The Securities and Exchange Commission pushes crowdfunding and other means of sourcing funds to alleviate the financial status of micro, small and medium enterprises in the country.
“Most [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,” SEC commissioner Karlo S. Bello said at the sidelines of the agency’s investment roadshow.
Data from the International Finance Corp. (IFC) indicate the Philippines suffer from a $220 billion credit gap, meaning entrepreneurs finance their capital requirements from sources other than banks and financial institutions.
A survey conducted by the Asian Development Bank in 2020 also revealed that 47.5 percent or nearly half of MSMEs used retained profits to survive during the pandemic and only 4.8 percent obtained credit from banks.
“Further, the recent economic slowdown due to the Covid-19 crisis has exacerbated our MSMEs’ poor financial position. Hence, in our continuous bid for financial inclusion, we recognize that there is a need to broaden the financing instruments available for MSMEs,” Bello said.
The SEC has presented crowdfunding as an accessible and convenient means for businesses to secure funds for expansion.
Crowdfunding is a fundraising activity typically conducted by startups and SMEs, where the public support or fund a business idea through an online platform.
The roadshow was led by the newly created SEC Office for the Advancement of Strategic Investments in SMEs, which was established to encourage SMEs to consider the capital market as a financing option.
The effort is part of the SEC’s goal to see a minimum of 888 companies access the capital market in time for the SEC’s 88th anniversary in 2024.
A total of 627 companies or 70 percent of the 888 target have already listed and done so as of May 2023. This consists of companies listed on the PSE; non-listed PSE companies but registered on the Philippine Dealing and Exchange Corp.; companies registered through direct public offering; and companies with pending IPO and DPO applications.
The SEC is optimistic it will reach the the target with 261 companies or issuers needed to access the capital market by 2024, SEC director Vicente Graciano P. Felizmenio Jr. said.
He lauded MSMEs as heroes helping lift the economy during the pandemic, and their potential to contribute further by making use of the capital market to meet their capital needs.
The agency has thus far brought its roadshow to Davao, Cebu, Cagayan de Oro, Zamboanga, and Bacolod. Next stops include Iloilo, Tarlac, Baguio, Legazpi and Tacloban.
