The small and medium-sized enterprises (SMEs) in the Philippines are still facing significant challenges in accessing finances despite providing the majority of businesses and employment in the country, according to a recent SME funding study conducted by Visa, a digital payment service provider.
The study discloses that SMEs, which represent 99% of businesses in the country, receive less than 10% of total corporate loans, highlighting the sector’s limited access to credit.
Cash flow is also a top concern as relayed by 44% of SMEs, with more than half citing reserves that would last less than six months, stressing the need for better financial management.
A secure payment system is needed as 33% of SMEs that accept cards cited fraud prevention as a key concern. Additionally, other hurdles include device and hardware cost for acceptance and lengthy application processes for cardholders.
Women-led SMEs are also facing barriers such as gender bias in lending and limited property rights which limit their ability to use financial collateral. Despite these challenges, 51% of women-led SMEs and 56% of micro-businesses in the Philippines experienced revenue growth through digital payments, implying that SMEs can overcome financial problems through the use of digital solutions.
Another factor that complicates the SME funding landscape is the report that the Philippines is facing a substantial funding gap for SMEs, with a demand of $221-billion as against a supply of $15-billion. Despite mandates to increase SME lending, utilization remains low due to informal business practices, limited credit history, and financial literacy gaps.
To address challenges SMEs are facing, Visa is actively working with local partners to launch innovative products and services. In partnership with CIMB Bank Philippines, Visa launched a new Visa Business Debit Card designed to cater to SME owners with features like zero fees, free fund transfers, and insurance product offers.
Visa also launched a $100-million small business accelerator program through the Visa Foundation. This program aims to advance digital financial inclusion, stimulate job creation, and increase access to capital for SMEs in Asia Pacific, including the Philippines. This project has reached an estimated 29.6-million SMEs in the region, including 10.9-million women-led SMEs. It is complemented by Visa’s Practical Business Skills program, which equips SME owners with knowledge in cash flow management, digital payment integration, and financial planning.
“SMEs form the backbone of our economy and supporting them helps contribute to overall economic growth. We continue to work with local partners to bring financial products and solutions responsive to their unique needs, and we share the government’s vision to help SMEs unlock their full potential through innovation and resilience,” said Jeffrey Navarro, Visa country manager for the Philippines.
