Lending

Three Quarters of Filipino MSMEs Unable to Secure Funding in the Past 5 Years

More than three quarters (77%) of micro, small and medium-sized enterprises (MSMEs) in the Philippines have been unable to secure sufficient, or any, funding on at least one or more occasion over the last five years, according to a new report from cloud banking platform Mambu.

This figure is significantly higher than that for the wider Southeast Asian region (67%).

The ‘Small Business, Big Growth’ report surveyed over 1,000 MSME owners globally, including Filipino MSME owners, who set up their company and applied for a business loan in the last five years.

More than half (56%) of Filipino MSMEs had to rely on friends and family for loans, and 45% used personal funds to launch their business.

Of the MSMEs unable to secure sufficient funding, 48% went on to experience cash flow issues, 48% were unable to launch new products or services and 48% were unable to upgrade or improve technology.

Mambu’s findings come amid a rise in alternative lending, as MSMEs turn to challenger banks and fintechs to overcome common barriers.

The opportunity for new entrants is clear as the vast majority (93%) of Filipino MSMEs surveyed say they are open to changing lenders for a better lending experience.

Nearly two thirds (64%) of Filipino MSMEs cited better borrowing benefits and incentives as the top reason to change lenders.

Meanwhile, 62% would switch for better financial options and 46% for better customer service support.

Myles Bertrand

Myles Bertrand, Managing Director APAC at Mambu said,

“Micro, small and medium enterprises (MSMEs) make up more than 99% of businesses in the Philippines, and in fact around 98% are classified as micro or small enterprises.

These businesses are essential to the Filipino economy, employing around 62% of the country’s workforce – they reduce poverty and drive innovation, and yet access to adequate funding remains out of reach for many.”

The research found that the length it takes to apply for a loan is a major influence on small businesses when choosing a lender.

While low interest rates were a leading consideration for 93% of Filipino MSMEs in this decision-making process, 92% also want a short application process, and 91% want cash-out options.

When it comes to improving the application process, 91% of Filipino MSMEs want to see faster loan decision processing, 90% are interested in low or no collateral requirements, and 87% want more flexible loan conditions.

Globally, the most common barriers to securing funding among SMEs are not enough starting capital (30%), too much paperwork and admin in the lending process (28%) and cash flow not being considered strong enough (27%).