Financial access, modernizing systems and improving cognition

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ALEX CAPULONG

Another year has come and gone. Another year of the government and financial institutions trying to target the same SMEs they’ve been trying to help for the better part of a decade. Perhaps it’s time to set something new in motion?

I’ve spent most of 2017 speaking to business owners across various industries as well as officials of different government agencies and financial institutions. I’ve learned that on the side of the government agencies there are those actively trying to solve the issue of financial inclusion. Despite their best efforts and specific directives to assist business owners across the nation, the financial gap remains significantly unchanged. Oerational structures and product offerings have still not adapted to properly serve the SME market though one cannot completely fault financial institutions for having a hard time adapting. Banks especially must still contend with BSP risk regulations, which prevent them from easing requirements beyond a certain point, and there’s also the need to maintain profitability.

Then there is the other side of the equation — the SMEs. A recently commissioned study of business owners around Metro Manila has yielded surprising results. It’s safe to say that most have developed a management style that works for them. From my conversations with some of them, it’s clear that plenty are reluctant to change the way they do things, adhering to the mantra of “If it isn’t broken don’t fix it”. The study also revealed that while over 80 percent of business owners possessed a bachelor’s degree, over 60 percent aren’t interested in modernizing (digitizing and automating) the way they track their sales. This is astounding!

Tracking sales in an accurate and precise manner is a fundamental requirement of a sound business. That’s the reason why large corporations employ very complex supply chain and inventory management systems. Manually tracking sales leaves the business open to leakage, especially as transactions increase. Some will say that the cost of having a system and training someone to use it isn’t worth it. The caveat is you may not realize how much you’re losing because the system being employed can’t detect it. This doesn’t even account for the opportunity cost of spending countless man-hours reconciling sales and doing menial tasks that could be better spent with the family. Imagine having a tumor and not knowing it’s there simply because the symptoms haven’t manifested. It’s there! It may be discovered too late!


Opportunities may also remain undiscovered. It’s fair to say that not all owners have specialized in business administration or finance. Really, most entrepreneurs don’t and realizing and accepting this is only the first step.

The next is to do something about it. What can be done? There are plenty of books and short courses on offer.

Hiring is another viable solution: if you can’t do something find someone who can! You may ask, why exert that much effort? Well, chances are you’re losing out on a lot more. Large businesses hire consultants to get a fresh perspective to generate ideas and identify problems that they can no longer see. The same can be said for SMEs, especially those who function on a day to day basis, solving one problem after the next. There needs to be an overarching strategy if a business is to move up the ladder!

All of this goes back to the issue of financial access. There are so many benefits to improving management systems: tracking sales, minimizing losses, discovering opportunities and gaining access to credit. How does one get access to credit by improving tracking? How do you expect a financial institution to provide capital when it’s impossible to determine the health and opportunities of businesses in a concrete and unbiased way?

The fact is that while the financial institutions and government agencies are trying to promote inclusion. SMEs must also do their part to reach at least a minimum level of financial clarity way beyond what has been the status quo for the last couple of decades.

Alex Capulong is the strategic partnerships manager of First Circle, an online SME lending fintech startup focusing on trade finance for purchase orders and invoices/receivables. Feel free to contact him at for questions or if you’d like to chat about your business problems particularly in supply chains.

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