ADB flags persistent credit, regional barriers holding back PH MSMEs

MANILA, Philippines — Micro, small and medium enterprises (MSMEs) in the Philippines still face challenges in scaling access to finance, expanding regional reach and deepening capital market integration. This is limiting the crucial sector’s ability to unlock its full economic potential, the Asian Development Bank (ADB) said.

In its “Asia Small and Medium-Sized Enterprise Monitor 2025” report, the ADB said the Philippines nevertheless has a robust legal and institutional framework. This will support MSME growth and competitiveness through a series of regulatory policies.

Even so, the Manila-based lender flagged several critical constraints that continue to impede the MSME development. The ADB did so particularly amid rising global uncertainty and geopolitical tensions.

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A primary challenge, the ADB said, is the lack of acceptable collateral to access credit. This, along with high credit risk perceptions and operational costs, makes MSME lending high-risk and low-return for financial institutions. 

Data showed that MSME credit accounted for only 3.9 percent of total bank loans in 2024. It represented only 2.1 percent of gross domestic product. 

Regional data showed that MSME lending in the Philippines remains highly centralized. Of national total, 83.8 percent of loans is concentrated in Metro Manila, reflecting ongoing geographic disparities in credit access.

“Addressing structural challenges—such as risk-based lending, collateral requirements, and regional disparities—will be critical to unlocking the full potential of MSMEs in driving inclusive economic growth,” the ADB said.

Less trading at the bourse

Meanwhile, the SME board under the Philippine Stock Exchange saw market capitalization decline slightly to P25 billion in 2024. Trading was reduced despite the addition of one new initial public offering raising the total to 11 listed companies.

This, the ADB said, suggests lower investor interest and liquidity. This reinforces the observation that the local capital market remains relatively underused as an MSME financing venue.

“The overall scale and activity of the SME Board remain limited,” the bank said.

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“This underscores the need for sustained efforts to promote capital market literacy, streamline listing requirements, and strengthen investor confidence to view the capital market as a viable alternative MSME financing source,” it added.

Looking ahead, the ADB noted that policy and institutional support continue to evolve. Stronger efforts on digitalization, financial inclusion and innovation are seen boosting the growth of MSMEs.

“Initiatives such as the Standard Business Loan Application Form, PalengQR PH Plus and expanded guarantee programs are part of a growing ecosystem to improve MSME resilience and competitiveness,” the ADB said. INQ