More than three quarters (77%) of micro, small, and medium-sized enterprises (MSMEs) in the Philippines have been unable to secure sufficient, or any, funding on at least one or more occasion over the last five years, according to a new report from cloud banking platform Mambu. This figure is significantly higher than the result for the wider Southeast Asian region (67%).
The report surveyed over 1,000 MSME owners globally, including Filipino MSME owners, who set up their company and applied for a business loan in the last five years.
More than half (56%) of Filipino MSMEs had to rely on friends and family for loans, and 45% used personal funds to launch their business. Of the MSMEs unable to secure sufficient funding, 48% went on to experience cash flow issues, 48% were unable to launch new products or services and 48% were unable to upgrade or improve technology.
Mambu’s findings come amid a rise in alternative lending, as MSMEs turn to challenger banks and fintechs to overcome common barriers. The opportunity for new entrants is clear as the vast majority (93%) of Filipino MSMEs surveyed say they are open to changing lenders for a better lending experience.
Nearly two thirds (64%) of Filipino MSMEs cited better borrowing benefits and incentives as the top reason to change lenders. Meanwhile, 62% would switch for better financial options and 46% for better customer service support.
William Dale, commercial director at Mambu, added: “If lenders want to play a part in the success of Filipino MSMEs they need to modernize the lending experience, and embrace new technologies to make lending processes simpler, more personalized, and accessible. Better digital lending services will enable faster loan decision processing and onboarding, meaning funds get into the hands of the business owners when they’re really needed, and these MSMEs can get back to doing business.”
The research found that the length it takes to apply for a loan is a major influence on small businesses when choosing a lender. While low interest rates were a leading consideration for 93% of Filipino MSMEs in this decision-making process, 92% also want a short application process, and 91% want cash-out options.
When it comes to improving the application process, 91% of Filipino MSMEs want to see faster loan decision processing, 90% are interested in low or no collateral requirements, and 87% want more flexible loan conditions.
Globally, the most common barriers to securing funding among SMEs are not enough starting capital (30%), too much paperwork and admin in the lending process (28%), and cash flow not being considered strong enough (27%).
