The Philippines’ micro, small, and medium enterprises (MSMEs) posted modest but consistent growth in 2024, despite ongoing structural hurdles, according to the Manila-based multilateral lender Asian Development Bank (ADB).

In its host country, “challenges remain in scaling access to finance, expanding regional outreach, and deepening capital market integration,” the ADB said in its report titled “Asia Small and Medium-Sized Enterprise Monitor 2025: Global Uncertainty, Trade, and Private Sector Businesses in Asia and the Pacific,” published on Wednesday, Nov. 12.

The ADB report noted that MSME lending in the country increased by 8.4 percent year-on-year to ₱545.2 billion last year but still accounted for only 3.9 percent of total bank loans, highlighting persistent structural financing barriers.

This, even as the report cited that the Philippine banking sector is evolving through digitalization, regulatory reforms, and rising consumer demand, playing a key role in supporting MSMEs.

“While the MSME credit market expanded in 2024, its share of the broader banking portfolio remains limited,” the ADB said.

“Several critical constraints continue to impede MSME development, particularly amid rising global uncertainty and geopolitical tensions,” the report stressed, citing the lack of acceptable collateral and high credit risks, which make lending to MSMEs costly and risky for financial institutions.

It added that MSME credit access is hampered by traditional assessment methods, limited operational data, and the underuse of secured transactions and online asset registries.

“Regulatory and bureaucratic inefficiencies also pose significant barriers, as MSMEs often encounter inconsistent and time-consuming processes across local government units (LGUs), delaying registration and increasing compliance burdens,” the report said.

Limited access to finance, coupled with market, technology, and geopolitical challenges, continues to restrict MSMEs from expanding, innovating, and planning long-term, it added.

The report said it helped that credit guarantees through state-run Philippine Guarantee Corp. (PhilGuarantee) expanded, supporting over 10,000 MSMEs and improving disbursement efficiency.

“Public credit guarantees continue to play a vital role in enhancing MSME access to formal credit by mitigating lender risk and improving borrower creditworthiness,” the report added.

Meanwhile, the Small, Medium, and Emerging (SME) Board of the Philippine Stock Exchange (PSE) saw growth in listed companies with the addition of a new initial public offering (IPO) of Nexgen Energy Corp. in 2024, despite a slight decline in market capitalization, it noted.

The ADB noted that MSMEs in the Philippines are classified by assets and employment. Microenterprises have up to ₱3 million in assets and fewer than 10 workers; small enterprises up to ₱15 million and under 100 employees; and medium-sized enterprises up to ₱100 million with fewer than 200 workers.

“As of the end of 2024, the Philippines had 1.2 million MSMEs, representing 99.6 percent of all registered establishments,” the ADB said. However, this figure was down slightly by 0.4 percent from 2023. The report also noted that MSMEs employed about 6.3 million people, or 66.6 percent of the national workforce, with employment declining by 1.8 percent year-on-year.

It noted that “other services,” including accommodation and food services, led MSME employment with 39.9 percent of jobs, followed by wholesale and retail trade at 37.9 percent and manufacturing at 12.9 percent.

The ADB cited that in 2024, wholesale and retail trade continued to dominate the MSME sector, accounting for 48.7 percent of total enterprises, followed by other services—including accommodation, food, and financial services—at 36.5 percent. Geographically, 17.8 percent of MSMEs were based in the National Capital Region (NCR), with the remaining 82.2 percent operating outside the NCR.

(Ricardo M. Austria)