Philippine MSME funding gaps remain a drag on inclusive growth

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Philippine MSME funding gaps

Highlights

MSMEs comprise 99.5% of Philippine businesses and over 60% of jobs, but receive less than 4% of total bank loans, limiting broad-based growth.
An estimated P67 billion to P180 billion MSME financing gap persists, with 83% of bank lending concentrated in Metro Manila and traditional requirements excluding smaller borrowers.
Tailored credit structures, movable asset lending, digital credit scoring, and improved value chains are identified as key tools to boost MSME financial access and economic resilience.

Forum highlights financing and resilience priorities

As reported by BusinessWorld Online, the discussion at the BusinessWorld Insights forum "Boosting the Philippine MSME Ecosystem" centers on the financing constraints facing micro, small, and medium enterprises in the Philippines and the policy changes needed to address them.

Suhail Khan, director for private sector financial institutions at the Asian Development Bank, says MSMEs are where economic growth becomes tangible because they turn ideas into businesses, create first jobs and extend economic opportunity into communities that larger companies may not reach. He also says their small scale leaves them highly exposed to payment delays, typhoons, higher input costs and the loss of major customers.

Khan argues that support for MSMEs is central to inclusive growth, job creation, economic resilience, gender equality, food security and climate transition. He points to a structural mismatch in the Philippines, where MSMEs account for 99.5% of registered businesses, employ more than 60% of Filipino workers and contribute more than one-third of gross domestic product, yet represent less than 4% of total bank loans.

Regional credit imbalance weighs on broader economy

The concentration of more than 83% of reported bank lending in Metro Manila underscores a wider regional credit shortfall, with the Philippine financing gap estimated at P67 billion to P180 billion. Traditional underwriting standards, including long operating histories, audited financial statements and real estate collateral, continue to exclude many smaller borrowers from formal lending channels.

Khan says around 70% of firms reportedly finance expansion mainly through equity and retained earnings, limiting their growth potential. He adds that women-led MSMEs face steeper barriers, with lower rates of bank account ownership and loan approval than male-led firms, reflecting gaps in outreach, data collection and credit assessment.

Looking ahead, he identifies tailored credit structures, long-term capital, movable asset lending and digital credit scoring as important tools for improving access to finance. He also says stronger agricultural value chains, financial literacy and digital skills are needed so that added liquidity translates into durable business growth and greater resilience to climate and economic shocks.

Our earlier article covered the SEC’s proposal to ease Sarbanes-Oxley internal-control audit attestation requirements for many listed companies, aiming to cut compliance costs and make IPOs more attractive. The planned exemptions would apply to firms with a public float below $2 billion and to companies during their first five years after going public, with regulators estimating sizable savings in audit fees. The debate also highlighted the trade-off between lowering barriers for smaller firms and maintaining investor-protection safeguards tied to audit oversight.

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