If financial institutions and the government could help the small business sector grow, they could produce as much as 60 percent of the country’s gross domestic product, which is something that global digital payments platform Visa believes.
According to Gareth Parrington, Visa head of commercial money movement in Southeast Asia, 98 percent of job creation in the Philippines is through small businesses, contributing around 36 percent of GDP.
“I think there is an opportunity to grow and help businesses do business more effectively,” he said. “Their contribution can increase to 40, 50, or 60 percent (of GDP), as we see in Indonesia, for example.”
He said that the biggest need for a small business owner is working capital. But the majority of these owners want to concentrate on their operations and ensure that their products are produced effectively.
However, small business owners in the Philippines do not have enough access to loans, he said. Most lending decisions are also made based on their balance sheets and assets, rather than their transactions.
“We need to continue to work with our banking partners to help understand a small business and review how we offer them credit and make decisions on their creditworthiness,” he stressed.
He added that promoting digital transformation in the sector can also help a small business, as there was a large shift in awareness and acceptance of digital payments among markets since the COVID-19 pandemic.
However, digitizing the small business sector is a collective effort and requires partnerships from banks, financial institutions, and the government.
Aside from digitization and providing access to financing, there are many more aspects of running a business that will need improvements if that potential is to become a reality, and all sectors will need to work together if the goal is to double the contribution of small businesses to the GDP, which is a tall order.*
