Govt committed to support MSME growth
PATRICIA LYNN CAÑAVERAL
The Philippines is on track to be one of the fastest growing economies in the Southeast Asia region with the World Bank forecasting its real GDP to grow at a rate of 6.7% for 2018 and 2019. This expansion is expected to be leveraged by the manufacturing and services sectors, supported by rising external demand from our trading partners, strong consumer spending and high public investment.
With this, micro, small, and medium enterprises (MSMEs) are seen to play a significant role in the economy in the coming years. After all, this sector comprises 99.6% of all business establishments in the country. Increasing the sector’s productivity will prove to be an effective strategy to distribute the gains of economic growth. However, operational challenges remain, including labor shortages, manpower cost, foreign exchange volatility, and access to reasonably priced capital, among others.
To emphasize the last point, the World Bank estimates that around 70% of all SMEs in emerging markets lack access to credit, with the total credit gap for both formal and informal SMEs reaching as high as US$2.6 trillion. In the Philippines, the Bangko Sentral ng Pilipinas (BSP) placed the credit gap at P170 billion ($3.2 billion).
In response to this, MSMEs are managing costs by downsizing, cutting staff wages, reducing overhead costs, switching to cheaper suppliers of raw materials, and increasing productivity through digitalization or use of technology.
What steps are being taken by the government to support the MSME sector in terms of financial assistance?
Department of Trade and Industry Secretary Ramon Lopez said, “Currently, the DTI is crafting a financing program for MSMEs known as Pondo Para sa Pag-asenso (PPP) to help MSME owners optimize their potential and achieve major growth through alternative sources of funding. By helping the Filipino entrepreneurs grow their businesses, the program aims to provide accessible, fast, and hassle-free business loans tailor fit to each entrepreneur’s needs, goals, and cash flows.” In addition to this, President Duterte’s flagship micro financing initiative, Pondo Para saPagbabago at Pag-asenso (P3), sets aside P19 billion for the next five years to eradicate the underground money lender scheme or “5-6”.
The BSP is also supporting digitalization and technological innovation with the National Retail Payment System (NRPS). This is positioned to facilitate the country’s transition from a cash-heavy to a cash-lite economy, eventually bringing material benefits for the government, the business and private sectors, consumers and individuals in terms of speed and efficiency of transactions, reduced costs, improved transparency, enhanced security, and expanded access to financial services.
Patricia Lynn Cañaveral is a magna cum laude graduate of the University of the Philippines School of Economics and is currently with First Circle, a Philippine-based financial technology company on a mission to expand business opportunity by empowering SMEs in growth markets with supply chain financing. She writes about finance, technology and innovation for entrepreneurs to promote financial literacy.
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