Funding firms urged to reach out to more entrepreneurs

CEBU, Philippines - To facilitate an easy access to finance for micro, small and medium enterprises (MSMEs), financial institutions in the Philippines should aim to improve their lending practices and establish more facilities for wider coverage, thus reaching out to more entrepreneurs.

This according to Professor Nestor Raneses, director of Institute for Small Scale Industries of the University of the Philippines – Diliman during a recent forum on risk-based lending for SMEs.

He noted that various studies and research have cited that the Philippines has been lagging behind other countries in terms of bank penetration and loan processing for SMEs.

Based on the 2009 financial access database of the Consultative Group to Assist the Poor (CGAP), Philippines ranked third with the least branch and automatic teller machine (ATM) penetration following Cambodia and Indonesia among other Asian countries.

According to a study conducted by Thorsten Beck, Asli Demirguc-Kunt and Maria Soledad Martinez Peria, it also showed that the Philippines is one of the top three countries together with Bangladesh and Pakistan that take within 30-45 days to process an SME loan among 55 countries surveyed globally.

“Majority of the countries can do it in less than five days but for Philippines, it takes about two months. It makes businesses less productive,” Raneses said.

He cited that universal and commercial banks served only 45 542 MSMEs as of June 2009 due to the strong growth in consumer and corporate lending, lack of geographical presence to effectively reach customers, lack of appropriate lending methodologies to reach clients and high-cost structure.

Expanded financing programs for SMEs and enhanced capability of financial institutions to administer such programs and product developments can lead towards a favorable SME lending environment and could also result to sustainable business operations, he added.