MSME recovery to be complex, may boost chances by digitizing


SMALL BUSINESSES are expected to better deal with post-pandemic challenges if they embrace digitization, according to a study conducted by a microfinance non-profit.

Restart Micro-Enterprise, Inc. (RestartME) concluded in its study, which is supported by Bank of the Philippine Islands (BPI) Foundation and BPI Direct BanKo, that digital solutions carry the promise of helping small businesses navigate the complexity of the recovery, at a time when many small businesses are struggling and with banks reluctant to lend to the segment.

“The extent of financial tech adoption recently shows how a significant number of MSMEs are flexible enough to embrace innovation. But with institutional support, they can take these digital solutions even further,” RestartME Executive Director Jessica Marie G. Robredo said in a statement.

The study noted that MSMEs face a recovery path that is not as straightforward as in previous calamities.

As the pandemic is also a financial crisis, MSMEs and microfinance institutions are also facing funding difficulties as collection rates fall and portfolio risk exposure increases, it added.

Other challenges that impede reopening of small businesses identified in the study were the slow recovery of consumer demand due to shifts in consumer purchasing behavior and income; inadequate access to affordable capital for businesses seeking to reopen; lack of infrastructure and ability to use digital solutions; disruption of operations due to changing government policies; and low capacity for resiliency and risk management.

Despite the general adoption of digital transactions, most small retail stores and market stalls still prefer face-to-face engagement and have yet to fully adopt digital solutions.

The study suggested that the tech industry, particularly telecommunications, financial technology, e-commerce, and social media companies, could play a pivotal role in pushing MSMEs to adopt digital solutions.

“The immense capacity of the private sector and financial institutions per se in driving innovation put us in a strong position to create opportunities for the MSME sector and give them the wings to fly,” BPI Foundation Director Owen L. Cammayo said.

The central bank has provided regulatory relief for banks to boost lending to MSMEs, including making MSME loans eligible as alternative reserve compliance, and reducing the credit risk weight for loans extended to the sector. — Luz Wendy T. Noble