By Benel D. Lagua - Executive Vice President at the Development Bank of the Philippines and an active FINEX member and a long time advocate of risk-based lending for SMEs.
Financial inclusion has highlighted the need to make available a wide range of financial services (savings, credit, insurance, payments) to the unbanked and under-banked, particularly micro, small and medium enterprises or MSMEs. Interestingly, the Philippine Development Plan framework for 2017-2022 aims to provide a foundation for inclusive growth anchored on the three values of “malasakit, pagbabago and kaunlaran.”
I have previously written that lending to small and medium enterprises (SMEs) is primarily a distribution problem. The most recent count of the Philippine Statistics Authority of MSMEs in the country placed them at 99.6 percent of all enterprises. While the financial system is awash with liquidity, the credit gap for MSME loans is estimated by various research groups to range from P100 billion to P270 billion. Access to finance is a clear concern confronting small business, ranking in the top three of most surveys. Capital needs to flow to MSMEs to create sustainable economic growth.
