According to a recent study developed by the Cambridge Centre for Alternative Finance (CCAF) together with the Asian Development Bank Institute (ADBI), micro, small and medium-scale enterprises (MSMEs) from member countries within the ASEAN achieved better growth performance after receiving financing through a financial technology (fintech) platform.
Such growth can be seen in terms of net profit, revenue, employment, and performance of MSMEs in the ASEAN region, which includes the Philippines.
The study, which was held at the University of Cambridge Judge Business School, noted that such findings also indicate that fintech support could be a promising means of helping small businesses grow and scale up their operations.
“Most MSMEs reported that the financing had a positive impact on their business, primarily through increased productivity and an expanded customer base,” the study said. “Those which borrowed from alternative financing sources defaulted less on their loans, resulting in a default rate of 1 per cent versus the 3 per cent non-performing loan (NPL) bank average in ASEAN countries,” it added.
Entitled “ASEAN Access to Digital Finance Study,” the study measured the impact of digital financial services. The findings were built on 600 responses from MSMEs operating out of Malaysia, Thailand, Indonesia, Singapore, Thailand, and the Philippines between February 28, 2022, to April 15, 2022.
Based on 2020 data from the Asian Development Bank (ADB), there are at least 71 million micro, small and medium-sized enterprises (MSMEs) in Southeast Asia, accounting for 97 per cent of all businesses in the region.
In 2020, MSMEs also contributed 40.5% of the national Gross Domestic Product (GDP) in the region on average and 19.2% in terms of total export value. These MSMEs also employed 67 per cent of the working population and the ADB believes that this number could be higher as many microenterprises also operate informally.
Breaking down the results of the ADBI study in PH
In the Philippines, researchers tapped local fintech companies like First Circle, BillEase, and Tala to collect data from their clients.
More than half or 59 per cent of MSMEs that received financing using a peer-to-peer or a marketplace business model reported increases in profits as well as in revenue, while 52 per cent also reported an increase in employment.
In terms of business changes caused by borrowing funds from an invoice trading platform, 44 per cent of the respondents reported an increase in profits, 40 per cent cited an increase in revenue, and 24 per cent said there was an increase in employment.
For MSMEs that received funding through an equity crowdfunding platform, 60 per cent of respondents reported revenue increases, with 53 per cent saying there was an increase in profits while 47 per cent said they experienced an increase in employment.
In the Philippines, MSMEs also make up the majority of businesses as they now comprise 99.51 per cent of the total business population as per 2020 data from the Philippine Statistics Authority (PSA).
According to the Department of Trade and Industry (DTI), there were also at least 7,000 registered MSMEs in the Philippines in 2021.
The majority of these MSMEs are engaged in wholesale and retail trade, motor vehicles and motorcycle repair, as well as food services, and manufacturing.