RestartME and BPI: Digital financial solutions can speed up MSME recovery

The growing digital connectivity among Filipinos is leading small businesses to adapt to the next normal, according to a study by local NGO Restart Microenterprise Inc. (RestartME), together with the Bank of the Philippine Islands (BPI) Foundation, BPI Direct BanKo, and social impact expert group FSG, Inc.

The Collective Action Secretariat to Enhance Resilience among MFIs and MSMEs (CASTER) Scoping Study evaluated opportunities, challenges, and solutions that may assist micro, small, and medium enterprises (MSME) and microfinancing institutions (MFI) in their business recovery efforts.

The multi-sector research study, conducted from November 2020 to January 2021, evaluated the end-to-end business impact of the COVID-19 pandemic on MSMEs and identified solutions to assist them amid these challenging times. It found that “online marketing and e-commerce as the most common starting points for micro, small and medium enterprise (MSME) in embracing digitalization.”

“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,” says RestartME Executive Director Aika Robredo.

The study identified MSMEs under “food and non-food” as those that lead the use of online platforms such as Shopee and Lazada. Same-day delivery services such as Grab and Foodpanda were also “leveraged by restaurants, groceries, and stores to extend their delivery services.”

CASTER noted that there is even “utilization of digital payment channels and mobile wallets'' such as G-Cash and Paymaya. It explained that these digital payment collections and transfers are “gaining traction due to the increased adoption among users, although concerns on fraud would still make cash the primary preference.”

Even though these figures and emerging markets demonstrated growing digital connectivity, the study, however, showed that most of the surveyed neighborhood sari-sari stores, small carinderias, and market stall owners still prefer face-to-face engagements and have yet to fully adopt end-to-end financial technology solutions.

Moreover, “despite the promising development in the acceleration of e-commerce and digital payments during the pandemic, trade activities and transactions were still heavily concentrated in the cities.”

Slow recovery

The CASTER Scoping Study further identified four other challenges MSMEs are facing these days, including limited access to affordable capital; slow recovery of consumer demand; continued disruption of operations in response to evolving policies and guidelines; and lack of resilience and risk management mechanisms to enable MSMEs to weather economic disruptions from various forms of disaster and calamities.

In the study, five key solutions were identified to help MSMEs in their road to recovery and resiliency. These include supporting pivot to resilient, sustainable business models; recovery and resilience financing innovation; scaling up digital adoption; resilient supply chain innovation and incubation; and MSME resilience metrics, scorecard and tracking.

“This is where we see all stakeholders working together in achieving the common impact goals,” says Robredo.

As identified in the paper, some of the stakeholders who will derive benefits from the collective action model are civil society organizations, the digital players in the private sector, banks, MFIs, and the government.

“Collective impact solutions are about uniting for a common goal, which for us all here, is MSME recovery and resilience. And, the way to do it is by working together, ​building trust, and agreeing to track​ progress in the same way,” says FSG Senior Advisor Anand Nandakumar.

Getting on board

The study identified digital players including telecom companies, financial technologies, e-commerce, and social media, among others as that which “play roles and offer financial and expert support” for the “required MSME digital solutions.”

Robredo noted that, “For this initiative to really fly there is a need to get everyone on board, from the banks, MFIs to digital players, and of course the government and its development agencies.”

“The immense capacity of private sectors 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. From doing capacity building programs to providing funding, BPI has been standing behind MSMEs to help Filipino micro entrepreneurs and catalyze inclusive growth,” said BPI Foundation director Owen Cammayo.

For his part, Rod Mabiasen Jr., BanKo Head of Financial Inclusion and Microfinance Solutions, said, “As a participant and beneficiary of this study, our role is to help MSMEs move forward with relevant solutions to address their needs, and help them embrace digitalization.”

Robredo recognizes the need for domestic banks and private funders to provide accessible capital and be active team players to sustain this initiative. “The same way that every stakeholder in the MSME ecosystem has to coalesce and work together to maximize the result. At the heart of it all are the micro to medium Filipino entrepreneurs, our sari-sari stores, small carinderias and market stall owners who remain co-creators of these solutions,” she said.

Project CASTER commits to continue its advocacy efforts to spearhead stakeholder action on the proposed solutions. “Ultimately, we have a common goal that is to provide long-term and long-standing MSME recovery and resilience. CASTER has provided us the challenges, opportunities and more so, a win-win solution for everyone,” says RestartME.