Last updated: 21 September 2016




Despite the sheer size of the SME population and being the country’s major jobs provider, how come they make up only 36% of the country’s GDP while the richest 1% accounts for 60%? 


Do you invest in the stock market?


Do banks constantly knock on your door to offer you a loan?


Does your name land on a magazine even if you don’t advertise?


If you answered “yes” to all these questions, then you must belong to the richest 1% of the economic strata whose combined wealth accounts for most of the country’s gross domestic product (GDP).


If you answered “no” to the above, chances are, you are an owner of a small and medium enterprise (SME). Your name may not land on the headlines, but don’t sulk.


Your SME matters

You are considered a primary force in the local economy. For one, your size and category comprise 99% of all registered businesses.


Compared to Big Business, you also created more jobs (nearly 5 million jobs in 2014 versus 3 million by large corporations). You contributed almost 65% of the total jobs in the country out of all kinds of business establishments.


You also generated 20% of our export receipts, and comprised an estimated 60% of our exporters.


The big ‘what if’

Despite the sheer size of your SME population and being a major jobs provider, you may ask: how come we make up only 36% of the country’s GDP (a measure of the size of the economy), while the richest 1% accounts for 60%? Why is the wealth concentrated in the hands of a few?


This leads us to the often-discussed issue of “inclusive growth.” Simply put, economic growth is considered “inclusive” if it creates opportunity for all segments of the population — regardless of size — and distributes the benefits of increased prosperity equitably. You can visualize this by imagining a delicious pie (the economy) that is equally divided among those who will eat it (segments of the population) so everyone will have a fair share of the pie.


Sounds utopic?


Come out

Economists say it’s possible, only if we all participate in ensuring “broad-based, pro-poor growth,” in which SMEs like you play a key role.


As it is, the government has yet to fully capture the full depth and breadth of SME businesses. A vast section of small enterprises operate within the so-called “informal economy” — producing and distributing products and services without official regulations, control, or sanction.


Yet for you to survive and thrive, you need help from others. And before the public or private sector extends a helping hand, you must first “surface” — and this means more than having an ID or a business card. For one, not all SMEs are registered with the Department of Trade and Industry (DTI) or the Securities and Exchange Commission (SEC), and remain under the radar (undocumented). Some also do not keep books or pay their taxes.


Risky business?

Availing of credit from financial institutions also helps you expand your business and grow further. But before you bewail the fact that credit is not readily available to your small business, guess what? Studies have shown that SMEs’ problem is not so much the lack of funds, but the lack of access to them.


Banks, for one, cannot shun you away. As early as 2008, banks have already been required by law to set aside at least 8% of their total loan portfolio to the micro and SME sector, or face penalties.


Despite the enforcement of Republic Act No. 9501 (the Magna Carta for Small Enterprises) since 2008, large commercial banks would rather pay the annual fine than set aside funds for micro and SMEs, according to a 2015 report from the Asian Development Bank. Lenders shun lending to mSMEs for several reasons, including the high administrative cost of handling small loans, the perception that small business are “risky” ventures, and lack of collateral.


This is why in Southeast Asia, the Philippines ranked the second lowest among its neighbors in terms of SME loans, which made up only to 3.1% of GDP and 10.3% of total loans.


Aside from lack of access to credit, mSMEs are also hounded by the following:

  • Technology – Most SMEs suffer from poor or low levels of technology, translating to low productivity, inconsistent quality and output, and high wastage. The lack of adequate funding for research and development leads to insufficient information and training, technical know-how, and alternative technologies to exploit for expansion and progress.


  • Input availability – There could be difficulty in sourcing and moving raw materials due to poor infrastructure, as well as uncertainty and seasonality in raw material supplies.


  • Access to markets – Poor transport and communication systems, coupled with limited access to market (especially online or web-based) information, lead to poor access to target markets. If you are facing this challenge, you are effectively unable to respond to demands around volume, quality, and consistency.


  • Other issues that include cumbersome government requirements upon startup, weak institutional SME support, and lack of organization in SMEs’ own ranks.


“These problems have been perennially hounding mSMEs, and very few are able to survive beyond three to five years,” said Victor P. Dela Dingco, vice president and executive director of the FINEX Foundation for Entrepreneurship, Inc. (FFEI).


Unlocking the click

To unlock growth opportunities for SMEs, especially when it comes to credit, the SME arm of the Financial Executives Institute of the Philippines (FINEX) has partnered with data provider Dun & Bradstreet Philippines on a web-based loan portal that will connect SMEs directly to various lending institutions in just one click.


Through the portal,, SMEs can register and post their loan requests online. Various participating lenders that can directly offer their loan products and discuss the terms with the potential SME borrower can view these requests.


In addition to providing access to credit, SMEs can also take advantage of the expertise of SME mentors who can assist them in their loan application, documents preparation, project management, financial advisory, marketing, and other business advice.


The portal continues to build its database of SMEs in the country. From 20,000 DTI-registered SMEs when it started its partnership with the DTI in 2012, Loanpinas now has a registry of more than 300,000 SMEs nationwide.


“This database will be made available to banks and other lending institutions which will subscribe to,” Mr. dela Dingco added. The loan portal currently has 13 founding member-banks that have the privilege of accessing 20,000 SMEs from the Loanpinas database every quarter.


“With Loanpinas, we hope to serve as a bridge between SMEs and the lending institutions, as well as between SMEs and experts who can mentor them in growing their business,” said Mr. dela Dingco.