Credit hungry PH firms face P12-T funding gap
MANILA -Philippine businesses need an estimated P12 trillion worth of credit for their enterprises to thrive—a funding gap felt more acutely by smaller firms, which the Securities and Exchange Commission (SEC) aims to bridge through a nationwide roadshow promoting alternative financial solutions.
The fundraising needs of businesses, a pillar of the Philippine economy, were massive at an estimated $220 billion, based on data of the International Finance Corp. However, most small businesses do not have access to traditional financing options. Citing a study from the Asian Development Bank, the SEC said only 4.8 percent of micro, small and medium-sized enterprises (MSMEs) borrowed from banks.
“Most of [small businesses] rely on internal resources for their capital needs. While those who apply for traditional bank loans face tedious documentation, high interest rates, and mandatory collateral requirements,” Karlo Bello, commissioner of the SEC, said during the event on Friday.
SEC roadshow
About 1,300 entrepreneurs from MSME participated in the small business roadshow on Friday, which was held in the SEC’s headquarters in Makati City and also streamed online.
Similar to caravans previously held in Davao, Cebu, Cagayan de Oro, Zamboanga and Bacolod, the corporate watchdog underlined other fundraising methods such as crowdfunding, which allows businesses to raise money from a pool of small investors via an online platform.
“In our continuous bid for financial inclusion, we recognize that there really is a need to broaden the financing instruments available for MSMEs,” Bello said.
Crowdfunding firms
There are three registered crowdfunding firms in the country: Investree Philippines, SeedIn Technology Inc. and Eastern Securities Development Corp. (Round One). The SEC said SeedIn alone disbursed P1.42 million in funding for nearly 300 projects at the end of 2022.
Philippine Stock Exchange president Ramon Monzon also joined the event on Friday as he underscored the benefits of going public.
Monzon said small businesses also have the option to list on the SME board or they could find a qualified sponsor to pursue their listing goals.
He encouraged firms to consider launching an initial public offering (IPO) even if market conditions were volatile.
“There is no right time there is no wrong time. When you have a good company and your company needs the capital you do the IPO,” he said.
“My opinion on that matter is the IPO price is not the be-all end-all. You do an IPO because you need capital and if you use that capital correctly the IPO price is history,” Monzon added.
Businessman Lester Yu’s Fruitas Holdings and Balai Ni Fruitas were among the successful listing stories that were highlighted during the event.
Fruitas chief financial officer Calvin Chua said listing was a strategic decision given their expansion goals to reach more households in the Philippines.
“For us, we wanted to ensure we have access to capital, particularly capital market access, that will help us fulfil our mission,” he said. INQ
