FOR MSMEs, STARTUPS: SEC hosts capital formation roadshow

THE Securities and Exchange Commission (SEC), in collaboration with the Camarines Sur Chamber of Commerce and Industry, hosted a Capital Formation Roadshow for micro, small, and medium-sized enterprises (MSMEs) and startups on Thursday, July 11, this year.

The event ran from 8:30 a.m. to 5:00 p.m., drawing over 150 participants from across the Bicol Region, with both in-person and virtual attendees via Zoom.

The SEC Roadshow, part of a national initiative to promote financial inclusion, aimed to enhance awareness of various financing options available to MSMEs and startups through the capital market. The event featured a series of presentations and panel discussions designed to inform and empower local businesses.

Naga City Mayor Nelson Legacion, represented by Mr. Reuel M. Oliver, head of the Information and Technology Office, opened the event with a welcome message. “The most challenging part of being a business owner is access to capital,” he said.

He highlighted the success of a local technology startup that began in 2007 with just two employees and angel investor funding, growing to a company with an annual turnover of over 1 billion pesos and approximately 200 employees.

The program included a keynote address from Atty. Norma Tan-Olaya, Director of the SEC Legazpi Extension Office, followed by a comprehensive discussion by Atty. Oliver Leonardo, Director of the SEC Markets and Securities Regulations Department, on "The Capital Market and How it can Benefit MSMEs." Ms. Charmaine Co, Marketing Head of Eastern Securities Development Corporation, explored "Opportunities in Crowdfunding as a Capital-Raising Activity for MSMEs and Startups." Mr. Arnold Bufi, Founder and CEO of Tipaklong Mobility Solutions, shared his success story as a crowdfunding issuer.

Further insights were provided by Atty. Roel Refran, Chief Operating Officer of the Philippine Stock Exchange (PSE), and Camille Ann Pastorel, Assistant Vice President and Associate Director of Investment & Capital Corporation of the Philippines (ICCP), who presented on "PSE IPO Listing: Paving the Way for SME Growth." Testimonials from publicly listed companies were given by Mr. Owen Kieffer Ocampo, Vice President and Head of Investor Relations at Converge ICT Solutions, Inc., and Mr. Edgar Saavedra, CEO and Chairman of Megawide Construction Corp.

In a pre-event interview, Atty. Oliver Leonardo highlighted the roadshow's goal of addressing the funding needs of MSMEs and startups, emphasizing the importance of the capital market as a funding source. Atty. Norma Tan-Olaya also underscored the dual focus of the event on business owners and potential investors, stressing the SEC's commitment to promoting safe and informed investments in MSMEs.

In the Bicol region, under the direction of Atty. Norma Tan-Olaya, the SEC has been active in partnership with advocacy networks, government, and private sectors to promote the SEC’s programs. Atty. Tan-Olaya emphasized that part of raising awareness among MSMEs involves introducing the concept of incorporation.

"We conduct seminars on how to establish corporations, particularly one-person corporations. Our seminars also cover the necessity of obtaining a secondary license from the SEC and the corresponding permit to offer investments to the public, which many business sectors are unaware of," she stated.

She also highlighted the SEC's role in digital transformation, noting the launch of online registration. "Businesses no longer need to visit the SEC office in Legazpi; they can register online. We also provide remote assistance to help users navigate the online portals, eliminating the need for travel to Legazpi," she added.

The SEC's initiatives aim to make capital formation for MSMEs and startups more accessible, promoting economic growth and stability across the region. Since the start of the Roadshow in February 2023, there has been an increase in the use of capital market-based products and services among the country's MSMEs. "A significant number have already successfully tapped into the capital market for their capital-raising activity," Atty. Tan-Olaya noted.

She emphasized that catering to the needs of MSMEs is a top priority of the Marcos administration. "The government continues to highlight the importance of providing different financing for MSMEs, especially as businesses continue to recover from the effects of the pandemic and the recent economic slowdown," she added. The SEC is one of the pioneers in recognizing MSMEs as the backbone of the national economy, given their role in stimulating domestic demand, job creation, innovation, as well as competition.

According to the UNDP report, the Philippines MSMEs make up 99.5% of the total businesses in the country, 63% of the local workforce, 5% of the country's total exports, and 40% contribution to the country's Gross Domestic Product (GDP).

However, 67% of MSMEs continue to experience credit constraints. Hence, the SEC continuously bid for financial inclusion that recognizes their needs in a broader financing instruments availability.

Under the Markets and Securities Regulation Department is the Office for the Advancement of Strategic Investment in SMEs with the aim of taking the mantle of championing the needs of the MSMEs in terms of helping gain access to finances using capital market based products and services.

The Capital Market and How it can Benefit MSMEs? Atty. Oliver O. Leonardo, Director of Market and Securities Regulations Department, SEC, discussed the various programs of SEC that can explore all possibilities for the growth of micro, small, and medium enterprises, as well as startups.

He outlined business objectives that should begin with starting and running the business, then focus on the business expansion, and ultimately aim to reach the top. The SEC observed a need to broaden the range of available financing instruments for MSMEs. To address this, the Office for the Advancement of Strategic Investment in SMEs (OASIS) aims to promote the capital market as a viable alternative source of financing for MSMEs. Director Leonardo talks about crowdfunding, offering shares to the public and potentially contributing to the financial inclusion efforts by providing improved access to funds and financial assets.

SEC provided Crowdfunding rules to crowdfunding issuer, intermediary, and investors. To crowdfunding issuer, transaction must be done through a registration of intermediary, and the disclosure of annual reports and progress updates.

To crowdfunding intermediary, a need to provide review, due diligence, and or risk assessment, as well as disclosing relevant information relating to it's crowdfunding activities.

To Investors, there's an investment limit that retail investors with income up to PHP 2M/yr- max. value of 5% total annual income, and retail investors with income of more than PHP 2M/yr- max. value of 10% of their total income per year. SEC's 888@88 goal, which aims to see a minimum of 888 companies accessing the capital market in time for the SEC's 88th anniversary in 2024.

As of March 31, 2024, the capital market tapped with 709 or 79.84% out of 888 goals, 346 total numbers of companies/issuers listed/accessing the capital market, as well as 362 total numbers of issuers through crowdfunding. Director Leonardo also talks about the SEC initiatives on capital market participation.

SEC FARMS or Securing and Expanding Capital for Farms and Agribusiness Related Modernization Schemes that engage in agricultural or agribusiness enterprise.

SEC POWERS or Securing and Expanding Capital for PowerGen Operators and Wholesale Electricity and Retail Services that can be availed by power generation and distribution companies.

SEC HOPES or Securing and Expanding Capital for HOsPital EntrepreneurS that is dedicated for the individual who established medical facilities. He also talks about the other initiatives of the SEC which is the REITS or Real Estate Investment Trust that is also aligned with the stock corporation established principally for the purpose of owning income generated assets.

Hand holding initiative for MSMEs and Startups is the CAFE SEC or Call-A-Friend and Engage with SEC that assist MSMEs and Startups to have the chance to virtually meet the resource speakers of the Roadshow and gave them a guide on the next step of raising capital through crowdfunding or listing at the exchange.

In addition, Director Leonardo tells of their upcoming initiatives which is the SEC RENT or Securing and Expanding Capital for Non Traditional Securities that is for the individual who owns a condo unit, or has an interest in building a condo and many more. Company Registration and due diligence services and initiatives. Where the business registration was made easy at SEC by the use of electronic simplified processing of application for registration of company. Opportunities in crowdfunding as capital- Raising Activity for MSME and startups Ms. Charmaine Co the president of the Philippine Young Entrepreneurs Association is the one who discussed “Building stronger and resilient enterprise through equity crowdfunding”.

She shares how equity crowdfunding will help startups and SMES in becoming stronger and more resilient enterprises. A lot of traditional crowdfunding platforms allow individuals to lend small amounts of money to entrepreneurs in developing countries to help them start and expand their business.

Ms. Charmaine said, “even traditional businesses like real estate development and manufacturing have approached them to find out more how to fundraise, and the only requirement for this is you need to be registered either in SEC, DTI, CDA and other government bodies that regulate commercial enterprise.”

Testimonial from successful Crowdfunding issuer Founder and CEO of TIPAKLONG MOBILITY SOLUTIONS, Mr. Arnold Bufi, started his crowdfunding journey in January 2022. Mr. Arnold was introduced to Mr. Brandon of Round One, the Philippines first equity crowdfunding platform, and end-to-end investment crowdfunding platform.

Prior to that, Mr. Arnold already thought of crowdfunding as a venue for capital raising for their start-up. Mr. Arnold looked for various platforms for capital raising as far away as Singapore. In January 2022, Arnold Bufi applied on Round One and was able to raise 2 million pesos, as well as concurrently raise private placement limited to 19 investors only to do the registration with the SEC for the capital raising.

“The capital we secured from that exercise is insufficient to fund our pre-seed stage, as our assessment indicates we need $23 million. Currently, we have reached about 60% of our fundraising target”, he said.

Mr. Arnold also tried in IPO or Initial Public Offering maybe in the next Ten years because they want to join in the Philippine Stock Exchange for more capital raising activity. PSE IPO: Paving the way for SME Growth To learn about tapping the capital market for capital formation through public listing, Attorney Ruel Refran, the COO of the Philippine Stock Exchange (PSE), discussed the process.

He explained how to start with the PSE and the steps for IPO listing. He emphasized that the PSE provides a platform for companies to access capital for long-term growth, serving nearly 300 listed companies. "Some of the companies that joined the PSE are now successful, like Jollibee Food Corporation and Wilcon Depot," he noted.

The second speaker in the afternoon was Ms. Anne Camille Pastorel, Assistant Vice President and Associate Director for Execution at the Investment and Capital Corporation of the Philippines (ICCP).

She covered four key areas: tapping the equity capital market, the role of an issue manager and underwriter, considerations in choosing partners, and key success factors. She also shared ICCP's mantra: "Your success is our success." Testimonial stories Two testimonials from publicly listed companies on the PSE, Converge ICT Solutions and Megawide Construction Corp, shared their experiences with public and other capital-raising initiatives.

The first testimonial, from Converge ICT Solutions, was presented by their Vice President and Investor Relations Officer, Mr. Owen Kiefer D. Ocampo. Mr. Ocampo discussed the offerings and services of Converge, emphasizing their commitment to providing quality services to SMEs. He concluded by advising businesses to explore multiple channels of capital.

The second testimonial was given by Mr. Edgar Saavedra, Chairman and CEO of Megawide Corporation. He highlighted several of Megawide's projects, such as creating livelihood and employment opportunities and addressing key infrastructure gaps, including the construction of 10,000 public classrooms.

Mr. Saavedra shared their story to inspire other entrepreneurs and MSMEs to pursue their dreams, stating, "The capital market can serve as an ally to help you achieve your goals just like we did." He also noted that the government, through the SEC, will support and guide businesses in their plans and endeavors.