Financial insecurity and difficulties accessing loans hinder many aspiring entrepreneurs in the Philippines.
For many Filipinos, the dream of entrepreneurship remains just that—an unattainable goal, hindered by challenging financial barriers and limited access to funding. Analysts highlighted the struggle for financing, which continues to be a significant obstacle for those looking to start businesses in the country.
A recent study revealed that six out of ten Filipinos cite financial security and starting a business as their top priorities. However, achieving these ambitions is increasingly difficult, as budding entrepreneurs face tough loan requirements and high collateral demands. Sitti Reyes, principal at Boston Consulting Group, Inc., pointed out these challenges at the Asian Banking & Finance and Insurance Asia Summit 2025, held in Manila in February.
Reyes noted that the financial goals of Filipinos are often rooted in a desire to ensure security, particularly in the face of health emergencies. Unlike the typical aspirations of purchasing a home or traveling, many Filipinos aim for financial stability to cover potential medical costs.
“The top Filipino dream was actually quite surprising — it’s financial security for healthcare,” Reyes said, referencing a study by Boston Consulting Group released in November. To meet these needs, she emphasized the importance of aligning financial products with Filipinos’ aspirations, such as healthcare coverage and business development, to address the ongoing financing gap.
Challenges for MSMEs in Accessing Capital
Micro, small, and medium enterprises (MSMEs)—which form the backbone of the Philippine economy—are among those most affected by the financial system’s limitations. Fei Yong, a manager at YCP Holdings, discussed the substantial $10.5 billion (P600 billion) financing gap faced by MSMEs at the same summit.
Despite MSMEs representing over 99% of businesses in the country, contributing 36% to the economic output, and employing 67% of the workforce, they receive less than 5% of total bank loans—well below the 10% minimum required by law. These businesses often struggle with inadequate credit histories, cumbersome documentation, and exorbitant collateral requirements.
Yong explained, “Universal and commercial banks dominate the market, holding over 90% of the total loan portfolio. But out of this, only 4% goes to MSMEs.”
Meanwhile, rural and cooperative banks, which are essential to supporting businesses in the countryside, face their own financial limitations, further exacerbating the financing challenges for small businesses.
The Economic Potential of Scaling MSMEs
Yong also highlighted the untapped potential of MSMEs, noting that businesses in emerging markets like the Philippines operate at just 29% of the productivity of larger firms. If these small enterprises could scale up, their productivity could rise to 84%, contributing to a 77% increase in GDP per capita over the next two decades.
To address these gaps, Yong advocated for solutions such as credit guarantees, digital lending platforms, and alternative credit scoring models, which could help improve access to financing for MSMEs.
One promising initiative, the Philippine Guarantee Corp.’s credit guarantee facility for MSMEs, has already demonstrated success. As of June of the previous year, the program had guaranteed more than $130 million (P7.46 billion) in loans for over 43,000 MSMEs.
The Shift Toward a Digital, Advice-Oriented Financial Market
Patricia Buenaventura Nichol, partner and office head at Bain & Co., spoke about the growing economic power of younger generations, particularly Gen Z and Gen Y. These “digital natives” are projected to account for 55% of the market by 2030, up from 30% today. Despite their increasing influence, they remain largely underserved by traditional financial institutions, presenting a significant opportunity for those willing to meet their specific needs.
Nichol emphasized that financial institutions need to move beyond offering products and focus more on providing tailored advice. “We are going to start seeing a shift from what is considered product-led to something that is more advice-oriented,” she said.
In summary, while the road to entrepreneurship in the Philippines is fraught with financial obstacles, opportunities exist for innovative solutions and shifts in the financial landscape that could bridge the gap and support the aspirations of aspiring entrepreneurs and the growing young population.
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