Asia SMEs braced for global competition need greater access to credit – ADB


The slowdown in regional and global economic growth has created a need for a new growth model for Asia, triggering a shift in focus to the small- and medium-sized enterprises (SMEs), which now need greater access to credit if they are to be groomed for global competition.

According to the “Asia SME Finance Monitor 2014” report by the Asian Development Bank (ADB), the Philippines and other economies in Asia have made progress in addressing the SMEs’ limited access to credit, but a lot more needs to be done to help them grow faster into dynamic, globally competitive companies.

The latest data quoted by the report showed that SMEs accounted for an average of 96 percent of all enterprises and 62 percent of the national labor force across the 20 Asia SME Finance Monitor (ASM) countries, which cover Central Asia, East Asia, South Asia, Southeast Asia, and the Pacific.

SMEs contributed an average of 42 percent of the gross domestic product (GDP) or manufacturing value-added in ASM countries, it said.

Limited access to bank credit is a structural problem in the ASM region, it said, noting that bank loans to SMEs made up averages of 11.6 percent of GDP and 18.7 percent of total bank lending in the region, with a decreasing trend of the latter since the 2008-2009 global financial crisis.

On a positive note, the report stressed that several countries such as the Philippines, Papua New Guinea, Solomon Islands, Indonesia, Kazakhstan and Mongolia have made progress tackling this.

“In the Philippines, the Magna Carta for MSMEs (a core SME law) mandates banks to allocate 10 percent of their loan portfolios to MSMEs (percent for micro and small enterprises, and 2 percent for medium-sized enterprises),” it said.

In addition, the study said various government interventions to enhance SME access to bank credit have also been promoted in the ASM countries.

Seven countries in the ASM region, including the Philippines, have developed specialized capital markets that SMEs can tap for growth capital financing, it said.

To develop the SME equity market in the Philippines, a proposal to create a dedicated SME Exchange (SMEX) was submitted to Congress in September 2014.

The SMEX will cater to small enterprises with capital between P2 million and P19.99 million, and medium-sized enterprises with capital between P20 million and P99 million in equity finance.

Despite such development in the region, the ADB report pointed out that the Philippines and the rest of the ASM countries need to further develop credit bureaus, collateral registries and credit guarantees to expand the financial outreach, particularly in low-income countries.

Governments in the region need to help SMEs become more competitive and able to participate in global value chains. That includes governments making it easier for SMEs to access new financing, such as supply chain finance.

“Government authorities responsible for SME access to finance need to support SMEs in accessing timely financing opportunities, through flexible and innovative measures, according to their needs. To supplement the limitations of bank lending for SMEs, the diversification of financing models is vital,” it added.


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