MSMEs still experiencing credit constraints – SEC

MANILA, Philippines — Majority or 67 percent of micro, small and medium enterprises in the country are still experiencing credit constraints,according to the Securities and Exchange Commission.

This, despite accounting for 99.5 percent of the total businesses in the country.

Sixty-seven percent of our MSMEs are still experiencing credit constraints. Most of them rely on internal resources for their capital needs. While those who apply for traditional bank loans face tedious documentation, high interest rates, and mandatory collateral requirements,” SEC chairman Emilio Aquino said in his keynote speech at the kick off of the SEC Roadshow on Capital Market Formation for MSMEs and Start-ups in Davao yesterday.

MSMEs’ products also account for 25 percent of the country’s total exports, and the sector contributes around 40 percent to the national gross domestic product.

Thus, Aquino stressed the need to broaden the financing instruments available for MSMEs.

During the roadshow, SEC officials trumpeted the benefits of crowdfunding, which among others, is an accessible way for MSMEs and start-ups to raise funds for business expansion.

Crowdfunding is a fundraising activity typically conducted by start-ups and SMEs, where the public can support or fund a business idea through an online platform.

SEC Memorandum Circular 14 or the Rules and Regulations Governing Crowdfunding provides that SMEs no longer have to register securities with or secure approval directly from the SEC before they can solicit investments from the public.

SMEs may conduct their fundraising activity with a crowdfunding intermediary, funding portal, or crowdfunding platform registered with the SEC.

At present, there are three registered crowdfunding intermediaries registered with the SEC. These are Investree Philippines, SeedIn Technology and Eastern Securities Development Corp. (Round One).

As of December 2022, a total of 205 registered issuers successfully raised capital through the platforms of Investree and SeedIn Technology.

For instance, SeedIn Technology’s platform alone has seen a total of P1.34 billion raised to fund 259 projects during the same period.

Executives from Investree Philippines, SeedIn Technology, and Round One discussed the advantages of crowdfunding and how MSMEs and start-ups can avail of their services during the roadshow.

MSMEs were then given an opportunity to consult with their officials during break-out sessions.

“[The roadshow] will surely make opportunities more accessible for micro, small and medium enterprises that may lead toward their growth and expansion. We appreciate [the SEC’s] efforts to help small business owners resume their operations as they recover from the pandemic’s efforts,” said Davao City Mayor Sebastian Duterte in a written message.