The Philippines has been applauded by some of the world’s largest governments for its sophisticated e-procurement program. But the nation has a long way to go to improve other areas, especially in the business finance industry. Luckily, international conglomerates are recognizing the Philippines as an ideal market for B2B innovation, while investors and accelerators are eyeing the country for its groundbreaking startup community.
The Philippines has proven a global leader of electronic invoicing adoption thanks to a government mandate to digitize procurement activity. The venture has been such a success that EU officials praised the nation as an example for jurisdictions across the globe to follow.
Last February, EU officials held the Fair Competition, Transparency and Procurement: Attracting EU Investment to the Philippines forum. It is there that EU Ambassador to the Philippines Guy Ledoux applauded the Philippine Government Electronic Procurement System as a program sure to encourage foreign direct investment in the nation.
The Philippines is expected to update its PhilGEPS e-invoicing platform by 2018 to streamline the process even further. The solution already supports digital payments and online bidding processes, and future updates will aim to increase the platform’s availability to suppliers throughout the nation.
The Philippines may be a world leader in the digital procurement sector, but the country has a long way to go to strengthen other areas of its economy and businesses. Today, the current economic climate of the Philippines centers largely around landing more money in the hands of those who need it. Philippine officials have launched the National Strategy for Financial Inclusion to strengthen financial services in the nation.
Last week, Amado Tetangco, Jr., the governor of the Bangko Sentral (central bank), highlighted the high unbanked population of the country. According to government analysis, 15 percent of the nation is unbanked — that figure, he added, goes down to 3 percent when taking into account alternative lenders. Among those that do borrow, more than half do so through informal sources like family members. Just 4.4 percent borrow from a bank.
The high percentage of unbanked has major implications for small business entrepreneurs. Officials say that small business lending can — and should — be much higher. “As of 2012, there are 944,897 business enterprises in the Philippines,” said Metrobank SME head Godofredo V. Cruz at a presentation held earlier this month, according to reports. “This could have doubled by now.”
The executive, who was speaking at the Cebu Entrepreneurship and Investment Summit, said that only 19.1 percent of SMEs in the Philippines have borrowed from a bank. The reason, he said, is perception — small business owners are often intimidated by what is perceived to be a complicated and daunting lending process. The sentiment encourages business owners to instead turn to loan sharks.
But the current climate in the Philippines is for big banks to help SMEs, Cruz said. “Banks used to be structured to serve big businesses,” he said. “But we have been enlightened two years ago that SMEs hold a big potential.” Metrobank SME first launched in the nation two years ago, according to reports.
For startups, however, new sources of support are emerging. Singapore-based venture accelerator The Co-Foundry, for example, has set up shop in the Philippines to facilitate startup growth in the nation.
Earlier this month The Co-Foundry announced a partnership with international tech accelerator Plug and Play and Manila-based incubator LaunchGarage, in addition to forex platform OANDA and venture capital firm BlueHill Asset Management.
Together, the partners have launched Fintech Call 2015 to give Philippine startups access to the resources they need to enter into the financial technology sector.
“The Philippines is a critical and strategic market for startups seeking their foothold in Southeast Asia,” said The Co-Foundry founder Michael Yap during the launch of the partnership. “Many of the solutions brought by our startups are also extremely relevant and beneficial to Filipinos.”
Startups chosen for the accelerator will receive up to $250,000 in pre-seed funding, and up to $1 million for seed funding. Investors and backers are looking for startups to innovate within the mobile banking, alternative lending, digital currencies and security markets, among others.
The Philippines is an attractive destination for an array of some of the world’s largest companies. Cloud Lending Solutions, for example, is a behind-the-scenes software service provider for some of the world’s most prominent alternative lenders, including Lenddo, which operates in the Philippines.
Global technology giants like Panasonic and EMC are also setting down roots in the Philippines. Panasonic is reported to be focusing on its B2B services and has launched new initiatives to strengthen its B2B sales. The Philippines is a particularly strong market for the company. According to reports, the nation’s security sector, projected to be worth $35 million this year, has been a major source of business for Panasonic. Earlier this month, Panasonic Philippines adviser for Systems Network Department Shaun Sato told reporters that the firm is expecting $2 million in revenue in 2015 and is hoping to secure six percent of the nation’s market share for security solutions.
Meanwhile, EMC has chosen the Philippines to foster the conglomerate’s growth of Big Data services. A survey released last month by the company’s Philippines unit found that businesses are “drowning in information overload.” The nation has become an environment to foster EMC’s efforts to solve some of those Big Data challenges. According to EMC Philippines country manager Ronnie Latinazo, EMC has earmarked $5 billion for Big Data research and development, as well as the acquisition of technology firms. “All these key announcements are relevant to the Philippine market,” he said earlier this month. “It accelerates our lead with our competitors not only in sales but in technology.”
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