s Board
allowed MSMEs to use the loan proceeds to pay their employees 13th month
pay for CY 2020, provided that the amount will not exceed the amount of
₱12,000 per worker. The number of workers eligible to receive said amount will
be based on the loan applicant’s disclosure in the online loan application. Any
amount in excess of ₱12,000 per head will be shouldered by the MSME. The
subject loan for 13th month pay may be on top of the loan of the MSME under
Bayanihan CARES on condition that the loan does not exceed 20% of sales.
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CARES Program
objectives were
not assigned with
specific
performance
indicators in order
to measure the
program’s
success
As discussed in the earlier portion of this chapter, the SB Corp admitted that it
has yet to implement a mechanism to monitor the use of the proceeds of the
loan. As a result, currently, it is difficult to verify whether the amounts loaned
were used properly by the borrowers. There is also no assurance that the loan
proceeds helped the MSMEs remain operational. The SB Corp committed to
look into this and develop a monitoring mechanism. One factor that contributes
to this is the non-assignment of specific performance indicators. With no clear
performance indicators, it will be difficult to develop a monitoring mechanism to
measure the impact of the program.
Internal Control Standards for the Philippine Public Sector (ICSPPS) requires
Management to identify and define objectives in specific and measurable
terms. By developing objectives in specific and measurable terms, the design
of internal control for related risks can facilitate better understanding at all
levels of the agency. This includes defining what is to be achieved, who is to
achieve it, how it will be achieved, and the time frames for achievement.
Objectives may be provided in a quantitative or qualitative form that allows
reasonably consistent assessment. For quantitative objectives, performance
measures maybe a targeted percentage or numerical value. For qualitative
objectives, management may need to develop performance measures that
indicate a level or degree of performance.
We noted that the SB Corp established a set of program objectives in its
Operational Policies and Guidelines (OPG) on COVID-19, which are as follows:
1. To protect Filipino workers by saving jobs;
2. To capitalize on opportunities created by the health crisis by
encouraging innovation and effective strategic decision making; and
3. To prepare for an immediate rebound by providing the urgent relief
needed to restart micro and small businesses.
However, these are too general and difficult to measure. It would be beneficial
to the SB Corp to develop specific, measurable, attainable, relevant, and timebound (SMART) performance indicators. Looking into the relevant planning
documents, the audit team found that there were no specific indicators
established on the above-cited goals in CY 2020 when the CARES Program
was launched. We noted, however, that the SB Corp started to discuss the
inclusion of specific targets for CY 2021 as contained in Board Resolution No.
2020-12-3027 dated January 5, 2021. However, as discussed in the earlier
portion of the report, these were not reflected in SB Corp’s Performance
Scorecard for the same year, which was approved by the GCG on September
6, 2021.
In its letter dated March 26, 2021, SB Corp admitted that they do not have
specific performance indicators for CARES Program in their scorecard and
evaluation reports that can be used to evaluate its performance.
The SB Corp explained that the evaluation of the CARES Program particularly
the corresponding accomplishment of its primary objectives cannot and should
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not take place in a vacuum. SB Corp added that financing the working capital
needs of the MSMEs is but only a small part of the shared responsibility and
solidarity in response to the unprecedented impacts of the pandemic, which
include among others an immediate coordinated health response to suppress
community transmission, universal access to treatment and vaccine,
addressing the social and economic dimensions of the health (and now also
economic) crisis and its profound consequences, e.g. massive job losses due
to business closures and need for scaled up social protection measures. It is
only after exhausting all avenues to provide assistance to MSME borrowers
can then determine if the stimulus MSME financing as provided for under the
CARES Program – in combination with other key health, social and economic
measures – was able to save jobs, successfully encouraged innovation and
enabled MSMEs to restart, rebound and recover from the pandemic.
The SB Corp further added that when the OPG of the CARES Program was
drafted in April 2020, it was primarily premised on the assumptions that the
COVID-19 pandemic would not be protracted and that a return to pre-pandemic
time would not extend far off into the horizon. These beliefs were aligned with
the early optimistic growth projections from the country's economic managers
led by the National Economic Development Authority (NEDA) and the BSP.
Further, the varying degrees of heightened community quarantine restrictions
which remain in place to date, severely hinder SB Corp's ability to perform the
close monitoring of loan accounts through the conduct of project visits. As
such, towards the end of 2020, SB Corporation carefully considered how to
enhance its key business processes and further rationalize its manning
requirements in terms of loan origination, account management, and other
supporting roles. In May 2021, Office Order No. 020, s. 2021 was issued to
provide enhancements to key business processes, including account
management, among others. With the issuance of the said Office Order, the
enhanced account management strategy was laid out, which provided for
manpower assignment and the development of an IT-enabled Account
Monitoring Module (AMM), the pilot testing of which is currently ongoing. Once
rolled-out and fully implemented, it is expected that the AMM will enable SB
Corp to fully meet its close monitoring requirements under the CARES
Program, online. Nevertheless, SB Corp is doing parallel account monitoring
through an MS Excel template, pending full implementation of the AMM. The
AMM by design includes questions that would inform an evidence-based
impact assessment of the CARES Program.
We took note of the comment that the design of AMM includes impact
assessment of the program. Metrics and performance indicators can be aligned
with the design to measure progress, guide the decision-making and assess
success of the program. Not setting up specific performance indicators would
lead to lack of monitoring scheme and inability to assess the contribution of the
program in addressing the effects of the pandemic.
More women
borrowers than
men
In compliance with the Magna Carta of Women, the audit team looked into the
sex disaggregated data of the CARES Program and found that SB Corp have
more women borrowers than men. Of the 30,806 approved loan applications
with gender data, about 61% or 18,776 are women while 39% or 12,030 are
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men. Based on the figure below (Figure 6), across the country and every
region, SB Corp has more women borrowers than men.
Figure 6: Sex Disaggregated Data of the Business Owners Served by the CARES Program per
Region
Source: COA Analysis of SB Corp data
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Challenges
encountered
which contributed
to the
underutilization of
the funds
In this chapter, the discussions will focus on the following:
1. Challenges encountered by the SB Corp, which contributed to the
underutilization of the funds;
2. Causes, which gave rise to these challenges; and
3. Actions taken by the SB Corp to address these challenges.
As discussed in the previous chapter, a total of ₱4.99 billion or 54.96% of the
released budget of the program remained unutilized as of June 2021. We
identified several major challenges, which may have led to this scenario: the
first major challenge is insufficiency of human resources. As discussed in the
background, prior to the pandemic, the SB Corp already implements this
program but under a different name, which is P3-ERF. SB Corp normally
operates within the budget of ₱1.5 billion. So, when the Bayanihan 1 was
enacted and the CARES Program was created, SB Corp was able to utilize
about 98.84% of the initial ₱1 billion budget, which covers the processing of
20,043 applications.
But when the Bayanihan 2 was enacted, the members of the Legislature
allocated ₱10 billion for the CARES Program, which is way beyond the normal
capacity of the SB Corp if to be implemented within the timeframe of Bayanihan
2. We checked whether there were significant administrative adjustments made
by SB Corp in light of the massive infusion of funds. We found that the SB Corp
adopted an automated system to process loans, however, there were no
significant adjustments in human resources. Despite this challenge, the SB
Corp utilized ₱4.09 billion, which is 273% higher than its usual budget of ₱1.5
billion for its regular program.
The second major challenge is hesitancy of potential clients to avail the
assistance. Of the 995,745 potential clients of SB Corp, only 48,010 MSMEs
applied. That is an availment rate15 of only 4.82%. We noted, however, that the
total budget allocated for the program will not be able to accommodate all
MSMEs. In spite of the lower number of potential beneficiaries that can be
served by the program, still the SB Corp was unable to serve them. One major
reason for this is that the bulk of the budget is allocated for the tourism
______________________________________________
15
Availment rate refers to the number of MSMEs availing the benefits offered by the CARES
Program signified by the total applications divided by the total population of MSMEs reported by
PSA for CY 2019.
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industry. Many tourism-based companies are hesitant to restart their
companies due to the multiple imposition of ECQ in the country.
Massive infusion
of funds beyond
the usual
operations of SB
Corp but it was
able to adjust due
to automation
The appropriation of SB Corp under the GAA for its regular program is ₱1.5
billion. In a state of emergency, the Legislature appropriated ₱10 billion to SB
Corp as an equity infusion. SB Corp claimed that there were no in-depth
discussions with the Legislature on administrative issues prior to the infusion of
funds and they were not consulted regarding the appropriateness of an equity
infusion. It was emphasized by the SB Corp that the mandate is to provide 0%
interest loans and it would be ideal to have a fund allocated for subsidy to
manage the losses without passing it on to the clients. In light of the responses,
it looks like the SB Corp had to deal with what was brought to them. Hence, the
audit team looked into the adjustments made by the SB Corp in view of the
massive infusion of funds under the Bayanihan 2.
Automation of
loan processing at
the start of the
pandemic
The main solution of SB Corp is automation. According to the SB Corp, during
the early days and strictest phase of the community quarantines, i.e. between
March 2020 and May 2020, they strategized on how to safely provide quick
financing response to affected MSMEs. As a result, SB Corp created the
Borrower Registration System (BRS). This enabled SB Corp to accept online
loan applications beginning June 8, 2020.
Borrower
Registration
System
The BRS is the online platform developed by the SB Corp where MSMEs can
sign up and apply for loans. Applicants can access this by visiting this website:
brs.sbgfc.org.ph. The website allows applicants to encode vital information and
upload supporting documents to enable SB Corp to assess the eligibility of the
borrowers. The system has four (4) process modules:
1.
2.
3.
4.
Page 25
Credit Standing Assessment (CSA);
Borrower Information Assessment (BIA);
Financial Performance Assessment (FPA); and
Loan Releasing (LR).
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Figure 7: System Overview – Online Application to Releasing Process
Source: SB Corp
Credit Standing
Assessment
The first process module is the CSA. This process is done by Credit
Investigators (CI) and undergoes four steps, which are as follows:
1. Generate file – determine correctness of the following information
encoded by applicant in his/her online application;
2. Credit Checking – CSA Team download Negative File Information
System (NFIS) report and implement action based on NFIS results;
3. Assessment – Tagging of no negative, minor or major unresolved credit
dealings; and
4. Notification – Send email advice to the loan applicant on results of
verification and/or next steps
The CSA Team generates the NFIS report from the database of the Bankers
Association of the Philippines Credit Bureau (BAPCB) for the accounts listed in
the NFIS portal for credit checking.
Then, the CI verifies whether the identity of the applicant is similar with the
name in the NFIS portal. The CI generates NFIS report and downloads all
information that matches the name of the applicant. Once the identity is verified
as correct, the CI report is transferred to the NFIS portal.
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Then, the CI determines the credit standing classification using the assessment
criteria listed in Table 15. All the accounts with negative findings will be
included in the CI report and will be reflected in the NFIS portal to serve as
reference to other users.
Table 15: Credit Standing Assessment Criteria
NFIS Classification
No Negative/Unresolved
Credit Dealings
Particulars
No records in BAPCB database
With minor unresolved
credit dealings
Comprising of not more than 20% of the requested loan
amount and/or if involving multiple unresolved credit of
not more than 3 accounts
Comprising of more than 20% of the requested loan
amount and/or if involving multiple unresolved credit of
more than 3 accounts
With major unresolved
credit dealings
Source: SB Corp Data
Depending on the results of the assessment, either of two things may happen,
1) if there are no negative findings and/or the unresolved credit dealings is
minor, then the CI will submit the application to the BIA Team for verification or
2) if the unresolved credit dealing is major, then the CI will submit the
application to the Corporate Support Sector Head for supervisory review for
further evaluation and validation.
In some instances where the NFIS reports are not updated, CSA will verify first
the identity of applicants with major credit standing assessment by sending an
email advice and requiring the submission of any of the following: 1) Certificate
of full payment, 2) Settlement arrangement, or 3) Affidavit of Denial.
Borrower
Information
Assessment
Once the credit standing of the applicant has been assessed, the next process
is the BIA. This process is performed by Document Verifiers (DVs). In this
process, DVs verify the documents submitted by the applicants. The DVs start
by looking into to the following documents:
1. Business name of the enterprise - BIR-filed FS for 2018 and/or 2019; or
Mayor’s Permit 2019 and/or 2020 or Brgy. Permit 2019 and 2020
2. Name of the Applicant/Business Owner (Sole Proprietorship) or P/CEO
(Corporation)/Managing Partner (Partnership) - Government issued ID
and Secretary’s/Partnership Certificate
For the validation/verification of other documents, there are two separate tracks
for applicants with BIR-filed FS and applicants with none. Valid applications
with at least one data/document for correction will be tagged as data correction
in process (DC-in process). A system generated email advice will be sent to the
BRS account of the client notifying them that they have items in their
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application that need correction. Once the client already complied with all the
data correction, the status will be updated from “DC-in process” to “Complied”
then the assigned assessor revalidates the resubmitted documents on whether
these are already valid or not. If valid, a system generated email will finally be
triggered which will show whether the application already passed the BIA
process. As long as the CSA and BIA both show a valid status, the application
will already be forwarded to FPA.
When there are certain issues that cannot be resolved, there is also a
discontinue application button. There are designated email templates for each
reason for discontinuance.
Financial
Performance
Assessment
The next process module is the FPA. This process is performed by Account
Officers (AOs) and undergoes the four major stages as follows:
1. Validate financials – review, analyze, and cull out Sales and Asset size
figures based on submitted FS or from the pictures and videos
uploaded by the loan applicant for those without BIR-filed FS.
2. Encoding – encode validated Asset and Sales figures if different from
figures encoded by the applicant and tag/determine applicable Loan
Limit based on Bayanihan CARES lending guidelines (initial amount
has been generated by the system).
3. Decision – automatic approval based on policy amount up to ₱2 million;
CreCom to render decision for loans exceeding ₱2 million.
4. Notification – notify applicant thru email on the loan approval decision
and approved loan amount.
All loan applications that are cleared under the CSA and BIA assessment
procedures are already assured of loan granting under the CARES Program.
The personnel assigned to perform the assessment shall undertake the
following (Table 16):
Table 16: Financial Performance Assessment Criteria
Procedure
1. Read and encode the
Asset size and Annual Sales
of the enterprise
Basis
BIR-filed FS for 2018 and
/or for 2019, if available
Remarks
No need to interact with the
loan applicant
2. Select the Asset Size
bracket to which the
enterprise belongs to
Pictures and videos on
business assets
Not applicable if with BIR-filed
FS, no need to interact with the
loan applicant
3. Select the annual sales
bracket to which the
enterprise belongs to
Proof of sales in 2019
(should be for at least 3
th
months, preferably 4
quarter
Not applicable if with BIR-filed
FS and if loan request does not
exceed ₱100K; interaction with
loan applicant will be necessary
Source: SB Corp Data
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It must also be noted that in case of gray area, the assigned personnel shall
consult with the designated Supervisor who may request for further guidance
from senior officers in the hierarchy, or from CreCom as the case may be.
Loan Release
The last stage is Loan Release. LR Team’s activities are centralized in the
Head Office except for signing of loan release documents. All the loan release
documents such as Promissory Note and Disclosure Statement are system
generated. LR staff then converts the LR documents to PDF and sends them to
the respective field staff for signing. These are uploaded in the NextCloud
database per group area with subfolder per province. The field staff will then
schedule the client for document signing and email to the client the
amortization schedule if post-dated checks are necessary. Upon signing, field
staff will upload the signed documents to SB Corp portal for verification by the
LR staff in the Head Office. Once verified, LR staff then locks the account for
the creation and generation of loan drawdown sheet (LDS) and finally for the
creation of fund allocation request which are all forwarded to controllership
group and treasury group for the disbursement of loan proceeds. Table 17
shows the different disbursement channels with each corresponding cost
offered to MSME borrowers.
Table 17: List of Disbursement Channels Offered to Borrowers
Disbursement Channels

Check


Instapay or PesoNet


LBP Cash Card



Cebuana Lhuillier, Inc.
Fund transfer to
Borrowers LBP Account




Control Mechanism
Loan Drawdown Sheet and details
of checks are reviewed prior to
endorsement to signatory
Signed by Class A and B signatory
Initiated by Maker and reviewed by
TG Manager prior to endorsement
for approval
Approved by SB Corp Authorizer
Extraction of KYC and Fund File
direct from Oracle database
Debit Advice is approved by Class
A and B signatory
No manual intervention
Fund Transfer is initiated by Maker
and reviewed by TG Manager
Approved by SB Corp Authorizer
Loan
Release
initiation
is
processed by Uploader, Approver
and Poster
Fund Transfer is initiated by Maker
and reviewed by TG Manager
Approved by SB Corp Authorizer
Cost
-


₱25
for
instapay and
₱15
for
PesoNet
₱150 valid for
5 years

₱300 will be
charged
for
every ₱30,000

Free of charge
Source: SB Corp Data
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The audit team
tested the
controls and
found that all four
process modules
are working
effectively
Item 7.3 of ICSPPS provides that all government agencies need to consider the
potential for fraud to occur in their operations. Fraud refers to an unlawful
interaction between two entities, where one party intentionally deceives the
other, through the means of false representation in order to gain illicit and
unjust advantage. It involves acts of deceit, trickery, concealment, or breach of
confidence that are used to gain some unfair or dishonest advantage. In
addition, fraud should be included as part of the risk assessment process but
can be documented separately or in conjunction with other risks.
The audit team identified the control risks associated with each process
modules as being performed by respective evaluators per assessment
modules. Listed below are the risks identified based on criteria per process:
1. Credit Standing
Assessment
2. Borrower
Information
Assessment
3. Financial
Performance
Assessment
4. Loan Releasing
 Loan application with incorrect information will be
processed and approved
 CI Report contain incorrect credit standing
assessment/NFIS classification
 CI reported number of unresolved credit dealings
not matched with generated information from NFIS
Report which may affect the credit assessment
result
 Loan application with incomplete attachment will be
processed
 Loan application with incorrect information will be
processed
 Loan application with incorrect information will be
processed
 Approved loan amount exceed the overriding limit
 Loan is processed even without CreCom approval
 Loan is approved even with incomplete attachment
 Loans are released even without proper signature
 Loans are released even with incomplete
attachment
To assess the extent of reliability and effectiveness of the processes
embedded in each process module, the audit team conducted test of controls
with the aid of attributes sampling table on statistical sample sizes for test of
controls. We have set our confidence level at 95% with a corresponding
tolerable deviation rate of 6%, sample size of 103, and two expected errors.
Table 18 shows the results of our tests of controls on the 103 samples of
released loans within the tolerable level of two deviations:
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Table 18: Result of Test of Control on Selected Samples from Loans
Released
Process Module
CSA
BIA
FPA
LRP
Deficiencies
Unmatched reported aggregated loan
amount in NFIS
With invalid attachments
No co-borrower ID
Approved amount exceeded the allowable
amount
Incomplete attachment (no proof of bank
accounts)
Released loan without PDC
Attachment without signature
No. of Deviations
within the Sample
1
2
1
1
1
1
1
Source: COA Analysis
Upon evaluation of these systems through the conduct of test of controls, the
audit team noted that controls in place could be considered working effectively
and could be relied upon.
With the
enhancements,
SB Corp was
able to operate
despite the
pandemic
As of June 30, 2021, the SB Corp received 48,010 loan applications – 20,043
under Bayanihan 1 and 27,967 under Bayanihan 2 (see Figure 8). Of this, SB
Corp released loan proceeds to 28,222 or 58.78% of all applicants. About
8,053 or 16.77% of the total number of applications were disapproved. In total,
the SB Corp completely processed 36,275 applications in a little over a year
since the BRS went online on June 8, 2020.
However, we would like to bring to the attention of the SB Corp some of the
feedback of its clients on the BRS. Some respondents expressed that they
experienced difficulty in scanning/uploading documents online and
understanding the online loan processing. Perhaps, the SB Corp can look into
this and make adjustments in order to make the interface user friendly.
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Figure 8: Status of Applicants as June 30, 2021
Source: COA Analysis of SB Corp Data
Insufficiency of
Human
Resources
The audit team also looked into the adjustments made by SB Corp in its human
resources. We found that there were no significant changes in the said SB
Corp’s human resources. From 335 personnel in CY 2019, SB Corp’s human
resources marginally increased to 337 personnel in June of CY 2021.
To highlight the insufficiency of human resources, we would like to bring your
attention to the number of personnel assigned to evaluate the application in
BIA. Of the 337 active personnel, only 12 people are assigned to accept the
initial processing of loans (see Table 19). With the total required target per
month of 4,320, these personnel were expected to process a total of 43,200
loan applications within the 10-month duration of the program, that is, from May
2020 (program’s launch) to June 2021 (Bayanihan 2’s effectivity) except the
two-month suspension of loan acceptance from June 18 to August 17, 2020.
Table 19: Number of Personnel Assigned for Each Loan Process Module
Loan Process
Modules
Number of
Personnel
Ave Target per Month
per Personnel
Total Required
Target per Month
BIA
12
360
4,320
CSA
9
471
4,240
FPA
19
184
3,500
LRP
11*
380
4,180
*excluding 1 personnel responsible for LDS creation and reprocessing of failed transactions
Source: SB Corp Data
As earlier discussed in this report, SB Corp received 48,010 applications which
exceeded the expected/targeted loan applications of 43,200 for the 12
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personnel. With limited number of personnel, the initial processing of loans
required an average of 400 loan applications per month processed by each
personnel which is beyond the expected/targeted capacity of 360 loan
applications processed individually.
The audit team conducted a survey involving selected SB Corp personnel and
it revealed that 30 out of 101 or 30% of the respondents said that there should
be additional personnel for each loan process module to be able to
accommodate all the loan applications on time. Survey results showed that
there are validators who are concurrently assigned to other tasks and are just
assigned part-time to the CARES Program. It was also noted during the survey
that not all loan applications can be accommodated/validated within the same
day of application and need to add more full-time verifiers.
Although the SB Corp ensured to conduct various briefings and walkthrough of
the online modules prior to its usage, the survey revealed that 21 out of 85 or
25% of the respondents involved in processing of loan applications were
saying that the trainings provided were insufficient. There were orientations and
briefings conducted but there was no hands on training done due to time
constraints. It was noted that the actual usage of the module was the training
itself. Respondents also emphasized that there is a lack of training on proper
online implementation and how to handle technical issues encountered.
During the exit conference, the SB Corp raised the issue of insufficiency of
funds allotted for mobilization. According to the SB Corp, the entire amount
allocated for the CARES Program under the Bayanihan 2 was given to them
through equity infusion. It does not include funds for mobilization, which would
be used to increase human resources. The audit team verified that the ₱8.08
billion downloaded to SB Corp as equity infusion included a mobilization fund
equivalent to ₱300 million and approved by the Board thru Board Resolution
No. 2020-11-3006.
However, even if SB Corp was granted mobilization funds, the Management
raised the issue of difficulty of hiring during the pandemic. The SB Corp
published the openings publicly but there were no interested applicants. To
mitigate the insufficiency of human resources, SB Corp hired part-time workers
but the management admitted that it is still not enough.
Hesitancy of
potential clients
to secure a loan
Another significant challenge is hesitancy of potential clients to secure a loan.
Of the total 995,745 MSMEs16 as potential clients of the CARES Program, only
48,010 MSMEs applied. That is an availment rate of only 4.82%. As stated
earlier, we noted that the budget allocated for the program will not be able to
accommodate all MSMEs. At best, the remaining budget would only be able to
accommodate approximately 50,000 MSMEs. However, despite this lower
target, still the SB Corp was unable to meet it.
______________________________________________
16
Philippine Statistics Authority, PSA 2019 Philippine MSME Statistics, p. 1
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Low Availment
Rate under the
Tourism Sector
One major reason for this is that the bulk of the budget was allocated for the
tourism industry. Many tourism-based enterprises are hesitant to restart their
companies due to the multiple imposition of ECQ in the country. The
Bayanihan 2 Act specified that a portion of the ₱10 billion allocated to the
CARES Program should be given to tourism sector. Accordingly, the SB Corp
approved the allocation of ₱6 billion to CARES for TRAVEL program for
accredited MSMEs of the DOT. Out of the ₱6 billion appropriated fund, ₱4
billion was approved by the Board or 50% from the initial released fund of
₱8.08 billion for the Tourism sector.
Table 20: Total Loan Applications and Fund Released for Tourism as of June 30, 2021
Particulars
Total No. of
Applications
Received
743
Total No. of
Loans Released
Total Loan Amount
Released
Total Unutilized
Fund
368
₱154,544,378
₱3,845,455,622
Micro Enterprise
260
209
₱30,031,806
Small Enterprise
138
101
47,745,941
Medium Enterprise
76
58
76,766,631
Large Enterprise
1
-
-
268
-
-
Tourism
Blanks
Source: COA Analysis
With the ₱4 billion allocated fund for the said sector which is estimated to cover
40,000 MSMEs (average loan of ₱100,000 per beneficiary) as potential clients
of the CARES Program, only 743 MSMEs applied or an availment rate of only
1.86%. As presented in Table 20, only ₱154.54 million or 3.78% of the ₱4
billion fund was released to MSMEs as of June 30, 2021. Also, of the total
₱5.19 billion unutilized fund, a big chunk of ₱3.84 billion or 74.09% came from
the funds allocated for MSMEs in the Tourism sector.
This could be attributed to the imposition of strict community quarantines
throughout the implementation of CARES Program which forced MSMEs to
temporarily stop operating especially in the tourism sector.17 According to the
report chaired by NEDA, 31% of the surveyed MSMEs still do not see good
prospects for their business. The less optimistic business outlook is shared
across firms of different sizes. By sector, the most pessimistic are in the
education (36%), tourism (35%), and transport (34%) sectors in recognition that
______________________________________________
17
Impact of COVID-19 on the Philippine Tourism Industry, July 2020, available at
https://www.pwc.com/ph/en/publications/tourism-pwc-philippines/tourism-covid-19.html (last
accessed December 6, 2021)
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certain restrictions on social distancing will continue even after strict community
quarantines.18
The SB Corp acknowledged that one of the reasons for the slow lending
uptake is primarily due to the fact that tourism in the country is still at standstill.
According to the DOT, in 2020 both foreign tourist arrivals and tourism receipts
plunged 84% and 83.1%, respectively.
General
Hesitancy
among MSMEs
to secure a loan
Apart from the hesitancy among tourism-related MSMEs, there is also general
hesitancy among MSMEs to secure a loan. Our survey revealed that for
selected MSME loan applicants with cancelled status, 3 out of 6 said that they
were reluctant to borrow as they have no means to repay due to uncertainty
and had technical difficulties or no access to online applications.
SB Corp tapped
various partners
to reach-out to
its clients
We acknowledged that the SB Corp had exerted efforts to reach their clients by
partnering with the Philippine Information Agency and various organizations,
including those involved in television, radio, and social media. Listed below are
the different strategies the SB Corp had employed, particularly the various
partnerships it entered into and several public advisories it underwent to reach
out and inform the public about the CARES Program:
1. Partnerships
a. Board Resolution No. 2020-08-2948: ₱305 million CARES
Allocation for Congressional Districts Nationwide via House of
Representatives (HoR)-referred MSMEs
As recommended by Management under ManCom Resolution No.
2020-0806-002, the ₱305 million was allocated for HoR-referred
MSMEs to expand the CARES outreach to all congressional
districts. With this, target beneficiaries from the 243 congressional
districts all over the Philippines, as well as from the marginalized
sectors represented by party list representatives will be given
access to the CARES Program.
b. Board Resolution No. 2020-05-2925: Communication of Partnership
with PhilExport and with Philippine Chamber of Commerce and
Industry (PCCI) under the CARES Program.
Philippine Exporters Confederation, Inc. (PhilExport) has 78 exportoriented member associations in the country with a total
membership of 2,245 duly-registered firms – of which 1,520 are
micro enterprises, 294 are small enterprises and 339 are medium
enterprises. The other 92 members are large enterprises. PhilExport
______________________________________________
18
Inter-Agency Task Force Technical Working Group for Anticipatory and Forward Planning
chaired by National Economic Development Authority: We Recover as One, p. 24
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has the responsibility to inform all PhilExport member-MSEs on the
CARES Program and of the special features. They are also to
provide appropriate marketing and online application support for the
CARES Program incorporating the special features for PhilExport
MSEs. It was estimated that PhilExport members will qualify for
₱300 million in loans under the CARES Program. Also, a similar
partnership between SB Corp and PCCI where parallel lending as
that of the PhilExport has been approved.
c. Board Resolution No. 2020-06-2938: Confirmation of Partnership
with the City Government of Baguio – (BRAVE-ESP)
In order to facilitate the implementation of a lending facility for MSEs
affected by the COVID19 pandemic in Baguio City and as endorsed
by Management under ManCom Resolution No. 2020-0616-004, the
confirmation of partnership with the City Government of Baguio in
implementing a lending facility, the Baguio Revitalization Actions for
a Vibrant Economy – Economic Stimulus Package (BRAVE-ESP),
under the CARES Program where the City of Government has
allotted ₱100 million from its current budget to fund the facility and
where selection of eligible enterprises shall be based on the
guidelines set by the City Government and loan evaluation, loan
approval, loan release, monitoring and collection shall be done by
SB Corporation using the Borrower Registry and Evaluation
Platform for which SB Corporation shall be entitled to management
fee(s) which shall be consistent with existing service fee under the
P3 CARES facility of 6% and 8%.
d. Board Resolution No. 2020-06-2929: Participation of SB
Corporation in Component 1 of the Restart Program and
Partnership with ASKI and ASA Ph
As recommended by Management, the participation of SB
Corporation in Component 1 (Safe Store Communications) of the
Restart Program and the partnership with Alalay sa Kaunlaran
Incorporated (ASKI) and ASA Philippines Foundation (ASA Ph)
under the P3 CARES with loan amount of ₱30 million each to be
released in two tranches, at zero interest, service fee of 6%, loan
term of two years and subject to the condition that 40% of the loan
amount should be for other goods to be sold by the sari-sari store
beneficiaries other than Coca Cola products.
2. Public Advisories
The SB Corp had issued advisories about the CARES Program through
posters and announcements on their official website.
a. CARES Program Primer and Posters (see Appendices III and IV)
b. Promotion through Social Media
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i. Mancom Resolution No. 2020-0625-003: Corporate
communication on social media posts relative to CARES
Program stated that inquiries and comments on CARES
Program via social media platforms will be responded by a
corporate messaging on a daily basis. (See Appendix V)
ii. A marketing communication proposal dated December 2020
revealed that the SB Corp proposed to engage the services of
different media and networks as marketing partners.
Table 21: Target Marketing Partners
Business Groups
Media
Regional Network
Government
Agencies
OFW Groups
Teleradyo (Radyo
Pilipinas, DZRH, etc)
Local Media
Negosyo Centers
Philippine business
groups overseas
Trabaho, Negosyo,
Kabuhayan at
Konsumer
Local influencers/
provincial tourism
boards
Webinars
Specific industry
groups (restaurant
owners,
manufacturers,
etc.)
Speaking
Engagements from
various events
organized by the
private sector
Network from
borrowers/loan
applicants
Ceremonial
release in support
of local
government
efforts
Source: SB Corp Data
c. Facebook Highlights
As of February 2021, the facebook page of SB Corporation has a
total page follower of 44,076 of which 3,103 are new followers
with age range of 25-44 years old. Their post engagements
(clicked link, shared, reacted or left comment) also increased by
123% compared to previous month. They also received 391 new
messages, a 100% increase and 10,553 numbers of views on
their page.
d. Success Stories
The success stories page was created last January 2021 with 19
stories uploaded as of May 5, 2021. Successful applicants share
their stories on how they discovered the program and the
assistance it has brought to their businesses.19
e. Media Broadcasts (TV, Radio, News Articles)
______________________________________________
19
Bayanihan CARES Success Stories available at https://bayanihancares.wordpress.com/ (last
accessed: February 7, 2022)
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The SB Corp also took the initiative to publish its marketing
campaign about the CARES Program in different media outlets.
The media broadcasts and coverage of the program in news
articles as listed in SB Corp’s media monitoring report related to
CARES started in March 2020. (see Appendix II)
Despite the SB Corp’s information dissemination effort, the low rate of
availment signals the need for a re-assessment of strategies. According to
media reports, potential borrowers were reluctant and worried on the
repayment of loans due to uncertainties on their businesses brought about by
COVID-19 pandemic.
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Despite various
enhancements,
presence of
deficiencies and
gaps in the
implementation of
the CARES program
were still observed/
noted
In this Chapter, the discussions will focus on the various administrative
deficiencies noted by the audit team, which are as follows:
1. Long processing time;
2. Lack/late status updates to the applicants; and
3. Existence of fragmentation as a result of lack of a policy clearly defining
the roles and responsibilities of the stakeholders.
We found deficiencies and gaps in the administration of the program. Out of the
48,010 loan applications, a total of 4,378 or 9.12% borrowers cancelled their
loan applications as of June 30, 2021 (see Figure 9). Results of our survey
revealed that some of the respondents cancelled their loan applications
because of the long processing time and non-communication of the status of
their applications. We also noted the existence of fragmentation of functions
among the key stakeholders, which is primarily caused by lack of a policy,
specifying the roles and responsibilities of the stakeholders.
Figure 9: Status of Loan Applications in Bayanihan 1 & 2 combined as
of June 30, 2021
Source: SB Corp
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Long processing
time
Results of the audit team’s survey showed that 53 out of 68 or 78% of selected
MSME loan applicants with released loan status said that they know fellow
business owners that are hesitant to apply due to various reasons such as
delay in processing time. As a result, the audit team looked into records of the
SB Corp to determine the extent of delay in processing the applications. The
average loan processing time exceeded beyond the prescribed 20 working
days.
Section 9 (b.1) of Republic Act (RA) No. 11032 or “An Act Promoting Ease Of
Doing Business And Efficient Delivery Of Government Services, amending RA
No. 9485, otherwise known as the Anti-Red Tape Act (ARTA) of 2007 provides
that applications or requests involving activities which pose danger to public
health, public safety, public morals, public policy, and highly technical
application, the prescribed processing time shall in no case be longer than
twenty (20) working days or as determined by the government agency or
instrumentality concerned, whichever is shorter. Accordingly, the SB Corp’s
Performance Scorecard commitment/target for CYs 2020 and 2021 is to
process 100% of loan applications within the standard and prescribed
turnaround time (TAT) of 20 working days.
Table 22: Comparison of Reported Ave. Loan Processing Time vs COA
Computation
Particulars
Per SB Corp
Per Audit
Variance
P3-CARES
21.22 days
68.91 days
47.69 days
B2C
17.89 days
3.33 days
37.22 days
31.69 days
19.33 days
Improvement
Source: COA Analysis
As per SB Corp, the average loan processing time improved from 21.22
working days under the P3-funded CARES under Bayanihan 1 to 17.89
working days in CARES under Bayanihan 2 (see Table 22). However, our audit
revealed that the actual average loan processing time under the Bayanihan
laws were beyond the 20 days prescribed period. The team noted that under
the Bayanihan 1, the average loan processing time was at 68.91 working days
or more than three months to completely process the loan. Meanwhile in
Bayanihan 2, an improvement was noted making the TAT for the processing of
loans faster which took an average of 37.22 days or less than two months to
consummate the processing of loans. Comparison on the average loan
processing times between P3-CARES and CARES under Bayanihan 2 per
region is shown in Figure 10.
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Figure 10: P3 CARES vs. B2C Average Loan Processing Time per Region
90
80
70
60
50
40
30
20
10
0
ARMM CAR
NCR Region Region Region Region Region Region Region Region Region Region Region Region Region Region
I
II
III
IV-A IV-B
IX
V
VI
VII
VIII
X
XI
XII
XIII
P3 CARES
B2C
Source: COA Analysis
As illustrated in Figure 10, the average loan processing time per region under
P3-CARES as compared to that of CARES Program under Bayanihan 2 was
significantly reduced due to system/program enhancements as discussed
earlier. However, the variance of 47.69 days in P3-CARES and 19.33 days in
CARES under Bayanihan 2 between the SB Corp’s reported data and the
audit team’s computation was mainly attributed to the stop time (waiting time
from client for data correction) and the queue time (transmission from one
process module to another). The SB Corp excluded the queue time in its
computation and deducted the stop time in its TAT measurement formula,
particularly in each stage of the loan process. The SB Corp revealed that the
TAT measurement formula used by the Management Information System (MIS)
Department was discussed and agreed upon in one of the management
discussions conducted for the CARES Program. However, there was no official
document that reflects this formula in any of the CARES Program issuances.
Turn-around Time Measurement:
Formula:
TATtotal = PTCSA + (PTBIA –STBIA) + PTFPA + (PTREL –STREL)
Where:
TATtotal = Total Turnaround Time
PTCSA = CSA Processing Time
PTBIA = BIA Processing Time
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STBIA = BIA Stop Time
PTFPA = FPA Processing Time
PTREL = Releasing Processing Time
STREL = Releasing Stop Time
During an interview with the SB Corp officials, it was discussed that this
formula reflects the processing time per loan process module deducting the
stop time which is the time in which loan applicants are needed to do corrective
actions on the noted deficiencies as notified by the SB Corp. However, it does
not include the queue time or the time involved transmitting a loan application
from one assessment to another assessment. Tables 23 and 24 show the
average net actual processing time during P3-CARES under Bayanihan 1 and
CARES under Bayanihan 2 using the formula set by the SB Corp.
Table 23: P3-CARES under Bayanihan 1 Standard vs. Average Net Actual
Processing Time as of June 30, 2021
Actual Processing Time
Standard
Processing Time
Processing Time
Stop
Time
Net Processing
Time
Document
Verification
5
6.34
-
6.34
Financial
Performance
Assessment and
Approval
9
7.14
Loan Releasing
6
15.19
7.45
7.74
Total Processing
Time
20
28.67
7.45
21.22
Loan Process
7.14
Source: SB Corp Data
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Table 24: CARES under Bayanihan 2 Standard vs. Average Net Actual
Processing Time as of June 30, 2021
Actual Processing Time
Loan Process
Standard
Processing
Time
Credit Standing
Assessment
Borrower Information
Assessment
Processing
Time
Stop
Time
2.21
Net Processing
Time
2.21
5
9.19
5.01
4.18
Financial Performance
Assessment and Approval
9
4.16
Loan Releasing
6
12.60
5.26
7.34
Total Processing Time
20
28.16
10.27
17.89
4.16
Source: SB Corp Data
Based on SB Corp’s data, the Corporation already managed to reduce the
actual processing time in CARES under Bayanihan 2 with an average net
actual processing time of 17.89 days from 21.22 days in P3-CARES under
Bayanihan 1 or an improvement of about 3.33 days. This computation is
based on the TAT measurement set by SB Corp which excludes the queue
time in the total processing time reported.
The audit team’s computation, on the other hand, considered only the
application date and released date of the reported 28,222 released loans to
MSMEs excluding all the regular holidays, special holidays and weekends. This
computation is consistent with the definition of the processing time by the
ARTA law. Although the audit team agrees that stop time should be deducted
in the total processing time as it is beyond the control of SB Corp, the audit
team maintains its position that queue time should still be included in reporting
the actual processing time to appropriately reflect the actual TAT.
The SB Corp agreed that there are certain issues and constraints that needed
action from the loan applicants. There were setbacks in the processes due to
constraints such as data corrections or the stop time needing action from the
loan applicants. SB Corp reported that in many cases with documentary
deficiencies, the back-and-forth communications with the loan applicants would
take some time. It added that the common issues and constraints that need
corrective action were at client’s end that significantly contributed in the
downtime and delays which eventually prolonged the loan processing time.
The SB Corp also pointed out that some of the loan applicants were
technologically challenged in view of the following: a) no email address; b) no
smart phones and would require assistance from someone; c) no internet or
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data load; d) slow or intermittent internet connectivity; and e) weak
telecommunications signal.
The audit team noted the following issues/constraints per process module as
encountered by the SB Corp that needed actions from loan applicants:
a. Credit
Standing
Assessment
b. Borrower
Information
Assessment
-
-
c. Financial
Performance
Assessment
-
-
-
d. Loan
Releasing
-
-
Late or lack of
status notification
to applicants
submission of settlement documents of loan
applicants/businesses with major unresolved
credit findings
Documentary deficiencies and/or incorrect
information in the loan application
Learning curve as to the use of the BRS for
those not technologically savvy
Applicants who cannot be contacted even via
mobile phone for the resubmission of documents
or correction of information
Incorrect information in the loan application or
incorrect/incomplete uploading of necessary
documents which the Business Verifier has to
return to the BIA Team for correction/
re-uploading
Some applicants have no capacity for virtual
interview which makes validation thru virtual
interview a challenging task for the AOs. There
were also cases wherein loan applicants were
quite difficult to contact due to low signal strength
especially those located and operating in
rural/remote areas of the country.
Some applicants cannot provide proof of annual
sales or business assets which normally lead to
the denial of the loan application
Applicants who are not familiar with technology
and would need assistance in using the Onetime password (OTP)/e-signature feature under
the digital loan release process
Unable to directly upload the documentary
requirements in the BRS
Submission of incorrect loan release documents
Based on the program manual, applicants are notified of the status of their loan
applications through automated e-mail notifications, text messaging and phone
calls initiated by the evaluating personnel per process module.
Results of our survey revealed that there were applicants that remain unaware
of the status of their applications even after more than the 20 days of waiting.
In fact, during our survey, we have respondents requesting updates from our
auditors because they have not received any notification from the SB Corp.
Likewise, our survey results revealed that there were a number of SB Corp
personnel who encountered difficulty in getting in touch with the loan
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applicants, specifically those with data corrections or deficiencies. Apparently,
the issue was that the e-mail addresses encoded in the database were invalid
or not accurate. Furthermore, there was no requirement for the provision of an
alternate phone number in case the primary number was unreachable.
SB Corp acknowledged these observations and shared a list of technological
challenges encountered by loan applicants, which have caused delays in the
past, such as: 1) lack of valid email address; 2) lack of smart phones; 3) need
for assistance or companion during filing out of online loan application; 4) no
internet or insufficient data credits; 5) slow or intermittent internet connectivity;
and 6) weak telecommunication service network signal.
The audit team would like to highlight that lack of constant communication or
technical assistance may adversely affect the interest of the prospective
borrower to continue their application. It is in the interest of the SB Corp to
avoid having a situation where it has exerted a lot of effort processing
applications, which have already reached the final stages and at the end only
to cancel it because of lack of notice. This situation resulted to waste of time
and effort on the part of SB Corp.
Fragmentation as
a result of not
having a clear
policy identifying
the roles and
responsibilities of
key stakeholders
We noted the existence of fragmentation in the implementation of the CARES
Program. The Government Accountability Office of the United States of
America defines fragmentation as those circumstances in which more than one
agency (or more than one organization within an agency) is involved in the
same broad area of national need and opportunities exist to improve service
delivery.
It is often illustrated as an incomplete pie. The
pie represents a government program. The
portions covered in light color represent the
portions of the program already covered by
various agencies. The dark colored portion
represents the portion of the program with no
agency covering it. Fragmentation happens
when there is no clearly defined roles and
responsibilities for all stakeholders. Because
of this, implementers inadvertently leave an
important component of the program
unattended.
Fragmentation in the implementation of CARES Program led to the following
situations:
1.
2.
3.
4.
Page 45
Inconsistent policy on program coverage;
Lack of coordination with the Philippine Information Agency (PIA);
Non-use of PSA data;
Non-establishment of the SB Corp and Negosyo Center (NC)
partnership; and
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5. Non-coordination with the DTI affected the compliance with the
prioritization set out in the OPG.
Inconsistencies
between the
Operational
Policies and
Guidelines (OPG)
and CARES
Program Primer
may have
deprived eligible
MSMEs
opportunity to
avail SB Corp’s
services
Section 3 of RA No. 9501 also known as the Magna Carta for Micro, Small and
Medium Enterprises defined MSMEs as any business activity or enterprise
engaged in industry, agribusiness and/or services, whether single
proprietorship, cooperative, partnership or corporation whose total assets,
inclusive of those arising from loans but exclusive of the land on which the
particular business entity’s office, plant and equipment are situated, must have
value falling under the following categories: micro – not more than ₱3,000,000,
small – ₱3,000,001 to ₱15,000,000, and medium – ₱15,000,001 to
₱100,000,000.
Results of our document review revealed certain provisions in the Joint
Memorandum Circular (JMC) No.1, s. 2020 which contradict the definition of
small enterprises provided by the Magna Carta for MSMEs wherein a business
entity with total assets of ₱3 million to ₱15 million is categorized as Small
Enterprise. Specifically, the criteria stated in section 7.6.1 of the said JMC
limited the eligibility of small enterprises to not more than ₱10,000,000 asset
size. The team noted that this is inconsistent with section 7.6.2 of the same
JMC which categorically stated that the loan is available to all small
enterprises.
In addition, the SB Corp’s published OPG for ₱1.0 billion P3 COVID-19 ERF
(CARES Program) loan facility adopted the salient features and eligibility
criteria stated in sections 7.6.1 and 7.6.2 of the JMC but in disagreement with
the definition of small enterprises as provided by RA No. 9501.
Meanwhile, the details contained for small enterprises in the CARES Program
Primer as presented during the audit team’s walkthrough session with the
Management (see Figure 11) were consistent with the definition of small
enterprises as provided in RA No. 9501 but were different from the
requirements of OPG and JMC.
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Figure 11: Walkthrough Presentation on P3 CARES Loan Processing: Loan
Amount Criteria
Source: SB Corp Data
According to the Management, the decision to initially limit the eligibility for
small enterprises with asset size of up to ₱10 million was by design and with
Governing Board approval. This is to allow SB Corp to reach and serve more
micro and small enterprises given the limited ₱1 billion funding allocation under
the COVID-19 P3 ERF Program (subsequently renamed as CARES Program).
Also, there were revisions made to the final version of the CARES OPG
increasing the asset size of small enterprises under the program from ₱10
million to ₱15 million as indicated in the minutes of the 323rd SB Corporation
Board Meeting dated 29 April 2020 where the Governing Board noted the said
revisions.
The audit team perceived that non-compliance with the requirement of Section
7.6.5 of the JMC20 on having a proper DTI Memorandum Circular which could
serve as an overall guide in the implementation of the CARES Program
attributed to the said inconsistencies. No DTI Memorandum Circular was
published regarding the implementation of the said program, instead the SB
Corp’s OPG for ₱1.0 billion P3 COVID-19 ERF loan facility was circulated.
Those small enterprises with asset size ranging from ₱11 million to ₱15 million
who in good faith have read the JMC and the SB Corp’s unrevised OPG would
have a possibility of not applying which could make the program not inclusive
to all small enterprises.
The Management replied that Section 7.6.5 of the JMC No.1, s. 2020 includes
a colatilla on the issuance of the proper DTI Memorandum Circular, “as soon
as the Community Quarantine declaration is lifted by the National Government
______________________________________________
20
DA/DBM/DILG/DOF/DSWD/DTI Joint Memorandum Circular No. 1, § 7 (2020)
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and/or respective Local Government Units”. When the National Capital Region
(NCR) transitioned to a more relaxed General Community Quarantine
classification beginning June 1, 2020, SB Corp has already able to secure the
required approvals by its Governing Board to implement Section 7.6 COVID-19
P3 ERF of JMC No. 1 primarily through the conduct of virtual meetings. In
addition, the Secretary of Trade and Industry also acts as the Chairman of the
SB Corp Governing Board.
Inadequate
Coordination with
the Philippine
Information
Agency
SB Corp thru PIA and Philippine News Agency (PNA) had informed the public
about the CARES Program but effectiveness of its marketing campaign is in
question due to low availment rate.
Section 7-B(h)(12)(c) of RA No. 9501 states that one of the ways to promote
the productivity and viability of MSMEs by way of directing and/or assisting
relevant government agencies and institutions is to conduct a nationwide
information campaign with the PIA that shall inform the public of all programs
and services, government and nongovernment available to MSMEs.
The PIA being the country’s chief information arm has the function to
disseminate information about government programs, projects, and services to
the Filipino public. The SB Corp coordinated with PIA on information
dissemination thru publication of advertisements. Our document review of SB
Corp’s provided media monitoring report for CY 2020 (see Appendix II)
revealed that it was only in September 2020 (four months after the program
was launched in May 2020) when the PIA first published an article regarding
the CARES 2 Program. No previous articles about the CARES 1 Program were
published as revealed in the said monitoring report.
The SB Corp clarified that the reason the first article published by PIA
regarding the CARES 2 Program came out in September 2020 was because
the said program was only launched on August 17, 2020 through the reopening of the online BRS. Meanwhile, SB Corp’s press materials are released
through the DTI Public Relations Unit (PRU) after these have been approved
by the DTI Secretary. DTI PRU then releases the approved press materials to
the DTI Press Corps which include PIA and PNA as members. PNA is a webbased newswire service of the Philippine government under the supervision of
the News and Information Bureau of the Presidential Communication
Operations Office (PCOO).
The first news article on the CARES Program came out in April 2020 as
published by PNA. This was followed by succeeding news articles which came
out in May 2020. A couple of news articles on the CARES Program were
likewise published by PIA as early as May 2020. (see Table 25)
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Table 25: Links and Dates of Published News Articles by PNA and PIA
related to CARES Program
Agency
PNA
Date Published
22 April 2020
Link
https://www.pna.gov.ph/articles/1100628
PNA
12 May 2020
https://www.pna.gov.ph/articles/1102620
PNA
19 May 2020
https://www.pna.gov.ph/articles/1103354
PIA
20 May 2020
https://www.pia.gov.ph/news/articles/1042327
PIA
21 May 2020
https://www.pia.gov.ph/news/articles/1042399
PNA
22 May 2020
https://www.pna.gov.ph/articles/1103671
Source: SB Corp Data
The SB Corp had informed the public about the Bayanihan CARES Program
thru the PIA and PNA which made the MSME sector aware about the program.
However, the effectiveness of its information dissemination campaign is still in
question. With the current availment rate of the program which is only at 4.82%
(48,010 applications vs 995,745 total MSMEs) this could be an indication that
potential beneficiaries have limited or no knowledge at all on PIA and PNA
websites leading to low utilization of funds.
Non-use of the
Philippine
Statistical
Authority data
SB Corp did not utilize statistical data compiled by PSA on Philippine MSMEs,
instead it used its own statistical data based on MSMEs loan applications to
project its targets.
Section 7-B(h)(12)(e) of RA No. 9501 states that one of the ways to promote
the productivity and viability of MSMEs by way of directing and/or assisting
relevant government agencies and institutions is to compile and integrate
statistical databank on Philippine MSMEs. The PSA being primarily
responsible for all national censuses and surveys, sectoral statistics,
community based statistics, consolidation of selected administrative recording
system, and compilation of national accounts should plan, develop, prescribe,
and enforce policies, rules and regulations, and coordinate government-wide
programs governing the production of official statistics and general purpose
statistics.
Upon request by the audit team of the data on Philippine MSME Masterlist to
be used on sampling for survey, the SB Corp was not able to provide the team
a copy of the said Masterlist, hence, the audit team took the initiative to request
directly from the DTI a copy of the Masterlist. Unfortunately, the team was not
able to secure said document, instead the DTI submitted their overall statistical
data on MSMEs with the information coming from the PSA.
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The team discovered that the SB Corp did not utilize statistical data compiled
by PSA on Philippine MSMEs, instead it used its own statistical data based on
MSMEs loan applications to project its targets. These also proved that the
database set-up by the SB Corp was not integrated to that of the PSA data. A
fragmented source of data on the details of Philippine MSMEs affects current
and future decision-making on program implementation, cost-effectiveness,
and outcomes and impact.
SB Corp did not clearly answer the audit team’s Audit Query Memorandum
(AQM) regarding their coordination with PSA. The Management just replied
that their pandemic response through the CARES Program is fully-aligned with
their developmental mandate and countercyclical role during times of crises,
when banks and other private financial institutions become risk-averse and the
supply of credit in the Philippine financial system contracts. SB Corp requested
further clarification from the audit team on the specific activities that should
have been coordinated with PSA as it relates to the implementation of the
CARES Program in their reply to the said AQM. The audit team wanted to
clarify the specific activities that the SB Corp should have coordinated with the
PSA. Since the team was requesting the data on Philippine MSME Masterlist,
we were considering its importance in the targeting process of the CARES
Program as its beneficiaries. The SB Corp should have coordinated its
planning activities with the PSA as one of the stakeholders of the CARES
Program. According to SB Corp, the PSA is the “appropriate government
agency” to have such database and the SB Corp is amenable that its custody
and safekeeping is limited only to its MSME client and even the DTI appears to
have no database as well. These circumstances only showed that the
databases of the agencies that should be in the frontline in serving the MSME
sector are not integrated.
The Management also commented on the criteria that we have cited above that
it specifically pertains to the powers, duties and functions of the Micro, Small
and Medium Enterprise Development (MSMED) Council and it would appear
that the audit team may have inadvertently mixed up the powers and functions
of the MSMED Council with that of SB Corp as provided for under RA 9501.
While it is true that SB Corp has separate powers and functions with that of the
MSMED Council, we cannot deny the fact that the SB Corp is a member of the
said council. As the catalyst and leader in transforming the MSME landscape,
the SB Corp should have made representations/ interventions within the
Council for strategic partnerships or institutional arrangements that would
promote and build innovative MSME financing solutions.
Lack of proper coordination between SB Corp and the PSA as regards to the
details of Philippine MSMEs would lead to non-alignment of the former’s
targeting process with the realities (industries which are most needy) in the
MSME sector as the data used by SB Corp do not represent the whole sector
of MSMEs.
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SB Corp and DTI
Negosyo Center
partnership in the
CARES Program
was not formally
established
DTI NC plays a vital role in the implementation of the CARES Program
pursuant to section 6.10(a) of the Program’s OPG which provides that in order
to expand outreach and improve access to the fiscal stimulus to a greater
number of qualified firms and individuals affected by COVID-19, DTI NCs shall
accept and pre-qualify loan applications based on the eligibility criteria.21
Our audit revealed that the SB Corp and DTI NC partnership was not formally
established thru Memorandum of Agreement or Memorandum of
Understanding (MOA/MOU). Hence, the specific roles and responsibilities of
the concerned agencies were not explicitly defined. During our walkthrough
session of CARES processes conducted last February 3, 2021, the
Management mentioned that the DTI NC is the place where the borrowers
were asked to physically sign the loan release documents, and assist them in
case of technical incapability. However, according also to Management, DTI
NC’s role focuses more on counselling services, assistance to clients, and
assist in marketing information dissemination during webinars.
To better enhance our understanding on the role of DTI NC in CARES’
processes, the audit team requested submission of documents including MOA
to support the DTI NC and SB Corp’s partnership. In response to our request,
the SB Corp provided a copy of ManCom Resolution No. 2021-0202-007
containing Communication Department Memorandum for ManCom dated
February 1, 2021 and Project proposal about SB Corp and DTI NC Partnership
for Bayanihan CARES Program.
Further, the audit team sought documentations of DTI NC’s performed role as
provided in the OPG to accept and pre-qualify loan applications, assistance it
had extended for marketing and information dissemination for the CARES
Program and other documents to support the partnership of DTI NC and SB
Corporation. The Management replied that as agreed upon during the DTI
Regional Operations Group (ROG) Meeting where SB Corp is a member, the
participation of the DTI NCs in the P3-ERF CARES Program was primarily in
the marketing of the Program. They were provided with the list of eligibility
criteria and documentary requirements for their reference when assisting walkin MSME clients interested in applying for a loan under the P3-ERF CARES. All
solicited loan applications which met the eligibility criteria and with complete
document requirements were forwarded by DTI NCs to the SB Corp area/field
offices. But the said applications were still subjected to SB Corp’s own prequalification/screening, credit investigation and business verification processes.
Further, with the shift from manual to an on-line application system, necessarily
the role of the DTI NC slightly changed. With the new application process, i.e.
online application through the BRS the NCs’ internet connectivity and the
availability of computers, which micro and small enterprise clients may not
have, provide the necessary logistics support to pursue their loan applications.
Moreover, in 2021, the Management approved the Communication Team’s
proposed new role of the DTI NC as shown in ManCom Resolution No. 2021______________________________________________
21
DA/DBM/DILG/DOF/DSWD/DTI Joint Memorandum Circular No. 1, § 6.10 (2020)
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0202-007 as Possible Areas of Partnership: Capacitating Business Councilors
and NC Staff, Information Sharing, and Assistance to walk in applicants.
In addition, the Management explained that a MOA/ MOU was deemed
unnecessary as SB Corp is an attached agency of the DTI. The functions
performed by DTI NCs are more of technical assistance to the applicants as
well as ministerial functions. Aside from Management’s responses to our query,
no other supporting documents were provided as proof of DTI NCs acceptance
and pre-qualification of loan applications under COVID-19 P3 ERF, and
accomplishments under its new role.
The audit team is of the view that while the SB Corp is under the DTI ROG and
is an attached agency of the DTI, it is still just and proper to forge an
agreement with the DTI NCs thru MOA/MOU as they are operating with
different mandates. In addition, explicitly defining the roles and responsibilities
of agencies and program administrators improve coordination and collaboration
within and across agencies which promotes efficiency in the implementation of
the program.
Non-coordination
with the DTI
affected
compliance with
the prioritization
set out in the
OPG
According to the OPG, the SB Corp shall take priority to: a) regions, sectors
and establishments severely impacted by the imposition of community
quarantine, and b) firms adapting for survival (defensive business model) over
firms adapting for growth (opportunistic business model) in order to provide
immediate relief to small firms and self-employed individuals, reduce
permanent damage to the economy, and maintain employment levels.
In June 2021, the DTI conducted a COVID-19 Impact Assessment Survey on
the MSME sector with the aim of determining the main impact of the pandemic
on the MSME’s operations. The result is intended to be used for policy
formulation and related program development. A total of 2,940 MSMEs
participated and were surveyed about their profile, status of operations, effect
on sales and workforce, alternative working arrangements, business direction,
and types of assistance needed.
Based on the DTI survey, top three regions that were identified with most
MSMEs who stopped operations due to the pandemic were as follows: a)
Region 3, 22.4%, b) NCR, 20.3%, and c) Region 4A, 18.1%. However, SB
Corp’s data showed that out of the 30,809 approved loan applications, the top
three served regions were 1) Region 4A with 3,935 MSMEs or 12.77%, 2) NCR
with 3,363 or 10.92%, and 3) Region 5 with 2,678 or 8.69% (see Table 26).
Meanwhile, the DTI’s Survey data showed that the industries mostly affected
were in the: a) manufacturing, 36.6%; b) other service activities, 29.7%; and c)
wholesale and retail trade, 18.9%. However, from the total 30,809 approved
loan applications data, the top three (3) industries catered by the CARES
Program were from the 1) trading industry with 13,942 or 45.25% approved
loan applicants, 2) services with 10,723 or 34.80%, and 3) manufacturing with
only 2,723 or 8.84% approved loan applicants (see Table 27).
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Table 26: Top 3 Most Affected Regions vs Regions Served by the CARES Program
Regions Affected as per DTI Survey
Region
Regions Served by the Program
No. of Closed
Businesses
% Share in
the Total
Survey
182
165
147
22.4%
20.3%
18.1%
Region III
NCR
Region IV-A
Region
No. of Approved
Loan
Applications
% Share in
Total
Approved
Loan
3,935
3,363
2,678
12.77%
10.92%
8.69%
Region IV-A
NCR
Region 5
Source: DTI Survey and COA Analysis
The team noted four reasons why the priority regions and industries as
identified by the DTI were not served by the CARES Program: 1) the firstcome, first-served policy was adopted due to urgency; 2) lack of program
awareness specific to priority regions and industries; 3) manufacturing for
health was the focus of the OPG; and 4) DTI survey was not considered due to
its late publication.
Table 27: Top 3 Most Affected Industries vs Industries Served by the CARES Program
Industries Affected as per DTI Survey
Industries Served by the Program
Industry
No. of Closed
Businesses
% Share in the
Total Survey
Manufacturing
Other Service
Activities
Wholesale and
Retail Trade
298
242
36.6%
29.7%
Trading
Services
154
18.9%
Manufacturing
Industry
No. of Approved
Loan
Applications
13,942
10,723
2,723
% Share in Total
Approved Loans
45.25%
34.80%
8.84%
Source: DTI Survey and COA Analysis
First-come, first-served policy was adopted due to urgency. According to
SB Corp, the CARES Program caters its beneficiaries on a first-come, firstserved basis with the notion that all applicants will be considered and there will
be no priority. This policy assumes that all those who applied are in need of
assistance. However, the team viewed this to defeat the prioritization and
selection process indicated in the OPG.
The SB Corp replied that this is consistent and compliant with Sec. 3 of RA No.
11469 which directs them to partner with the private sector and other
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stakeholders to deliver the program quickly and efficiently.22 Further, the
management believed that time is of the essence, therefore, mitigation,
recovery, and rehabilitation responses need to be implemented immediately.
Lack of program awareness specific to priority regions and industries.
The SB Corp partnered with the PIA, different organizations, and even used
the influence of media platforms to reach out and inform the public, particularly
the MSME sector regarding the program as discussed in the previous sections.
However, the effectiveness of its information dissemination campaign is still in
question as average loan applications received from the top three most
affected regions only reached at 5,498 or an average availment rate of only
3.54% (see Table 28).
Table 28: Availment Rate from Top 3 Regions Most Affected by
Pandemic
Region
Region IV-A
NCR
Region III
Average
2019 PSA
MSME Data
(a)
No. of Loan
Applications
(b)
Availment Rate
(c=b/a)
148,017
202,011
115,877
155,301
6,123
5,902
4,470
5,498
4.14%
2.92%
3.86%
3.54%
Source: PSA 2019 MSME Statistics and COA Analysis
Meanwhile, average loan applications received from the top impacted
industries only reached at 10,499 or an average availment rate of only 3.63%
(see Table 29), excluding the outlier from the services sector which had an
availment rate of 22.18%.
Table 29: Availment Rate from Top 3 Industries Most Affected by
Pandemic
2019 PSA MSME
Data
(a)
115,387
No. of Loan
Applications
(b)
3,519
Wholesale and Retail
Trade
462,492
17,480
3.78%
Average
288,939
10,499
3.63%
Industry
Manufacturing
Availment Rate
(c=b/a)
3.05%
______________________________________________
22
Republic Act No. 11469 § 3 (2020)
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Industry
Other Service
Activities
2019 PSA MSME
Data
(a)
65,918
No. of Loan
Applications
(b)
14,622
Availment Rate
(c=b/a)
22.18%
Source: PSA 2019 MSME Statistics and COA Analysis
In an effort by the SB Corp to reach out to more enterprises across the country
and ensure that no territory is left behind, SB Corp’s Board of Directors
approved the recommendation to allocate ₱305 million (3.36% of the total
₱9.08 Billion released budget) for Congressional Districts nationwide via HoRreferred MSMEs. However, it raises doubt on how the SB Corp. gauges the
severity of impact of community quarantine in those districts in relation to the
referred MSMEs.
The Management emphasized that the OPG includes a proviso that the SB
Corp “shall take necessary measures to ensure the equitable geographical and
sectoral distribution of COVID-19 P3 ERF Fund”. The HoR-endorsed facility is
the Corporation’s attempt to ensure that a small business operating in any
given geographical location in the country would have at least access to
finance through their congressional districts.
Manufacturing for healthcare was the focus of the OPG. The coverage of
the OPG explicitly provides that priority shall be granted to enterprises requiring
financing for any activity that directly support efforts of the Department of
Health (DOH) to contain further community transmission of COVID-19.23 The
Board approved the setting up of ₱30 million (0.33% of ₱9.08 billion released
budget) loan facility for SMEs manufacturing medical support products against
COVID-19 (SME-PPE).
The Management stated that this prioritization is in line with the State’s Policy
under Article II, Section 15 of the Philippine Constitution to protect and promote
the right to health of the people. Further, this is in consideration – at the time –
of the steady rise of confirmed COVID-19 cases and the continuing shortage of
PPE and COVID-19-specific medical devices such as ventilators and
respirators in the country.
DTI Survey was not considered due to its late publication. The result of the
audit team’s evaluation disclosed that the SB Corp was not able to consider the
DTI’s COVID-19 Impact Assessment Survey on the MSME sector wherein it
could formulate its strategies and targets for the CARES Program. Rather, the
SB Corp implemented a first-come, first-served policy of CARES
implementation.
Further assessment revealed that the first impact assessment of COVID-19 on
the MSME sector was conducted by the DTI on 4-17 June 2020, with the report
______________________________________________
23
DA/DBM/DILG/DOF/DSWD/DTI Joint Memorandum Circular No. 1, § 4.(2020)
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from the impact assessment survey published only in July 2020.24 Moreover, it
was also noted that CARES Program was already in operation – May 2020 to
be exact, before the said DTI survey was published, thus, was not considered
in the CARES Program’s policy formulation.
The Management commented that the distribution of funds allocated for the
CARES Program, which is a loan program may not necessarily follow a
criterion for social equity which suggests that grant administration decisions
should result in a distribution that targets and concentrates funding to
beneficiaries that serve those with the greatest needs. The decision to apply for
a loan under the CARES Program lies solely upon the risk appetite and
discernment of individual MSMEs given still highly uncertain times and should
not be expected to be distributed following the criterion for social equity. It is
the audit team’s position, however, that the criteria to be followed in the
distribution of funds allocated for the CARES Program which are laid out in the
OPG cannot be overemphasized. Further, late publication of the DTI COVID-19
Impact Assessment Survey (July 2020) is not an excuse since the CARES
Program was implemented in different phases and timelines (CARES 1 was
launched in May 2020, CARES 2 in August 2020, and B2C in October 2020).
Lastly, the result of the said DTI Survey is intended to be used for policy
formulation and related program development, hence, should have been
considered by the SB Corp in implementing the CARES Program.
In conclusion, without the evidence-based setting of strategies and targets on
the supposed priority regions and sectors or industries, the intended MSME
beneficiaries will not be served and could potentially cripple the economy postpandemic.
______________________________________________
24
Department of Trade and Industry, COVID-19 Impact Assessment Survey on Micro, Small,
and Medium Enterprise Sector, p. 1
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Conclusions
The CARES Program assisted 28,222 MSMEs, however, approximately ₱4.99
billion or 54.96% of the total released fund remain unutilized as of June 30,
2021. The bulk of this amount was intended for MSMEs in the tourism industry.
Considering the need for immediate action and limited resources in
government in general, these unutilized funds could have been used to fund
other emergency measures to address the effects of the pandemic. Based on
the discussions, there were no extensive deliberations on the administrative
issues before the funds were allocated to the CARES Program. This highlights
the need for an extensive planning even in the midst of an emergency. It is
important to assess the capacity of the implementing agency and needs of the
clients, map the underlying risks, and prepare contingency plans.
We acknowledged, however, the efforts of the SB Corp in implementing the
CARES Program. Within a little over a year, SB Corp was able to develop a
fully-functioning IT system. Through this, it was able to utilize ₱4.09 billion,
which is 273% greater than its usual operating budget of ₱1.5 billion.
We noted some operational and administrative deficiencies but these are
understandable limitations, in light of the on-going pandemic. These limitations
could have been managed had there been an existing information technology
system and procedures at the outset that would eliminate delays in the grant of
loans to MSMEs. In addition, lack of policy clearly delineating the roles and
responsibilities for the collaboration of key stakeholders led to a fragmented
implementation of the program.
Recommendations
Despite being faced with pandemic challenges, the SB Corp was able to make
some improvements in the implementation of the CARES program. Since the
program does not end with the expected end of the pandemic, the team
recommends measures to further improve program implementation, reporting
and assessment. The current status of the said program in terms of its
identified objectives could not be evaluated due to absence of specific
indicators. Thus, the team recommends that the SB Corp should incorporate in
its Performance Scorecard a set of metrics and performance indicators that will
measure the progress and success of the CARES program’s goals and
objectives. The development of an IT-enabled Account Monitoring Module
which provides an evidence-based impact assessment of the CARES Program
should be fast tracked so that the SB Corp could fully meet its close monitoring
requirements.
Once the community quarantine restrictions and alert levels have been relaxed,
SB Corp should conduct monitoring visits, validation and should continue
collection of relevant information which were missed during loan processing,
such as enterprise category, asset size and capitalization for use in
assessment. To provide a reasonable assurance that the loan proceeds helped
the MSMEs remain operational, the SB Corp has to develop a mechanism to
check whether the loan proceeds were used for the intended purpose. The
team also noted several deficiencies in communication between the SB Corp
personnel and its MSME client due to unreachable mobile/phone numbers and
invalid e-mails provided by the MSME client. This situation could be avoided by
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constantly updating the contact information of the client and thru conducting
series of trainings for its personnel on how to properly handle technical issues
encountered.
Finally, it is encouraged that the SB Corp establish a system which is designed
to analyze big data for use in decision-making. Thus, the audit team
recommends the integration of all relevant databases of various agencies to
have a single reliable source of data which is crucial in decision-making. The
SB Corp needs to integrate its database with the DTI and PSA in order to have
a consolidated source of data on the details of Philippine MSMEs that would
help provide relevant and accurate information for the current realities in the
sector.
The experience of SB Corp during the pandemic highlighted the need for
thorough planning before funding and rolling-out a program. While the CARES
Program is at the end of its term, similar emergencies might still arise and
similar measures will be created. Hence, the audit team further recommends,
for future emergency measures, the conduct of risk-assessment, which
includes an assessment of the absorptive capacity of the implementing agency
and the needs of the clients. The risk-assessment should include a discussion
on the need to provide mobilization funds to cover administrative adjustments,
especially if the measure would significantly expand the operations of the
implementing agency. For Government Financial Institutions, the risk
assessment should also include a discussion on whether or not the funding
should be through equity infusion or provision of subsidy. Due to its nature and
purpose, emergency measures tend to cause heavy losses on the
implementing agency. There is also a need to conduct stakeholder analysis,
which will help in issuing a set of guidelines and agreements clearly delineating
the roles and responsibilities of all involved agencies to promote efficiency in
the implementation of the program.
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Appendix I: Objectives,
Scope and Methodology
COA conducted performance audits to help government agencies better
perform their mandate and achieve program goals and objectives more
economically, efficiently, and effectively. It identified the CARES Program to
be audited considering its materiality and significance being one of the social
amelioration programs to mitigate the socio-economic impact of the COVID19 health crisis. The audit aimed to determine: (1) the extent the CARES
Program assisted MSMEs during the pandemic; (2) the challenges, if any, in
implementing the program; and (3) the extent the DTI, the SB Corp and other
concerned agencies administer the program in accordance with established
policies and procedures.
To determine the extent the CARES Program assisted MSMEs during the
pandemic and the challenges encountered, if any, in implementing the
program, desk reviews were conducted on relevant laws, policies, rules and
regulations related to CARES Program. This includes documentations of SB
Corp’s P3 Program features where the CARES Program was adopted;
program targets, prioritization and strategies; and TAT of processing loan
applications. The audit team extracted and analyzed loan applications
received, processed, approved and released from May 2020 to June 2021.
Moreover, surveys were conducted on sample loan applicants/borrowers to
assess the effectiveness of the mechanisms in place to raise awareness
about the CARES Program among members of the MSME sector and the
extent the program helped these MSMEs to recover from the economic
impact of the COVID-19 pandemic.
To determine the extent the DTI, the SB Corp and other concerned agencies
collaborated to administer the program in accordance with established
policies and procedures, the audit team obtained and reviewed SB Corp
policies and established guidelines on their processes. The audit team
performed walkthrough of the CARES Program’s processes, reviewed the
existing controls in the program’s loan processing and examined sample
documents related to released loans to perform test of controls. The data on
released loans were extracted from SB Corp database and was compared to
SB Corp provided excel file data to match and check completeness of
information obtained. Moreover, the audit team also conducted desk review
on relevant laws, rules and regulations related to DTI, SB Corp and other
concerned agencies’ functions, roles and responsibilities in the
implementation of the CARES Program.
The audit was conducted from February to December 2021. Given the
limitations on travels posed by the localized community quarantine
impositions and health protocols, face-to-face interview, audit fieldwork and
validations were restricted. As an alternative, most of the audit activities were
done using electronic means. The respondents of the survey were selected
from all regions of the Philippines using a generalizable, stratified sampling.
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Appendix I: Objectives, Scope and Methodology
Respondents were categorized according to their loan application status
(released, ongoing, cancelled and disapproved). The survey was distributed
using the email provided by the applicants in their application forms or via
their personal contact numbers. We obtained the approval of the SB Corp on
the use of email addresses and personal contact numbers of the selected
respondents. However, most of the respondents were not responsive, were
reluctant to participate, and some of the sample respondents’ contact
information were not up to date. To obtain the needed response, the audit
team made follow-ups and reminders to the respondents through their email
and mobile/phone numbers. The audit team sent out 527 (360 original and
167 buffer) survey questionnaires but only 90 loan applicants responded. The
audit team also asked the assistance of SB Corp to follow-up survey
respondents. In addition, timely response on the audit team’s Audit Query
Memorandum and document requests was affected by SB Corp officials’
resignations and retirement.
The audit was conducted in accordance with the Standard for Performance
Auditing as embodied in the ISSAI 3000. The standard requires that we plan
and perform the audit to obtain sufficient and appropriate evidence to provide
a reasonable basis for our findings and conclusions based on our audit
objectives. We believe that the evidence obtained provides a reasonable
basis for our findings and conclusions based on our audit objectives.
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Appendix II: SB Corp Media
Monitoring Report
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Appendix II: SB Corp Media Monitoring Report
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Appendix III: P3 CARES/CARES 1 Program Primer
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Appendix IV: CARES 2 Program Primer
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Appendix V: Example of Social Media
Advisories and Announcements
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Appendix VI: Survey
Methodology and Results
The audit team conducted a survey to determine the effectiveness of the
mechanisms the SB Corp has established to promote MSME sector’s
awareness about the CARES Program and the extent the program has
helped these MSMEs in their recovery from the economic impact of the
COVID-19 pandemic.
Due to the limitations on travel posed by the localized community quarantine
impositions brought about by the COVID-19 pandemic, the audit team opted
to conduct the survey online. The survey was facilitated by sending emails
and text messages with the link of the survey questionnaire (SQ) to the
selected respondents. All regions and enterprise categories were included.
The survey was grouped according the status of their loan application
namely: (1) released; (2) ongoing; (3) cancelled and (4) disapproved. A total
of 360 respondents were selected with a buffer of 167 or replacement in case
the original samples do not respond.
The audit team divided the survey questionnaires into five (5) parts to obtain
its objectives which consisted of Part I: General Information and Business
Information, Part II: Awareness, Part III: Effectiveness, Part IV: Efficiency,
Part V: Satisfaction. The survey has been customized depending on the
category of the respondent omitting some questions that is only for its target
respondents.
Only a total of 90 accomplished SQs were retrieved by the audit team
consisting of 68 respondents with released loans, 6 respondents with ongoing
loan applications, 6 respondents who cancelled their loan applications, and
10 respondents with disapproved loan application status.
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Appendix VI: Survey Methodology and Results
Survey Result conducted on selected MSMEs with Released Loan Status as of June 30, 2021
48/68 MSMEs are still operating prior to
loan application
19/68 MSMEs are temporary closed due
to quarantine restrictions
53/68 say that they know a fellow
business owner affected by the
pandemic but is not aware of the CARES
Program
53/68 say that they know a fellow
business owner affected by the pandemic
but is hesitant to apply for a loan
65/68 MSMEs are satisfied and would
recommend the CARES Program
Source: COA Analysis
Survey Results conducted on selected MSMEs with Ongoing Loan Status as of June 30, 2021
5/6 MSMEs are still running prior to loan
application
6/6 MSMEs are well aware of the
program
4/6 say that they know a fellow business
owner affected by the pandemic but is not
aware of the CARES Program
6/6 MSMEs are satisfied and would
recommend the CARES Program
Source: COA Analysis
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Appendix VI: Survey Methodology and Results
Survey Results conducted on selected MSMEs with Cancelled Loan Status as of June 30, 2021
5/6 MSMEs are still running prior to loan
application
3/6 MSMEs had difficulty in gathering
or submitting documents
3/6 MSMEs were hesitant to borrow
2/6 MSMEs had technical difficulty
during the loan application
4/6 say that they know a fellow business
owner affected by the pandemic but is
not aware of the CARES Program
4/6 MSMEs are satisfied and would
recommend the CARES Program
Source: COA Analysis
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Appendix VI: Survey Methodology and Results
Survey Result conducted on selected MSMEs with Disapproved Loan Status as of June 30, 2021
7/10 MSMEs are still running prior to
loan application
2/10 MSMEs had difficulty in gathering
or submitting documents
2/10 MSMEs had technical difficulty
during the loan application
6/10 say that they know a fellow
business owner affected by the
pandemic but is not aware of the
CARES Program
4/10 say that they know a fellow business
owner affected by the pandemic but is
hesitant to apply for a loan
7/10 MSMEs say that they were not
aware that their application has been
disapproved
Source: COA Analysis
The audit team also conducted the survey by providing survey questionnaires
to various CARES loan process module users including Credit Investigators
for CSA, Document Verifiers for BIA, Account Officers for FPA, and Loan
Release Officers for LRP. The audit team retrieved 101 accomplished
questionnaires including 16 regional field staff.
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Appendix VI: Survey Methodology and Results
Survey Results from CARES Program Loan Process Module Users Revealed the following:
30/101 say that there should be additional
personnel for each loan process modules
21/85 involved in processing of loan
applications says that trainings provided
were insufficient
Source: COA Analysis
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Appendix VII: SB
Corporation’s Profile and
Performance
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Appendix VIII: COA Contact
and Staff Acknowledgments
COA Contact
Michael L. Racelis (Director IV),
(02) 8952-5700 local 2022 or mlracelis@coa.gov.ph;
performance.auditoffice@coa.gov.ph
Atty. Roberto D. Mabagos, Jr. (Assistant Director),
(02) 8952-5700 local 2033 or rdmabagos@coa.gov.ph
Staff
Acknowledgments
Director Michael L. Racelis, and Director Roberto D. Mabagos, Jr. provided
the technical assistance from planning the audit up to the development of the
report. Ruby L. Caballes (Audit Team Supervisor), Jeremy A. Maceda (Audit
Team Leader), Toni Ann F. Figurasin, Charmaine L. Chua, Angelica Mae S.
Villaflor (All Team Members) conducted the audit and made key contributions
to this report.
Assistant Commissioner Alexander B. Juliano provided invaluable inputs in the
finalization of the report.
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