Alternative lending sources may solve financing woes

CRISTOBAL (CDN PHOTO/CHRISTIAN MANINGO

As access to financing remains a challenge for micro, small and medium enterprises (MSMEs) in the country despite government efforts to develop this sector, trade officials are encouraging entrepreneurs in this sector to avail of financing from alternative lending facilities like the government-owned, Small Business Corp. (SBC).

Trade Secretary Adrian Cristobal Jr. said that there is a need for more windows or ways to provide financing for MSMEs, especially for micro and small businesses.

“This isn’t only a challenge here (in the Philippines), but a challenge everywhere,” he said in a press conference after the launching of the Department of Trade and Industry’s (DTI) 3-day service caravan called “Negosyo, Konsyumer at Iba Pa” yesterday.

Traditional financing sources such as banks require businesses to present collaterals or assets to access loans, said Cristobal.

Micro businesses are defined as those enterprises with an asset size of P3 million below; small businesses with P3 million to P15 million; and medium businesses with P15 million to P100 million.

Businesses with an asset size beyond the P100-million threshold are considered large enterprises.

While medium enterprises are able to secure financing from banks, micro or small businesses such as start-ups may not have the same capacity.

Cristobal said traditional financing institutions are cautious of taking risks in approving loans and have to make sure they are paid back.

This is where alternative lending facilities such as the SBC come in.

SBC President and CEO Bartholomew Brillo Reynes said the company releases loans on the basis of risk lending.

Instead of requiring collaterals, SBC assesses businesses’ bankability or ability to earn in the future and uses that assessment as basis of releasing loans.

He said that collaterals are only a fallback when businesses fail.

“We are now also teaching other financial institutions to lend without focusing on collaterals,” he said during the same conference.

Furthermore, SBC also provides its clients capacity-building seminars on bookkeeping, financial literacy, and creating their own business plan, among others.

According to its website, SBC is now the national government’s third largest provider of MSME financing, with a lending portfolio of over P3 billion.

Reynes said the MSME sector is a dynamic one and that there is a need for more avenues to build its capacity to ensure continued growth, despite hurdles in financing.

Nora Terrado, Trade undersecretary for industry promotion, pointed out that lack of access to financing isn’t just the main reason MSMEs do not prosper.

She said they fail mainly because of a lack of competitiveness.

“You need to have the right product, of the right quality and just the right price,” she said.

Terrado said the Philippines is importing more products and local players shouldn’t only up their ante in terms of export but should be able to compete within the country as well.

Nonetheless, DTI vowed to continue doing its part to link MSMEs with different financing institutions and provide venues like innovation hubs to allow entrepreneurs to meet potential funders.