A business group is pushing for more financing support to help the micro, small and medium enterprises (MSMEs) recover from the pandemic and evolve under a new normal, at the same time make them aware of available financing opportunities.
“(One) area of work proposed that I think will benefit a lot of companies is knowing financing opportunities for various specific industries, for specific sectors, and specific regions… So if we go on industry to industry, I think we will get a lot of inquiries for this purpose,” Philippine Chamber of Commerce and Industry (PCCI) Secretary General Ruben Pascual said during a virtual info session.
Pascual underscored the importance of addressing the issue of information gap for the financing opportunities among MSMEs, especially as many banks have developed new products and alternative scoring systems to finance more companies.
“We have to be more creative about how to treat the MSMEs. We are looking at the MSME financing on a regulatory basis, it’s always rules-based, but there has to be a new mindset where we look at it in terms of opportunities…,” he added.
Pascual also cited some Asian neighbors which have mechanisms wherein their MSMEs can automatically be approved of a certain loan amount depending on their size.
“So part of what I would like to explore is what are other ways to make our (loan) approvals very easy because 99 percent of the enterprises are micro and small so we help them,” he said in mixed English and Filipino.
But Development Bank of the Philippines (DBP) Assistant Vice President Rallen Verdadero said that while the bank has developed more creative and innovative financing programs with some are even zero interest, a lot of MSMEs are afraid to borrow, invest, and continue their businesses amid the uncertainty brought about by the pandemic and the looming war in Europe.
“We already started going around, marketing and rolling out all of our programs. But unfortunately, like for example with our MSME recovery (sub-program) wherein the interest rate is really very low, the requirements are streamlined, no collateral requirement for PHP3 million loan and below, but unfortunately and sad to say, there are very few takers,” she said.
Verdadero said that as it uses wholesale lending, the DBP has partnered with rural banks, thrift banks, and cooperatives to expand its reach and make the requirements and eligibility criteria more flexible.
“But I guess slowly, we can recover and rest assured DBP continuously innovates and tries to find ways and partners with a lot of the public and the private sector so that we will be able to recover as one,” she added.
To improve access to SME financing, Victor Abainza, lead adviser and consultant for rural and SME finance for Association of Development Financing Institutions in Asia and the Pacific (ADFIAP) Consulting Group, highlighted the importance of integrating these firms into the formal sector, and the establishment of a credit rating system.
These recommendations were based on the results of the United Nations Industrial Development Organization (UNIDO) SME financing and development study conducted from June 2020 to December 2020 that tentatively concluded that there was a perceived need for alternative financing products that would fit into the specific financing needs of an enterprise as it grows and progresses along its business life cycle.
Abainza said alternative financing could come in various forms such as digital finance, use of capital market or equity financing for MSMEs, leasing and factoring, non-secured financing and supply and/or value-chain financing from banks and other finance houses other than secured loan and grants, and special market loan segments such as woman-led and youth-led MSMEs.
“However, access to or provision of financing is not the end of it all. This must be supported by various support services to make MSMEs better, agile and innovative in preparing the enterprise for success.
It is a wholistic approach and not a piecemeal or band aid solution to MSME financing and development,” he added.