The Philippines’ economy owes much of its success to micro, small, and medium-sized enterprises (MSMEs), which make up over 99% of businesses in the country and employ about 62% of the workforce. Unfortunately, despite their crucial role in the economy, these essential businesses face many barriers to growth when it comes to accessing business finance.

A new report from cloud banking platform Mambu, titled “Small Business, Big Growth,” surveyed more than 1,000 small business owners globally, including 100 Filipino SME owners, who started their businesses and asked a business loan within the last five years.

Alarmingly, the survey found that 3 out of 4 Filipino MSMEs (77%) had been unable to obtain sufficient business finance – or none at all – at some point during this period. Among businesses unable to obtain sufficient financing, 48% experienced cash flow problems, 48% were unable to launch new products or services, and 35% had difficulty repaying their creditors.

More than half (56%) of business owners resorted to loans from friends and family after being unable to secure funding through formal channels, and about 45% used their own funds personal to start their business.

Fostering the growth of MSMEs

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To overcome these barriers to growth, MSMEs in the Philippines are turning to technology-enabled alternative lenders for financing, taking advantage of the benefits that technology could bring to the lending process, such as faster loan applications and processing. . With 93% of Filipino MSMEs indicating that they would consider switching lenders for a better experience, there is a clear opportunity for lenders willing to embrace new technologies.

Leveraging technologies such as artificial intelligence, machine learning, data analytics and the cloud enables technology-driven lenders to deliver faster loan applications and processing, with much less focus on administration and paperwork. In fact, some digital lenders offer applications that can be completed in just five minutes, with loans approved and funds processed within 24 hours. This is a big improvement over the traditional MSME lending route.

If the Philippine economy is to recover from the impact of the pandemic, it is vital that banks and lenders embrace these new technologies. New cloud-native technology could dramatically improve the MSME lending experience, reducing the time it takes for each application and getting money much faster for business owners – two key issues facing business owners small businesses.

MSMEs need better support from lenders and financial institutions, and they are not afraid to change lenders to find it. Ninety-three percent of Filipino businesses say they are willing to switch lenders for a better deal. If this demand is not met, it would be a costly missed opportunity for the economy, banks and SME lenders.

If lenders want to play a role in the success of Filipino MSMEs, they must modernize their customers’ lending experience and embrace new technologies to make lending processes simpler, more personalized and accessible. Better digital lending services would enable faster processing and onboarding of lending decisions, meaning funds get into the hands of business owners when they are truly needed, and these MSMEs could get back to business.

William Dale is Chief Commercial Officer of Mambu APAC and is responsible for growing the business in the APAC region. During his time at Mambu, Will has worked with a wide range of businesses, including neo-banks, established Tier 1 banks, and other fintechs and financial services institutions that now rely on the platform. Mambu to provide banking, lending and BPaaS services to their customers. .