Dynamic Filipino small businesses may be weighed down by financing difficulties
Small businesses in the Philippines significantly increased their use of online payment technologies and sales in 2020. However, difficulty accessing external finance may hamper their growth prospects in 2021, according to CPA Australia’s 2020-21 Asia-Pacific Small Business Survey.
The survey canvassed 4,227 small businesses in 11 markets across the Asia-Pacific region, including Australia, Mainland China, Malaysia and Vietnam. Three hundred Filipino small businesses took part.
More than half (58%) of Filipino respondents reported being negatively impacted by Covid-19. However, 46% say they have already recovered or expect to recover in 2021. 62% of small businesses grew in 2020.
“The survey shows that small businesses in the Philippines are eager to innovate and engage with customers through social media. A vibrant and youthful workforce together with growing domestic demand supported the sector in 2020,” said Mark Chau, regional general manager of business development International at CPA Australia.
“Pending the effectiveness of the rollout of Covid-19 vaccinations and the control of Covid-19 cases, the dynamism of Filipino small businesses should help drive an economic rebound this year as restrictions are gradually eased and global economic activity returns to normal,” Chau said.
Filipino small businesses made greater use of digital technologies in 2020 as the pandemic accelerated the use of e-commerce. 27% of Filipino small businesses reported that they began or increased their focus on online sales in response to Covid-19.
61% of respondents received more than 10% of sales from digital or online payment technologies such as GCash, DragonPay and PesoPay, up from 47% in 2019. 62% of small businesses received more than 10% of their revenue from online sales, up from 50% in 2019.
“A re-opening of the economy in 2021 is likely to contribute to the continued expansion of e-commerce and digital transactions in the Philippines,” said Chau.
73%of Filipino small businesses expect to grow in 2021, with 52% intending to increase employees. 22% anticipate that revenue from overseas markets will grow strongly. 31%say they will introduce a new product, process or service to the local or overseas markets, the second highest of the markets surveyed.
Nevertheless, cashflow difficulties are having a negative effect on some Filipino small businesses. 64% of respondents sought external funds last year; 43% sought funds for business growth and 32% sought funds for survival.
However, only 13% of respondents found accessing external finance easy or very easy, the lowest of the markets surveyed. This may explain why respondents mainly sought funds from friends or family (21%) or personal resources (21%), compared to 15% from a bank.
Only 16% of Filipino small businesses expect accessing external finance to be easy or very easy in 2021, which is lower than the survey average of 28%.
“Difficulties in accessing external finance may hinder business plans to hire more employees, invest in technology or expand to new markets. Small businesses in the Philippines should consider seeking professional advice to maximise their success in obtaining external finance,” Chau said.
CPA Australia recommends that Philippines small businesses consider the following actions to improve their recovery prospects:
• Seek advice from a trusted adviser to maximise success in obtaining external finance.
• Improve cashflow by collecting outstanding debts.
• Keep innovating products and services.
• Invest in staff training to improve their productivity.
• Invest in up-to-date devices and relevant technologies.
Download CPA Australia Asia-Pacific Small Business Survey 2020-21
