Plantersbank ready to assist SMEs go into franchising

(Keynote address at the 5th Filipino Franchise Show held at Megatrade Hall 2, SM Megamall on July 7, 2006)

Across the globe, more and more developing countries have placed the promotion and development of SMEs on top of their economic agenda. Because of the wealth, employment and taxes that creation of small businesses generate, SMEs are considered vital to sustainable economic growth, industrial diversification and equitable income distribution.

Here at home, SMEs play a critical role in our economy. They account for 90 percent of the country’s registered business enterprises, contribute 25 percent of GNP, and provide jobs to half of our labor force. They are considered a lead section in stimulating economic growth, alleviating poverty, and promoting a strong middle class. Recognized as an engine of growth and anchor for job creation, the sector is expected to provide most of the 1.5 million jobs that the government seeks to generate each year to address widespread poverty.

Because of their importance, SMEs enjoy strong government support. Employing a variety of policies, government has deliberately sought to develop a vibrant, globally competitive SME sector.

In recognition of the vital role of SMEs in national development, we at Plantersbank have decided to focus on SMEs. For almost 34 years now, we have devoted our entire resources and organization to helping small Filipino entrepreneurs. It has been a fulfilling journey that has enabled us not just to do business and make profits, but more important, to also contribute in a vital way to our country’s progress.

Our involvement with the small Filipino entrepreneur has attracted four prestigious international institutions who became our partners and shareholders in Plantersbank. They are the Netherlands Development Finance Co. or FMO, the Asian Development Bank (ADB), the International Finance Corp. (IFC). Together they own close to 40 percent of the bank. Because of our pioneering effort in supporting SMEs, Plantersbank has been a recipient of numerous awards and citations from government, multilateral and guarantee institutions for excellence in SME finance. In recognition of the success of our SME lending model, we have been asked to share our learnings with other banking institutions in foreign countries. Last year, we were made a subject of a study as one of three banks in the whole world which successfully pursued social objectives while realizing superior returns for shareholders, otherwise known as double bottom line banking. The study which was presented before the conference on Global Poverty at the Harvard Business School, also showed that during the 10-year period 1995 to 2004, we outperformed the banking industry in terms of asset and revenue growth, and return on equity.

Our partnership with the small Filipino entrepreneurs has been a very fulfilling undertaking. But it has not been easy. Then as now, compared with large corporate accounts, SMEs were considered more risky, difficult and costly to lend to. A bank catering to SMEs had to be prepared to go beyond banking. In our case, we had to customize and design our products to suit the needs of SMEs, do a lot of handholding and provide our clients a variety of non-financial assistance and support to help strengthen their operations and build their capacity to pay.

For example, in partnership with the IFC of the World Bank, we established SME.com, an Internet company, to provide SMEs with web-based business solutions designed to help them manage their businesses better, expand markets and become globally competitive. Through a membership program designed to establish an e-Community of SMEs in the Philippines, SME.com enables SMEs to put their businesses in the world market through the world-wide web. Today, the SME.com website enjoys an average of 24,000-36,000 hits per day, making it one of the top 50,000 websites among 16 million worldwide. It has a venue called SME BizTalk where entrepreneurs can share their thoughts and ideas and open business opportunities. It also has a weekly electronic newsletter called SME BizLink which is regularly sent to all its subscribers.

To free our SME clients from tedious day-to-day cash management functions so that they can concentrate on growing their businesses, we offer them a package of cash management solutions. We also have the SME proposition, a package of customized facilities offering financial services and technology solutions to help simplify the SMEs’ daily administrative tasks. It comes bundled with a free desktop computer and printer that give SMEs an edge. And in partnership with PLDT our SME proposition package now comes with a high-speed broadband Internet access which opens up limitless possibilities for our SME clients to further expand their businesses and reach a much broader clientele.

Much still needs to be done to develop and grow our SME sector to strengthen even more its capacity to contribute to national economic development. Because of their size and organizational structure, SMEs are easily affected by economic downturns. Their access to capital, information, market and technology is poor. The sector’s growth has likewise been slower than desired. Studies show that we need more entrepreneurs to catalyze change and actuate the development process by creating small businesses.

The rise of the young franchising industry is, therefore, a most welcome and timely development. To us in the Bank, franchising is another way of helping develop SMEs. It at once addresses many needs and weaknesses of SMEs that are perceived to be obstacles to the growth of the sector. Through franchising, aspiring entrepreneurs can set up a business with little capital. AFFI members have franchise offerings for as low as P150,000. They are assured of a ready market, proven technology and formula for success that minimizes the risk of failure. Franchisees enjoy continuing access to modern management and operating systems which are normally available only to companies with huge resources. Opportunities for enhancement of skills and competencies are also available to them through franchising.

Because of our total commitment to our country’s SME sector and our belief that franchising can play a very important role in developing SMEs, Plantersbank is prepared to work with the Association of Filipino Franchisers, Inc. to develop a financing plan to enable serious small entrepreneurs to get into the franchising business.