At the height of the pandemic, only 4.8 percent of Filipino startups were able to obtain loans from banks, resulting in as much as 79 percent of micro-, small, and medium-sized enterprises (MSMEs) lamenting the lack of working capital in the post-COVID era.
This was revealed during a recent hybrid webinar titled, “Digital Innovation: Advancing Financial Inclusion for MSMEs” organized by the American Chamber of Commerce (AmCham) together with Grab Philippines and attended by some of the country’s financial specialists.
Industry leaders discuss financial inclusion for MSMEs
Led by speakers Bernadette Romulo-Puyat, Deputy Governor of the Bangko Sentral ng Pilipinas (BSP), and Erwin Yamsuan, Head of Lending of Grab Financial Group Philippines, the webinar tackled issues currently being faced by MSMEs. It also looked at opportunities for MSME growth in a digitalizing world.
The session also served as a platform to help raise the awareness of regulators, policymakers, the general public as well as small businesses on how digital financial services can be used to support the growth and overall development of MSMEs in a post-COVID economy.
Joining them as panelists during the webinar were Kelvin Lester Lee, Commissioner of the Securities and Exchange Commission (SEC); Ellen Joyce Suficiencio, BSP Director; Floredeliza Leong, Vice President for Advocacy, Communications, and Special Concerns of PHILEXPORT; and Rose Ferrer, a business strategist.
To kick off the webinar, Romulo-Puyat shared information about the country’s progress in terms of digital transactions. With e-accounts going beyond savings and credit to cover services like payment, insurance, and remittances, it was reported that 6 out of 10 Filipinos are now regularly making online transactions.
“From just being merely a tool for saving and safekeeping, an account has become a tool for convenient transactions that any Filipino can benefit from,” Romulo-Puyat revealed. However, she said that this does not always translate into the kind of financial support that small businesses need as they continue to be constrained with regard to financial access.
For his part, Grab Philippines’ Yamsuan noted that aside from accessibility of loans, there were also other structural gaps that prevent institutions from effectively loaning. These gaps include:
- Poor physical reach — Filipinos may not live in areas close to a bank that can provide them with the financial services that they need.
- Lack of readily-available, comprehensive information — since MSMEs are usually unbanked or underbanked, they can be classified as higher-risk borrowers, resulting in them not being provided with loan capital.
In line with this, Yamsuan said fintech firms can support MSMEs by enabling extensive accessibility and by allowing consumers to use fintech services wherever they may be. He added that fintech companies can also create an ecosystem synergy between businesses, lowering their possibility of being seen as “at-risk.” The industry could also capitalize on the growth of AI technology by leveraging data to reduce credit risk and increase consumer value, thus enabling MSMEs to receive higher approval ratings.
“Fintech can be a powerful complementary force to traditional financial institutions for financing MSMEs. It has emerged in recent years with the promise of delivering value to customers and business through innovations,” Yamsuan shared.
Supporting MSME growth through Quick Cash
Given these opportunities, Yamsuan went on to share in his presentation Grab’s efforts in addressing the needs of small business owners through the company’s Quick Cash package, a loan assistance program under Grab Financial Group that uses Grab’s own data to determine the loan amount that is tailor-fit for every client-merchant.
“These loans are personalized to each GrabFood or GrabMart merchant so that we are sure we don’t extend more than what they can actually afford. We are able to do this as we have all information on-hand to assess them,” beamed Yamsuan.
Aside from this, daily micro-deductions are also done to help merchants track their loan payments. Loan disbursal is also made shorter, with client-merchants provided with capital within just a week.
Apart from citing the company’s efforts to help MSMEs, the Grab executive also shared recommendations on how digital lending can be utilized further as a viable financing solution. He stressed the importance of financial education programs as a key way to start. He also talked about considering grants and incentives as a means to further encourage the market to embrace digital financing.
“As regulators formulate and implement MSME financing policies, it is imperative (that) there is close collaboration with the private sector to harness innovations while making sure risks are mitigated. At the end of the day, MSMEs are still the backbone of our economy,” Yamsuan concluded.