The Philippines needs to develop innovative financing models for micro, small and medium enterprises (MSMEs) to support their business growth and internationalization especially with the coming Asean economic integration.
In an export financing forum, Trade Undersecretary Ponciano Manalo Jr. said local MSMEs still face a number of challenges, most notable of these is access to finance, despite the passage of laws to support them.
“At present, the business environment of SMEs has rapidly changed at the national, regional and global levels. Regional integration such as the Asean Economic Community liberalized trade and investment across borders. This means that there is a need for firms to shift from being domestically focused to being more outward looking,” he said.
To address this financing constraint, Manalo cited a recent Asian Development Bank (ADB) study pushing new financing schemes such as crowdfunding or crowdsourcing, asset-based finance, cluster finance and capital market financing.
For his part, Philippine Exporters Confederation Inc. (PhilExport) President Sergio Ortiz-Luis Jr. said his group and the Export Development Council were undertaking various efforts to bridge financing gaps to help MSMEs grow “so that they could integrate into global value chains [GVCs].”
Based on the ADB study, GVCs account for the growth that Asia is experiencing today, he noted.
He pointed out that most MSMEs now rely on limited internal funds to finance their operations, backed by some external sources when the cash flow runs short.
“This makes access to external finance critical in a firm’s ability to develop, operate and expand, especially in the light of very tight cash flow from reduced business volume due to weaker global demand,” he noted in the same forum.
The exporters group’ head underscored the need for the country to facilitate MSME-friendly financing facilities to enable them to take advantage of global opportunities.
“We see positive ripples in championing this cause, considering that MSMEs account for 35 percent of our GDP [gross domestic product]and 60 percent of employment contribution. Clearly, betting on MSMEs will go a long way in uplifting the lives of generations of Filipinos to come,” he added.