Saturday, September 29, 2007 Lack of funds bugs MSMEs
ALTHOUGH micro, small and medium enterprises (MSMEs) in Cebu have a positive outlook of the country’s economy, their growth continues to be hampered by lack of access to financing institutions.
This was among the key findings of the two-week pilot study in Cebu of the MSME Indicator System (MSME-IS), which aims to collect timely, fast and more extensive information on industry performance, competitiveness, investment climate and business outlook.
The results of the study were presented yesterday during the Cebu Chamber of Commerce and Industry (CCCI) general membership meeting at the Cebu Grand Convention Center.
According to the study’s initial outcome presented by MSME-IS team leader Marissa Garcia, 43 percent of the respondents believed that their businesses will remain to be competitive in the next 12 years.
Obstacles
However, respondents MSMEs identified various “financial obstacles” that mar their positive outlook.
These obstacles include collateral requirements of banks, bureaucracy, high interest rates, need for “special connections” with financial institutions to be able to avail themselves of funds, the lack of loanable amounts by some banks, lack of access to foreign banks and investors, and inadequate financial information for customers.
Respondents also admitted to having problems with maintaining personnel and their businesses’ vulnerability to foreign exchange movements.
Cebu MSMEs also said their operations and growth are also affected by foreign trade relations, wage regulations, environmental laws, cost of tax compliance, and business licensing.
Respondents of the MSME-IS mostly belong to the manufacturing sector, which accounted for 37.5 percent, while the rest come from wholesale and retail industries, real estate, transport, storage, and communications, and financial intermediations.
Direct access
In an interview, Ted Locson, CCCI vice president for external affairs, said that what should be highlighted in the monitoring indicator is the need for MSMEs to have direct access to financing institutions, such as cooperatives and other microfinance institutions “that are better equipped in loan management.”
“Money must trickle down to where it is really needed,” he said. “Even the World Bank wants to effectively monitor where its money go.”
The study said that at present, MSMEs rely on internal funds, owner’s money, supplier’s credit, investment funding, assistance from family and friends, loans from rural banks and lending agencies, among others.
MSME-IS is a project of the Partnership and Advocacy for Trade and Competitiveness, Angelo King Institute, Philippine Export Council, US Agency for International Development, Universal Access for Competitiveness and Trade and CCCI.
Locson said the database is “very essential as a benchmark for the government in creating effective policies that affect the welfare of MSMEs, which contributes 99.7 percent of registered business establishments in the country.” (MMM)
