The Asian Development Bank recently released the results of its review of the SME sector and the state of finance in 14 countries from the five ADB regions of Central Asia, East Asia, South Asia, Southeast Asia and the Pacific through the inaugural volume of the annual Asia SME Finance Monitor 2013. While snippets of said report have been released and published, this writer is not sure if Philippine policymakers and SME finance players have fully digested how said report should wake up the Philippine system especially when viewed in the light of the forthcoming Asean integration in 2015. Like it or not, the picture it paints is that of the country being relatively unprepared compared to our Asean counterparts.
Measly growth
ASM: “SME loans made up 25 percent of total bank lending in Asia and the Pacific on average in 2012, down from 27 percent in 2011. SME loans grew at 10 percent year-on-year in 2012, down from 19 percent in 2011.”
Comment: Philippine SME loans only make up 12 percent of total banking sector lending portfolio. The total bank lending in the country has grown tremendously in the past years, suggesting solid growth prospects for the economy. Unfortunately, bank lending to SMEs has not kept in pace. In a 2012 review by this writer, the 10-year loan portfolio growth of the Philippine banking sector was registered at 121.7 percent. In the same period, small enterprise lending growth was a measly 10.6 percent, even as medium enterprise lending growth registered a more respectable 77.5 percent.
Only average
ASM: “SMEs are the backbone of the economies of Asia, accounting for 98 percent of all enterprises and 66 percent of the national labor force on average during 2007-2012.”
Comment: Philippine statistics show that micro, small and medium enterprises constitute 99.6 percent of the total number of registered establishments. Total gross value added is 35.7 percent and the labor force contributes 65 percent. On this metric, we are situated in the average pool.
No metric available
ASM: “While the lending to SMEs is relatively large in the Republic of Korea (38.9 percent of GDP in 2012), Thailand (33.7 percent of GDP in the second quarter of 2013) and Malaysia (20.1 percent of GDP in 2012), it is still small in Cambodia (7.8 percent in the third quarter of 2013), Bangladesh (6.7 percent in 2012), Indonesia (6.4 percent in 2012), and Kazakhstan (4.7 percent in 2012). The ratio of SME loans to GDP is not available in other ASM countries.”
Comment: Interestingly, there are no gathered statistics on this particular metric for the Philippines. But if the percentage share of SME lending to total bank lending is any gauge, we expect to be situated in the single-digit percent of SME lending to GDP category.
Low accessibility
ASM: “Nationally, there are two levels of SME access to bank lending in participating ASM countries: (i) relatively high accessibility, where the provision of SME credit stands at around 30 percent to 40 percent of total loan provision, as in the PRC, the Republic of Korea, Solomon Islands, and Thailand; and (ii) low accessibility, where the provision of SME credit is less than 20 percent of total loan provision, as in Cambodia, Indonesia, and Kazakhstan. Other ASM countries have no similar statistics.”
Comment: On this score, while the data was not captured by the ADB review, there is evidence to suggest that the Philippines belong to countries in the low accessibility range. This is despite RA 9501, which requires banks to allocate 10 percent of their loan portfolio to SMEs. The micro and small enterprises are even entitled to 8 percent, and yet the compliance here is below the mandate with the big banks, in particular, opting to pay a small penalty rather than comply.
Still time to catch up
Overall, the Asia SME Finance Monitor 2013 report acknowledges the gradual improvement of SME access to banks among ASM participating countries through various support measures such as mandatory lending and credit guarantees. This is particularly vital as SMEs serve as the backbone of the national economies of countries in Asia and the Pacific. The report, however, cautions that deepening global economy complexities may put the growth of Asian economies at risk. It cites the development of the SME sector in the region as the key for resilient national economies.
This is all the more crucial for the Philippines as we continue to lag behind our Asian counterparts, many of which have been more aggressive in the development of their respective national SME sectors. The lessons from the ADB review present Philippine policymakers and SME finance players an opportunity to focus and double their efforts and resources while there is still time to catch up. The country cannot afford to be complacent and must ensure that the necessary components and measures for a national level SME sector development are in place especially with regional integration just a year away.
An AIM-MBM and Harvard MPA graduate, Mr. Benel Lagua is in the faculty of the De La Salle Ramon V. del Rosario College of Business teaching courses in financial management. He is likewise executive vice president and chief development officer of the DBP.
The views expressed above are his own and does not necessarily reflect the official position of the De La Salle University, its administration and faculty.
See more latest news From Asia on Automobile,Technology, Agriculture, Finance, Lifestyle, Healthcare
Follow me on twitter for more Daily updates
For more reports from Asia www.search.dowellresearch.com
For any Market research consulting services www.dowellresearch.com
No comments:
Post a Comment