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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