THE self-employed micro-entrepreneurs (SEMEs) in the Philippines continue to bear the brunt of the Covid-19 pandemic. As the country remains at high risk amid the recent surge of coronavirus cases, SEMEs are finding it difficult to sustain their operations given stricter quarantine restrictions and even abrupt shifts in guidelines. Considering these challenges, it would come as no surprise that SEMEs would sound the alarm, signaling a desperate call for help.
In a paper titled "Covid-19 impact on micro, small, and medium-sized enterprises under the lockdown: Evidence from a rapid survey in the Philippines," published by the Asian Development Bank Institute in February 2021, researchers said "most MSMEs immediately lacked the funds necessary to maintain their business after the lockdown. The magnitude of the working capital shortage was more serious in smaller firms."
At the time of the survey, the study found out that there were 43.8 percent of micro, 23.2 percent of small, and 3.9 percent of medium-sized enterprises with no cash or savings. Furthermore, 61.4 percent of medium-sized, 53.1 percent of small, and 37.8 percent of microenterprises reported that they would run out of funds within a month.
Given this scenario, BPI Direct BanKo, the microfinance arm of BPI, recently signed a memorandum of agreement with the International Finance Corporation (IFC) to identify opportunities to improve and expand the products and services it offers to self-employed micro-entrepreneurs.
BPI Direct BanKo President Jerome Minglana said the micro-businesses are a huge contributor to the local economy, accounting for 89 percent of companies and 30 percent of jobs. However, they have been disproportionately impacted by Covid-19 due to factors such as the lack of financing options and a heavy reliance on domestic demand.
With this milestone partnership, IFC will support BPI Direct BanKo in the development of additional loan products, the digitalization of existing processes and services, and the development of additional credit scorecards.
"The challenges in gaining access to credit for micro-entrepreneurs and in granting credit for lenders like BanKo have been further exacerbated by the pandemic," said Mr. Minglana.
But instead of being discouraged by these developments, Minglana said BanKo is even more motivated to provide financial products and services to the unbanked and underbanked by innovating and by partnering with IFC, which is also a staunch supporter of micro-entrepreneurs and women in business.
"We trust that the technical expertise and global experience of IFC will help BPI Direct BanKo develop and implement relevant products and services that will benefit Filipino SEMEs in the short term and in the long run," he said.
Under the agreement, the partnership would also help advance the bank's digitalization and further promote financial inclusion in the Philippines.
Under the plan, SEMEs will be able to gain easier access to a range of products and services, with the added benefit of new digitalized processes that will be introduced. This will be part of a new loan growth strategy for BPI Direct BanKo that will not be highly dependent on the expansion of brick-and-mortar offices. The project is also being supported by the governments of Australia and Japan, as well as the Women Entrepreneurs Finance Initiative (We-Fi).
Jean-Marc Arbogast, IFC's Country Manager for the Philippines, also said women have been disproportionately affected by the pandemic as more than half of the country's MSMEs are led by females.
The IFC looks forward to a bigger footprint in the rural areas for BanKo through capacity building in risk assessment and digital lending, a catalyst for inclusive recovery from the pandemic.
BPI Direct BanKo is expecting not only to expand its products and services and make these easily accessible to SEMEs, but also to develop an improved credit scoring model aided by IFC's global knowledge and experience. This strengthened model will allow BPI Direct BanKo to make more informed and strategic decisions relating to lending risk and ultimately provide SEMEs more access to financial services.
With more innovative partnerships like this in the banking industry, there will be fewer SEMEs sounding the clarion call for deliverance, and more microentrepreneurs thriving, with hopeful expectations of brighter days ahead.
How banking has changed during the pandemic
In a recent interview conducted by veteran journalist Roby Alampay, Bank of the Philippine Islands (BPI) President and CEO Jose Teodoro "TG" K. Limcaoco had this to say on how the pandemic has affected banking:
"Clearly, people are so comfortable with digital now.... Second, because of the pandemic, people now have a greater realization to save and to save intelligently, to invest. (Third,) people are looking for value for what they are doing... That's why we need to give the best products or we need to give the best service. And fourth, the customers today are more willing to engage, to talk and let their feelings (be) known, and we need to understand that."
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