TUESDAY, 15 NOVEMBER 2011 19:40 DENNIS D. ESTOPACE / REPORTER
AMID the drop in formal sector lending in the past decade, micro, small,
and medium enterprises (MSMEs) turned more to informal sources of cash,
a 2009 survey recently released by the Asian Institute of Management
reported.
Data from 1,740 respondents noted that while majority of the country's
MSMEs consider access to credit to be important in their operation, a
document survey by the Asian Development Bank (ADB) bared formal sector
lending has dropped from a high of nearly 20 percent of the total loan
portfolio in 2008 to a mere one percent by 2010.
"There is still room to grow for SME financing, especially in the
micro-small segments," Niny Khor of the ADB economics research
department said in her presentation at an AIM-sponsored forum Tuesday.
Citing the ADB 2011 SME financing survey, Khor said that this room is
built on a significant increase in bank branches from 1980 to 2010 and
that the total amount of bank loans increased through the global
financial crisis.
"Universal and commercial banks [UKBs] remain as the primary source of
MSME funds," Khor said, adding that this accounts "for over 72 percent
of the total amount lent to the sector."
Last year, Khor said that the average UKB released about P6 billion
($134 million) to MSMEs in direct loans.
"While this is seven times the average of thrift banks, thrift, rural
and cooperative banks have managed to increase their market share to 27
percent last year from just 16 percent more than a decade ago."
Nonetheless, the graph based on the author's calculations using Bangko
Sentral ng Pilipinas (BSP) data showed total bank loans to MSMEs as
share of total loan portfolio net of exclusions declined.
Still, the decline from UKB lending reached its 1999 level of 20 percent
while thrift, rural and cooperative banks' lending has declined below
the levels they posted prior to a new millennium.
Khor's data coincide with the AIM survey that showed majority of the
respondents (35 percent among micro-enterprises and 34 percent among
small and medium businesses) consider access to credit to be important
in their operations.
Majority, too, tapped their savings accounts for the largest financing
requirements of their businesses.
Interestingly, relatives, immediate family, friends and usurers were
tapped as sources for loan or credit before these businesses went to
rural banks, other financial institutions and government banks.
More than half (54 percent) of micro-enterprises and majority (74
percent) of small and medium businesses said they borrowed from informal
sources because these had no or very little interest.
These capitalists also cited that they went to such sources because the
transaction was fast; no or fewer guarantee requirements were needed;
they are required to pay only when able or offered flexible payment
schemes; and there was no collateral needed.
Majority of the respondents said they didn't need much when they started
a business, citing that low capital was the top-most consideration.
Thirty percent of the enterprises surveyed by AIM started with less than
P150,000 capitalization.
The AIM Policy Center, which conducted the survey, said that there is a
need "to match the requirements of the financial institutions to the
capacity of the MSMEs to produce such requirements for loan availments."
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