To remedy this situation, Bangko Sentral ng Pilipinas Governor Nestor Espenilla has laid down a plan that would unclog bottlenecks in the financial system and reform outdated policies that result in banks charging often unwarranted risk premiums on small businesses wanting to take out loans for operations or expansion.
“MSMEs are unable to reach their full potential due to a range of barriers, including financial access,” the central bank chief said, adding that the Philippine situation mirrored those of other countries. “Bank lending to MSMEs leaves much to be desired, comprising only 8.4 per cent of total loan portfolio.”
Given this, 80 per cent of small businesses are “internally financed” while only 10 per cent are bank financed, unlike large corporations that can load up on credit for expansion while enjoying substantially lower interest rates.
MSMEs make up 99.5 per cent of all registered businesses in the Philippines and contribute the biggest share of total jobs generated at 61.6 per cent. Despite this, small businesses accounted for only 35.7 per cent of the total value of the country’s economic output as measured by its gross domestic product (GDP).
“At the BSP, we are troubled by these numbers and take them seriously,” Espenilla said.
To promote MSME access to finance, Espenilla said regulators have pursued continuing prudential reforms to improve the overall environment for credit allocation in the economy.
Published : October 20, 2017
By : PHILIPPINE DAILY INQUIRER ASIA NEWS NETWORK