Visa, a world leader in digital payments, is looking to expand support for Filipino small and medium enterprises (SMEs). Despite their economic contribution, SMEs still face significant barriers to financial inclusion and growth. They make up more than 99% of all business enterprises in the country and generate 66% of total employment. Even so, they continue to face significant challenges, including access to funding.
A global funding gap
Visa’s recent study reveals significant challenges for SMEs, particularly in accessing capital. These businesses receive less than 10% of total corporate loans. Cash flow concerns are prevalent. 44% of SMEs highlight it as a top issue, and over half report reserves that would last less than six months. Additionally, other hurdles include device and hardware costs for acceptance and lengthy application processes for card holders. Moreover, 33% of those accepting cards cited fraud prevention as a key concern.
The financial landscape further complicates these challenges. The International Finance Corporation reports a $5.2 trillion global funding gap for SMEs annually, predominantly in East Asia and the Pacific. The Philippines exemplifies this issue, with a $221-billion funding demand against a $15-billion supply. Despite mandates to increase SME lending, utilization remains low. Informal business practices, limited credit history, and financial literacy gaps drive this trend.
Women-led SMEs across the region face additional social barriers. These include gender bias in lending and limited property rights, which restrict their ability to use financial collateral. Moreover, household responsibilities can hinder their capacity to manage and expand their businesses. However, Visa’s research shows promising outcomes, revealing that 51% of women-led SMEs and 56% of micro-businesses in the Philippines experienced revenue growth through the adoption of digital payments.
Innovation in SME support and funding
Visa recognizes the crucial role SMEs play in economic development. Through the Visa Foundation, it previously launched a $100-million small business accelerator initiative that aims to advance digital financial inclusion, stimulate job creation, and increase access to capital for SMEs in Asia Pacific, including the Philippines.
This program has reached an estimated 29.6 million SMEs in the region, including 10.9 million women-led SMEs. In addition, Visa’s Practical Business Skills program, which equips SME owners with essential knowledge in cash flow management, digital payment integration, and financial planning.
Visa has been actively working with local partners to launch innovative products designed to expand financial inclusion for SMEs. Recently, it signed a new deal with CIMB Bank Philippines to launch a new Visa Business Debit Card. The card caters to SME owners. It will link to a high interest business savings account. There, business owners can enjoy zero fees, free fund transfers, and insurance product offers. They also get a revolving credit facility that they can maximize to grow their business.
“SMEs form the backbone of our economy and supporting them helps contribute to overall economic growth. We continue to work with local partners to bring financial products and solutions responsive to their unique needs, and we share the government’s vision to help SMEs unlock their full potential through innovation and resilience,” said Jeffrey Navarro, Visa Country Manager for the Philippines.
Source: VISA
