SEC wants MSMEs to tap capital markets

MANILA, Philippines — The Securities and Exchange Commission (SEC), the corporate regulator, urged micro, small and medium enterprises (MSMEs) to tap the capital market for their expansion needs.

The capital market can actually fill the estimated $220 billion credit gap in the Philippines, the SEC said.

“Most small businesses 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 commissioner Karlo Bello said in a recent roadshow organized by the SEC for MSMEs, which attracted more than a thousand entrepreneurs from small and micro enterprises and start-ups based in Metro Manila.

The initiative aims to harness the potential of MSMEs for further growth, in line with President Marcos’ thrust to provide different financing options for small businesses.

The SEC presented crowdfunding, among others, as an accessible and convenient means for such businesses to secure funds for expansion.

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

Executives from registered crowdfunding intermediaries SeedIn Technology Inc., Investree Philippine,  and Eastern Securities Development Corp. (Round One) discussed the advantages of crowdfunding and how MSMEs and start-ups can tap their services.

As of December 2022, over 200 businesses have successfully raised capital through the platforms of Investree and Seedin Technology, from a total of more than 1,000 registered issuers.

SeedIn Technology’s platform alone has seen a total of P1.42 billion raised funds for 296 projects during the same period. Among the MSMEs that have raised capital through crowdfunding is Crymton Comtech Sales & Services.

“These new avenues of funding prove to us that they are also reliable business financing partners, and they will help Filipino business owners propel forward even if the road seems uncertain,” Crymton Comtech human resource administrator Lyka Tan said during the event.

Data from the International Finance Corp. showed that there is an estimated $220-billion credit gap in the Philippines. A survey conducted by the Asian Development Bank in 2020 also showed that 47.5 percent or almost half of MSMEs used their funds or retained profits to survive during the pandemic, while only about 4.8 percent obtained credit from banks.

“The COVID-19 crisis has exacerbated our MSMEs’ poor financial position. Hence, in our continuous bid for financial inclusion, we recognize that there really is a need to broaden the financing instruments available for MSMEs,” Bello said.