Visa, a world leader in digital payments is looking to expand support for Filipino small and medium enterprises (SMEs), which, despite their economic contribution, still face significant barriers to financial inclusion and growth. While making up more than 99% of all business enterprises in the country and generating 66% of total employment, SMEs in the Philippines continue to face significant challenges, including access to funding.
A global funding gap
Visa’s recent study reveals significant challenges faced by SMEs, particularly in accessing capital, with these businesses receiving less than 10% of total corporate loans. Cash flow concerns are prevalent, as 44% of SMEs highlight it as a top issue, and over half report having reserves that would last less than six months. Additionally, other hurdles include device and hardware cost for acceptance and lengthy application processes for card holders. Fraud prevention was also cited as a key concern by 33% of those accepting cards.
The financial landscape further complicates these challenges, with the International Finance Corporation reporting a USD5.2 trillion global funding gap for SMEs annually, predominantly in East Asia and the Pacific. The Philippines exemplifies this issue, with a USD221-billion funding demand against a USD15-billion supply. Despite mandates to increase SME lending, utilization remains low due to informal business practices, limited credit history, and financial literacy gaps.
Women-led SMEs across the region face additional social barriers, including gender bias in lending and limited property rights, which restrict their ability to use financial collateral. Moreover, the added burden of household responsibilities can hinder their capacity to effectively 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
Recognizing the crucial role SMEs play in economic development, Visa, through the Visa Foundation, previously launched a $100-million small business accelerator initiative aimed at advancing digital financial inclusion, stimulating job creation, and increasing 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. The program is complemented by 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. Designed to cater to SME owners, the card will be linked to a high interest business savings account, where business owners can enjoy zero fees, free fund transfers, insurance product offers, as well as 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.
