CEBU, Philippines - Due to relatively low interest rates, the country's small and medium enterprises (SMEs) continue to be intimidated in entering the initial public offering (IPO), despite the aggressive promotion of the Philippine Stock Exchange (PSE) to encourage businesses to get capitalization from the capital market.
“Companies lately have not been listing with the PSE because of the low interest rates. Because of this, it is much easier for companies to get additional capitalization from the banks,†said PSE president Hans Sicat.
In fact, Sicat said that the SME Board, purposely created by the PSE to relax requirements of small and medium firms in entering the IPO, has only registered handful companies in the last 10 years.
At least four companies have postponed their listing last year, waiting for the right time to make use of the capital market as their funding source.
Despite this hiccup, Sicat said PSE is continuously working on its education program to attract more companies to be listed.
At present, he said the PSE is partnering with the Development Bank of the Philippines (DBP) to help small and medium companies which are interested to enter the IPO. Sicat, however, did not elaborate on the program.
Meanwhile, Cebu Business Club (CBC) president Dondi Joseph also said that Cebuano businesses are family-owned and most are organized to the scale of doing business in and around Cebu.
Joseph added that many family-run businesses feel they do not need outside capital at the expense of possibility of losing control of some most of their business.
“I think it also has to do with knowledge of the benefits of going public and how it can turn short-lived family businesses into sustainable corporations,†Joseph said.
“A lot of SMEs are not aware that raising capital in the stock market is much easier than going to the bank,†he said.
Most of SMEs still have the Filipino pre-disposition that the only source of capitalization are the banks, wherein alternative funding resources are easily available in other channels, such as the capital market, said Joseph.
Sicat, for his part, admitted that PSE still has to intensify its education awareness program for SMEs.
Cebu Chamber of Commerce and Industry (CCCI) past president Prudencio Gesta also said that Cebuanos are just too conservative to enter into IPO, which could be due to not the unfamiliarity with the ins and outs of the trade.
Gesta hopes to make strong partnership with PSE in order to provide educational awareness for Cebu-based SMEs the benefits of going public. /JMD (FREEMAN)