The Philippines implements fintech to support MSMEs
Financial technology (fintech) tools are being implemented by the Philippine government to enable the micro, small and medium enterprises (MSMEs) to tap the e-commerce market and to widen their business opportunities.
Department of Finance (DOF) Secretary Carlos Dominguez III said that aside from increasing the use of digital technologies in order to empower them, the government, through the state banks, have also implemented programs meant to promote the sustainability and competitiveness of small businesses all over the country.
According to the announcement made by the DOF, MSMEs are among the key beneficiaries of the Tax Reform for Acceleration and Inclusion Act (TRAIN). They have benefited from tax breaks worth billions of pesos in the first six months of this law’s implementation in the form of a higher value-added tax (VAT) threshold that exempts them from paying this tax.
During the 26th Metro Manila Business Conference, Sec Dominguez urged the MSMEs to be innovative and to explore opportunities opened by the new ways of doing business. He said MSMEs should be bold in opening new ventures.
He assured MSMEs that the government is supporting small businesses in every way possible for they recognise the crucial role that the MSMEs play in forging a better future for the Filipinos. MSMEs comprise 99.6% of all business enterprises in the country and they are significant in building a dynamic and inclusive economy for the people.
Sec Dominguez explained that the MSMEs employ a bulk of the labour force. They serve as a link between big manufacturers and their consumer base. MSMEs compose the supply chain that, when enabled, will support the industrialisation of the country’s economy.
Among the fintech tools being developed by the government to assist MSMEs include peer-to-peer lending, equity crowdfunding, merchant and e-commerce finance and invoice finance. The financial world, he said, is being revolutionised by new technologies and the government is responding promptly to make fintech accessible to the enterprises.
Furthermore, the Ease of Doing Business Act of 2018 was signed into law by President Duterte aiming to reduce red tape significantly and make government more responsive to the needs of the entrepreneurs.
This new law, Sec Dominguez added, will be complemented by several programs encouraging the use of digital technology in all government procedures, including the Bureau of Internal Revenue (BIR), which is streamlining processes for the documentary requirements on renewing business permits.
A TradeNet system has also been established. It automates licensing, permit, clearance and certification procedures for all regulatory agencies. It will enable the full interconnection of 76 trade regulatory government agencies across 18 government departments. The Bureau of Customs will be the first to go live. This system will also serve as the Philippines’ link to the ASEAN Single Window (ASW).
He added that the government is also ready to run PHPAY, which is a digital payment gateway that will enable taxpayers and other state clients to remit fees and other charges electronically. This will transactions costs across the board and cut corruption associated with primitive payments systems.
Also, the Philippine Business Data Bank (PBDB) will soon be on the testing stage to ensure that it serves its purpose efficiently of being the single repository of business registration information in the country.
As for funding support, the Land Bank of the Philippines extended US$ 1.69 billion (PHP 89.8 billion) in loans to small businesses in 2017.
The Development Bank of the Philippines (DBP) has lent US$ 245 million (PHP 13 billion) as of June 2018 and also offers financial advisory services to MSMEs for free. Moreover, it will open additional Lending Centres in order to be closer to its clients, partnering with microfinance institutions and cooperatives to support small businesses.
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