Small businesses warming up to crowdfunding, says SEC

By:  Business Inquirer
Source: business.inquirer

MANILA, Philippines — SeedIn Technology, one of the country’s largest crowdfunding companies, saw small business loans reach P1.34 billion last year, revealing a thriving scene for alternative capital-raising platforms.

This was according to the Securities and Exchange Commission (SEC), which said SeedIn’s loans helped financed 259 projects as of the end of 2022.

Crowdfunding allows businesses to raise money from a large pool of small investors though an online platform.

SeedIn is one of three registered crowdfunding intermediaries registered with the SEC. The two others players were Investree Philippines and Eastern Securities Development Corp. (Round One).

“We recognize that there really is a need to broaden the financing instruments available for MSMEs (micro, small and medium-sized enterprises),” SEC chair Emilio Aquino said during a recent small business roadshow that was organized by the corporate regulator.

The SEC is pushing for the vast number of small firms to tap capital market financing, which is typically reserved for the country’s biggest businesses and conglomerates.

The roadshow highlighted crowdfunding as an easy and accessible way for MSMEs and startups to raise funds for business expansion.

Aquino said as much as 67 percent of small businesses experience credit constraints.

“Most of them rely on internal resources for their capital needs. While those who apply for traditional bank loans face tedious documentation, high interest rates and mandatory collateral requirements,” he said.

Firms such as SeedIn act as investment managers that use pooled money from small investors. On its website, the company said investments are rigorously vetted and loans are backed by collateral. In exchange, investors can earn annualized profits of 7 percent or more.

At present, MSMEs account for 99.5 percent of total businesses in the country and 40 percent of the Philippine economy.

The segment also hires 63 percent of the local workforce and constitutes 25 percent of the country’s total exports.

Crowdfunding companies are not required to register the securities as long as investments are solicited through accredited third parties, the SEC said.

The program is an initiative of the newly created SEC Office for the Advancement of Strategic Investments in SMEs.

After Davao, the SEC will hold similar roadshows in Cebu, Cagayan de Oro, Zamboanga, Bacolod, Legazpi, Iloilo, Tarlac, Baguio, the Calabarzon region, and Metro Manila.