MSME access to bank credit remains weak

The difficulty among small businesses in the Philippines to secure financing has been worsened by the pandemic-induced recession, forcing entrepreneurs to shell out from their own pockets to keep themselves afloat, Asian Development Bank (ADB) said.

Citing the results of the first survey it conducted in March to April, ADB said nearly half or 47.5 percent of micro, small and medium enterprises (MSMEs) “used their own funds/retained profits to survive” at the height of the most stringent COVID-19 lockdown in the region, which put a halt to 75 percent of the economy and shed millions of jobs.

According to ADB’s “Asia Small and Medium-Sized Enterprise Monitor 2020: Volume 2-COVID-19 Impact on Micro, Small and Medium-Sized Enterprises in Developing Asia” report published last week, 33.5 percent of MSMEs in the country borrowed from close relatives and 16.7 percent applied for bank loans during the lockdown.

But the survey showed merely 4.8 percent of Filipino MSMEs were able to obtain credit from banks, ADB said.

To recall, an earlier ADB report in October noted that “access to finance is a chronic barrier for MSMEs to survive and grow” in the Philippines, even prepandemic.

At the height of the lockdown, ADB said “15.7 percent of microenterprises, 19.8 percent of small and 36 percent of medium-sized firms could apply for bank credit; and 11.4 percent, 12.9 percent, and 12 percent, respectively, could access nonbank finance institution loans.”

“However, firms successfully getting bank credit were small in number: 4.4 percent of microenterprises, 5.7 percent of small and 16 percent of medium-sized firms,” the ADB said.

“The survey found that 69.7 percent of MSMEs (85.4 percent of microenterprises, 13.7 percent of small, and 0.9 percent of medium-sized firms) had difficulty raising even small funds (P50,000). The survey also identified 81.3 percent of microenterprises, 77.7 percent of small firms and 52 percent of medium-sized firms seeking quick money of less than P10 million to survive during the pandemic,” according to ADB.—BEN O. DE VERA INQ