MSME recovery is complex, may increase chances by scanning
SMALL ENTERPRISES should face post-pandemic challenges better if they embrace digitization, according to a study by a nonprofit microfinance organization.
Restart Micro-Enterprise, Inc. (RestartME) concluded in its study, which is supported by the Bank of the Philippine Islands (BPI) Foundation and BPI Direct BanKo, that digital solutions promise to help small businesses navigate in the complexity of the recovery, at a time when many small businesses are struggling and with banks reluctant to lend to the segment.
“The scale of FinTech adoption recently shows how flexible a significant number of MSMEs are to embrace innovation. But with institutional support, they can push these digital solutions even further, ”RestartME Executive Director Jessica Marie G. Robredo said in a statement.
The study noted that MSMEs face a road to recovery that is not as straightforward as in previous calamities.
With the pandemic also being a financial crisis, MSMEs and microfinance institutions are also facing funding challenges as collection rates decline and portfolio risk exposure increases, he added.
Other challenges preventing the reopening of small businesses identified in the study were the slow recovery in consumer demand due to changes in consumer buying behavior and incomes; insufficient access to affordable capital for businesses seeking to reopen; lack of infrastructure and capacity to use digital solutions; disruption of operations due to changes in government policies; and low resilience and risk management capacity.
Despite the widespread adoption of digital transactions, most small retail stores and market stalls still prefer face-to-face engagement and have yet to fully embrace digital solutions.
The study suggested that the tech industry, especially telecom, fintech, e-commerce and social media companies, could play a central role in pushing MSMEs to adopt digital solutions.
“The immense capacity of the private sector and financial institutions themselves to drive innovation puts us in a strong position to create opportunities for the MSME sector and give them the wings to fly,” said Owen L. Cammayo , director of the BPI Foundation.
The central bank has provided regulatory relief to banks to stimulate lending to MSMEs, including making MSME loans eligible as an alternative compliance reserve and reducing the credit risk weight for loans to the sector. – Luz Wendy T. Noble