A digital "Bombay"?
In the recent forum by the Cebu Chamber of Commerce and Industry during the Cebu Business Month, I was the speaker on the topic "New Trends in Medium Small and Micro Enterprise (MSME) Financing". The coverage of my presentation was the currently available MSME financing which included the digital "Bombay" among others; and why there are still many MSMEs who are unable to get financing.
In 2015 there were 900,914 registered MSMEs in the Philippines, and by now there must be over a million plus probably over 100,000 unregistered. Fifty percent of MSMEs are in Luzon and the other 50 percent are in the Visayas and Mindanao. MSMEs account for 60 percent of total employment, 35 percent of value added and 25 percent of export revenues. Fourteen percent of MSMEs are in accommodation and food services, 12 percent are in manufacturing, 5 percent in wholesale/retail and repair of cars and motorcycles, 4 percent in information and communication and the rest are unclassified. All in all, MSMEs may account for 40 percent of the annual Gross Domestic Product, with the large companies accounting for 50 percent and the Government the 10 percent. The growth of the MSMEs is a reflection and complements the growth of the large corporations and the government, as it increases the purchasing power and consequently the demand for the products and services of the three sectors.
MSMEs need financing for working capital, fixed asset acquisition or equipment financing. These are all available from government and private banks. Commercial banks, thrift banks, rural banks and financing companies all have windows for MSMEs. Then there are the government mandated programs like the Small Business Corporation, the various Department of Trade and Industry programs like, "Pondo sa Pagbabago", Go Negosyo, Kapatid and other micro-finance lending programs. From the private sector, there is the recent BDO-Shinkin Bank dedicated for MSMEs, the Maybridge, the LENDR/FINTQ digital financial services, Digital Bombay, and the Pawn Hero. The LENDR/FINTQ is not a bank but a digital portal that will allow you to access financing from over 31 financial institutions through your computer or even from your smartphone. All you have to do is register in their website, fill in the required information and your desired loan. As long as you have a credit record and references, your application will be processed on line and you will get a loan approval or disapproval in a matter of hours or a few days. They have developed an efficient and economical credit checking system which will even be faster once the government's centralized credit information corporation is 80 percent operational. For micro-loans they are developing a system that will generate your credit score from the information you provide and grant the loan within a day via a credit to your account or through the existing remittance centers, like M. Lhuillier or LBC. This is the "Digital Bombay."
So, why are many MSMEs not getting the financing that they need? It's because these MSMEs do not do their homework, or lack the training, the diligence, and perseverance to succeed in business. They have to have a minimum understanding of accounting and finance, that's why we are happy that the government and some private sectors are doing training and mentoring the MSMEs. A project or business plan is important for the borrower to understand why the financing is needed and how it will be paid. If an MSME borrower can demonstrate these to the financial institutions, they will get the financing. There are already Receivable Discounting, Purchase Order Financing and other transaction financing. There are also all kinds of asset and equipment financing available including project finance. There are even "angel" investors willing to put in equity in MSMEs that are viable. So MSME financing for those qualified should not be a problem.
- Latest
