MANILA – East Asia and the Pacific accounts for 25 percent of small and medium enterprise lending, Philippine Central Bank officials said in a press release Saturday.
Bangko Sentral ng Pilipinas Deputy Gov. Nestor Espenilla Jr. said a recent World Bank survey estimates global SME lending volume at $10 trillion in 2009 and 70 percent of this is concentrated in high income countries.
The same study shows that in the Philippines, only 20 percent of the SMEs have access to loans from financial institutions, a far cry from about 60 percent in Malaysia.
He made the statement at the second and last day of the 9th Annual Meeting and Conference of Asia Pacific Economic Cooperation Financial Institutions in Pasay City Friday.
“While these data acknowledge the many imperfections of measuring SME lending across countries due to different definitions of SMEs and various indicators of lending levels, the message is clear that MSMEs in our region remain largely unserved and underserved,” Espenilla said.
Espenilla said ensuring SMEs’s access to funds will increase the sector’s importance as these are the “critical engines of economic growth and employment.”
He said that in the Philippines, MSMEs account for 99.6 percent of total enterprise, employs 61 percent of the country's total employed population, and contributes 32 percent to the gross domestic product.
“Attention to MSME access to finance is therefore not new but I believe efforts for its promotion have gained renewed momentum,” Espenilla said.
He said the government should have an enabling environment that is not structurally biased on MSMEs and there should be space for innovations undertaken by the market.
“ At the end of the day, the development of the MSME financial market, through sound, coherent and enabling policies, will lead to robust and long term growth and the creation of an inclusive financial sector,” Espenilla said.
In 2000, the country’s General Banking Law has mandated the BSP to recognize microfinance as a legitimate banking activity during a time when the sector did not have access to formal financial services and runs to informal lenders.
Espenilla said the central bank has “liberalized entry into the banking system and created an environment that allowed new entrants into the market particularly microfinance NGOs that wanted to transform into a formal financial institution.”
But Espenilla pointed out that while these innovations have been allowed prudent standards for the conduct of microfinance operations by prescribing the use of portfolio-at-risk to monitor and measure portfolio quality, in the context of risk-based supervision have been instituted.
He said these measures “allowed bank supervisors to fully understand the risk profile of microfinance and not lead the banks to simply avoid exposure to this market.”*PNA