Philippine MSMEs need tailored funding — ADB
EM - News Moderator 
By Justine Irish D. Tabile, Senior Reporter
FILIPINO micro, small, and medium enterprises (MSME) need tailored financing and broader business support to grow more sustainably, Asian Development Bank (ADB) Director for Private Sector Financial Institutions Suhail Y. Khan said.
“Solutions must combine finance with digital tools, risk sharing, skills and access to markets,” Mr. Khan said at the BusinessWorld Insights: Boosting the Philippine MSME Ecosystem forum on Wednesday. “No single institution can deliver this alone.”
MSMEs account for 99.5% of registered establishments in the Philippines, employ more than 60% of Filipino workers and contribute over a third of the country’s gross domestic product.
Despite their importance, Mr. Khan said MSMEs accounted for less than 4% of total bank loans, while more than 83% of reported MSME lending was concentrated in Metro Manila.
“The national numbers therefore conceal a much deeper regional financing gap… Too many viable enterprises remain unserved or underserved,” Mr. Khan said, noting that estimates of the financial gap in the Philippines vary from P67 billion to P180 billion.
The ADB official identified obstacles faced by smaller businesses in accessing financing including lack of collateral, audited financial statements, long operating histories, and formal credit records.
The cost of assessing and monitoring small loans also discourages traditional lenders from serving the sector, he added.
“The Philippine financing gap is not only about the volume of credit. It is also about geography, tenor, collateral, data, product design and the persistent barriers faced by entrepreneurs, particularly women entrepreneurs,” he said.
Mr. Khan said MSMEs need longer loan tenors, revolving working capital, movable-asset lending and risk-sharing facilities designed around their actual operations.
Digital platforms and alternative credit-scoring models could also lower information barriers by allowing lenders to use transaction data instead of relying solely on conventional financial documents.
However, he said credit alone could not address shortages in managerial and technical skills, market information, buyer connections, technology and long-term financing that constrain MSME productivity.
Credit guarantees could encourage financial institutions to lend to viable businesses that do not meet traditional requirements, Philippine Guarantee Corp. (PhilGuarantee) President and Chief Executive Officer Alberto E. Pascual said.
“The challenge is not only the availability of funds, but also how to reduce or mitigate the credit risk of lenders and encourage them to support the financing of MSMEs,” Mr. Pascual said.
“A guarantee is more than protection for the lender,” he said. “It is a bridge that allows a viable enterprise to cross from potential to growth.”
At the end of 2025, more than 90% of PhilGuarantee’s credit guarantees were for MSMEs, he said. The state-run corporation had issued about P13 billion in cumulative MSME guarantees benefiting around 71,000 borrowers. It also issued around P6 billion in guarantees benefiting about 40,000 small farmers and fisherfolk.
Meanwhile, Small Business Corp. (SB Corp.) Vice-President for Innovation and Advocacy Wally Don G. Calderon said access to financing had expanded significantly since the pandemic pushed financing institutions to accept online loan applications.
SB Corp.’s direct borrowers increased to nearly 90,000 from just over 2,000 before the pandemic, he said.
However, the wider availability of loans does not necessarily mean that businesses are receiving financing appropriate to their needs.
“There is financing available. The question is: Is it the right type of financing?” Mr. Calderon asked, noting that some quickly approved digital loans carry high interest rates and aggressive collection practices.
SB Corp. offers financing products tailored to underserved groups, including women and young entrepreneurs. It also provides grace periods and collateral-free business loans of as much as P3 million.
“We would like to believe that because we are stretching the boundary, we are influencing the financing landscape and hopefully we will be able to positively impact [the industry] again with our new products and programs,” he added.
Mr. Calderon said the long-term impact of government support should be measured by whether businesses “graduate” from micro to small and eventually medium-sized enterprises.
Aian Guanzon, chief marketing officer of Global Dominion Financing, Inc., said information asymmetry remains a barrier for both MSMEs and lenders.
Some creditworthy businesses are rejected because they lack traditional proof of income, even though electronic-wallet transactions, supplier receipts, and other business records could provide information about their cash flow and repayment capacity.
“Based on my study on MSME financing, I discovered that 20% of them were creditworthy, but they were initially declined by other financing companies,” Mr. Guanzon said.
“But nowadays, it’s not just about bank statements. It can be an e-wallet transaction record or a purchase receipt from a supplier that gives financing companies more information about their actual cash flow, their capacity,” he said.
Anna Isabelle Magalona-Go, president of But First, Coffee, said access to capital allowed businesses to finance their supply chains, hire employees and carry out expansion plans.
However, expanding a business also requires stronger financial discipline, internal systems, and knowledge of cash flow and profit margins.
“Growth unlocks more challenges and more problems,” she said, noting that scaling a business requires a different set of skills from those needed when starting one.
But First, Coffee grew from a home-based online café established with P6,000 in capital during the pandemic into a nationwide chain with more than 200 branches.
“When you’re growing, whether in terms of the number of branches, employees or your footprint, that does not always equate to success,” Ms. Magalona-Go said. “It’s not always about the number, but also how sustainable and profitable you are.”
BusinessWorld Executive Vice-President Lucien C. Dy Tioco said survival-driven entrepreneurship is no longer sufficient to build lasting economic resilience.
“Moving from sustenance to sustainable growth requires a synchronized effort that unites public policy, corporate partnership and community innovation,” he said.
Mr. Dy Tioco said unlocking the full potential of MSMEs requires a shift toward a “growth-oriented, innovation-led model that empowers local businesses to compete globally.”
“Here in the Philippines, building global competitiveness requires similar interventions, from specialized credit-guarantee schemes that ease collateral requirements to shared research, development and testing facilities that raise product standards,” he added.
