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KYOTO,
Japan—Small and medium enterprises (SMEs) continued to
contend with lack of dependable access to finance,
mainly due to poor independent financial information
about them so that ratings firm Standard & Poor’s on
Sunday called for greater transparency and more
financial information to maximize their potentials to
contribute to economies.
In Asia,
a number of governments are attempting to put in place
policies on SMEs to address this and other challenges
they face but the reality is these policies produce
mixed results, according to Michael Petit, managing
director for corporate and government ratings in the
Asian Pacific region.
“Very
often the misunderstanding of challenges facing SMEs is
behind the lack of effectiveness of the policies that
have been implemented to support them.”
Petit
listed two main challenges SMEs face—the overall
business environment that determines the ease of doing
business and specific issues that affect them.
“Governments may provide broad measures like credit
subsidies or guarantees but these may actually stifle
competition since they favor more established SMEs . . .
in the same way particular issues like difficulty of
attracting qualified personnel and inability to promote
themselves is critical.”
On
Philippine SMEs, Petit said their environment remains
depressed by a lot of red tape and “costs associated
with the bureaucracy and registering businesses. The
institutional arrangements have to improve…there is
actually a better way to benchmark against best
practices used by more and more governments to implement
reforms and track their progress over time.”
SMEs
comprise up to 99.6 percent of all private business
enterprises in the Philippines but contribute only 30
percent to the national economy despite employing almost
70 percent of the 36 million employee pool.
Another
S&P official, R. Ravimohan, said the Philippines could
follow India’s model in widening business opportunities
for small businesses.
“There
is a problem on the constitution of SMEs, which like
India, has a huge informal SME sector. Generally the
formal markets, especially the banks and equity markets,
consider the informal sector as somewhat inferior
largely because they do not know about them and the
information about them is very nebulous or of
questionable standards.”
Ravimohan, managing director of S&P’s India-based
subsidiary Crisil Limited, said Indian SMEs, in
cooperation with the private sector, are now being
quality-rated to boost their financing, governance, and
credibility with their customers. “Rated SMEs for
example have quality seals placed in their
advertisements, which help customers decide.”
Likewise, he suggested a reduction in red tape and
registration costs to attract more SMEs to incorporate
and eventually improve SME information.
“It
would be fantastic if there should be some way of making
the markets know about these informal SMEs…a lot of
value can be discovered for these businesses which are
doing an important service to localities they serve,” he
said. |
