SEC urges MSMEs to fill $220-B capital gap
By JAMES A. LOYOLA
The Securities and Exchange Commission (SEC) is pitching the capital market to fill the $220-billion estimated credit gap in the Philippines by encouraging micro, small, and medium enterprises (MSMEs) to go public.
The Commission on July 14 continued the Roadshow on Capital Market Formation for MSMEs and Start-ups at The SEC Headquarters in Makati City, attracting more than a thousand entrepreneurs from MSMEs and start-ups based in Metro Manila both onsite and online.
SEC Director Vicente Graciano P. Felizmenio, Jr. talks about crowdfunding and other capital sources to entrepreneurs during the Manila leg of the Roadshow on Capital Formation for MSMEs and Start-ups at The SEC Headquarters in Makati City on July 14.
The initiative aims to harness the potential of MSMEs for further growth, in line with the government’s thrust to provide different financing options for small businesses.
The roadshow was led by the newly created SEC Office for the Advancement of Strategic Investments in SMEs (OASIS), which was established with the aim of encouraging SMEs to consider the capital market as a financing option.
The effort is part of the SEC's 888@88 goal, which aims to see a minimum of 888 companies accessing the capital market in time for the SEC's 88th anniversary in 2024.
A total of 627 companies or 70.61 percent of the 888-target have already listed and accessed the capital market as of May 2023.
This consists of companies listed on the PSE; non-listed PSE companies but are registered on the Philippine Dealing and Exchange Corp.; companies registered through direct public offering (DPO); and companies with pending IPO and DPO applications.
The SEC is optimistic it will reach the 888@88 target with 261 companies or issuers needed to access the capital market by 2024.
During the event, SEC Director Vicente Graciano P. Felizmenio, Jr. touted MSMEs as heroes in lifting the country’s economy during the pandemic, and their potential to contribute further by making use of the capital market to meet their capital needs.
Data from the International Finance Corporation showed that there is an estimated $220-billion credit gap in the Philippines.
A survey conducted by the Asian Development Bank in 2020 also revealed 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.
“Most of [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 S. Bello said in his opening remarks during the event.
He added that, “Further, the recent economic slowdown due to 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.”
The Commission has 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 SeedIn Technology, Inc., Investree Philippines, and Eastern Securities Development Corporation (Round One)— which are registered crowdfunding intermediaries registered with the SEC— discussed the advantages of crowdfunding and how MSMEs and start-ups can tap their services.
Participants were also given an opportunity to engage in personal consultations with the platforms’ officials during break-out sessions.
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, whose testified on the “transformative impact” of its partnership with Investree.
“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.
The Commission has so far brought its nationwide roadshow to Davao, Cebu, Cagayan de Oro, Zamboanga, and Bacolod. Next stops include Iloilo, Tarlac, Baguio, Legazpi and Tacloban.