CEBU, Philippines – Industry experts from the Asia-Pacific region including the Philippines identified key challenges faced by small and medium enterprise (SME) sector and outlined possible recommendations to further strengthen the backbone of the economy, highlighting on improved access to finance from banks and financial institutions.

These were presented during the SME development council breakout session at the 27th Confederation of Asia-Pacific Chambers of Commerce and Industry (CACCI) last Thursday at Radisson Blu Hotel in Cebu City.

CACCI SME Development Council chairman George Abraham cited the struggles that impede the growth of the global SME sector which include increase in competition, manpower issues, rising operating costs, insufficient cash flows, lack of access to business opportunities and financing.

He added that SMEs should also work on their innovative capacity and adopt the current market trends indicate quick changes in consumer demands in order to survive.

He also said that lack of effective partnerships and networks is another problem for small-scale businessmen that could actually allow sharing of resources, services and knowledge once addressed.

Other current setbacks for the industry that Abraham presented include the lack of ability to grow, no critical mass for success, slow speed of growth from start-up to maturity, crucial gap between policy planning and policy implementation, future shaped by globalization and liberalization issues and the need to resolve issues on technology and financial management.

He then recommended creating an SME board to consolidate government resources, setting up an SME bank to provide a more efficient financing channel, redrafting current industry development plans to set up SME industrial parks, simplifying government policies and procedures, encouraging SMEs to join trade associations, and establishing an SME research center.

With the vision to develop a pro-business environment for SMEs and create an SME hub, he said that SMEs should be assisted to become international brand names, thus increasing the volume of job opportunities to provide more employment and enterprise opportunities for graduates.

“For everything to happen, you need a vision. SMEs think they are very local. They think they are small but they actually have a potential for international branding. In most countries, SMEs are mostly the employers but the quality of employment is not their goal. So we have to work on that,” Abraham stated.

He further urged the banks to be flexible in setting amortization schedules to match SME cash flows, put in place loan process improvements including credit scoring system and train lending officers in new approaches and global best practices.

He added that these financial institutions should also offer consulting services for SMEs to provide appropriate advice as an expert in finance and help them find and nurture business opportunities through a client network linkage system.

“We have to convince the banks to change the way they treat SMEs. Financing is important for the latter. Banks should just not only lend but also offer consultancy services to these businessmen. It actually creates a positive effect for both parties,” he said.

Other new initiatives for finance that Abraham raised include helping SME borrowers to strengthen their operations and build their capacity to pay, develop loan products suitable to their diverse financial needs, keep loan documentation simple and understandable and provide non-financial assistance and support.

Meanwhile, Department of Trade and Industry (DTI) Cebu business development division chief Elias Guia Tecson echoed the same sentiments for the Philippine setting.

Although 99.6 percent of the total firms in the country are SMEs, he said that issues on business environment, access to finance and markets, productivity and efficiency continue to challenge the sector.

Philippine SMEs, he added, account 62% of the total employment and 35.7% of value-added contribution in the country.

To address the key constraints of the sector, Tecson pointed out the development plan for 2011 to 2016 which is designed to boost key industry areas such as tourism, business process outsourcing, electronics, agribusiness, logistics, infrastructure, shipbuilding, mining, and housing.

It also aims to create two million employment opportunities by 2016 and increase the SME economic contribution to 40% of gross value added to be at par with the GDP share of the SME sector of the neighboring countries in the region.


19TH MARCH 2013


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Written by Shreya Patil