Lack of access to financing crippling MSMEs
ILOILO City—DESPITE THE aggressive pitch made by the Asia Pacific Economic Cooperation (Apec) to boost the micro, small and medium-sized enterprises, the local and business community scored the continued lack of access to financing as the biggest hurdle crippling these small firms, putting them at a big disadvantage when competing in the global market.
In an interview, Sergio Ortiz-Luis Jr., president of the Philippine Exporters Confederation Inc. (Philexport), claimed that locally, there seemed to be a bias in lending against the MSMEs as most banks “would rather lend to one big company than 20 small companies.”
“From my point of view, what we as an MSME need is access to financing. There is a law but it is not being implemented effectively due to the faulty implementing rules and regulations (IRR) of Republic Act 9501 or the Magna Carta for MSMEs, which does not seem to be working well as financing has not flowed into the sector over the years,” Ortiz-Luis said.
“We hope that the IRR can be repealed and changed. I think there is really a lack of appreciation of the role of MSMEs as the backbone of the economy. There’s no allocation of funds from the budget for MSMEs. If we can just give maybe 10 percent of what we’re giving for the conditional cash transfer, we could do a lot for the MSMEs,” he added.
Peter V. Perfecto, executive director of the Makati Business Club (MBC), noted that it was encouraging that Apec governments were looking into a holistic view of supporting both “traditional and tech-driven enterprises and, moreover, recognizing the role governments play in facilitating the growth of businesses through e-commerce, supporting the utilization of the Internet by MSMEs, and partnering with large corporations to help MSMEs become part of global supply chains.”
“Today, so many small businesses still contend with the challenge of access to finance. This year, Apec is discussing ways in which informal businesses can have more options to apply for loans. There is always room to explore alternative mechanisms to MSME finance and learn how economies can adopt these new financing trends,” Perfecto told the Inquirer.
He added that Apec, as a regional forum, was the venue where these options could be discussed and learned, and hopefully adopted to benefit our communities.
“These MSME topics covered by Apec are relevant and timely. With the Asean Economic Community just around the corner, we should strive to learn from best practices, understand what policies would work to enable a healthy MSME environment, and provide for the necessary capacity building assistance that our smaller entrepreneurs need to compete. It is all about building an ecosystem that will ensure that our MSMEs succeed and become key components toward the realization of our vision of inclusive growth,” Perfecto added.
Apart from financing, John D. Forbes, senior advisor at the American Chamber of Commerce of the Philippines (AmCham), also pointed out that other ways for the government to support MSMEs included minimizing red tape and making infrastructure, namely power and transportation, more efficient for these enterprises to help lower their business costs.
“For example, how can an MSME in Mindanao develop a market in Manila when it faces brownouts and shipping out its products is taxed 12 percent value-added tax on shipping services?” Forbes asked.
Dan Lachica, president of the Semiconductor and Electronics Industries in the Philippines Inc. (Seipi), underscored the significance of MSMEs in the electronics industry supply chain.
“If properly developed, MSMEs can help in localizing supply of materials, thereby increasing local value-added content. Industry can help with technology transfer to improve MSMEs’ capabilities but the challenge for MSMEs is access to funds for scaling up and expansion,” Lachica added.
Pacific Rim ministers on Friday adopted here the Apec Iloilo Initiative, which seeks to provide “a bigger voice and better opportunities” for MSMEs through increased focus on the potentials of the Internet, the digital economy and e-commerce.
