Their individual financial capabilities notwithstanding, micro, small and medium enterprises, or MSMEs, by sheer number, served as the country’s lifeline at the height of the pandemic. Despite their gargantuan role in keeping the economy afloat, these small companies ironically still struggle to gain access to financial support.
As such, Ramon S. Monzon, the president and chief executive officer of the Philippine Stock Exchange, or PSE, has made it his mission to support MSMEs on their journey toward financial independence. He promises to guide and assist them as they navigate the path to self-sufficiency.
The Daily Tribune’s Straight Talk recently had the privilege of sitting with Monzon to discuss his unwavering enthusiasm in the pursuit of transforming the local capital market into a modernized and efficient platform.
Notably, among the programs that he said he will persistently advocate for is the prioritization of small businesses, often family-owned, by eliminating obstacles and paving the way for their expansion. This growth will not only benefit these ventures but also create sustainable livelihoods for others.
“Startups have massive potential but they usually do not have a long list of track records but you know they are capable. They need investors, which in turn needs to be protected. So, we are making sure that these small ventures are equipped with proper knowledge on how they can improve their finances by tapping the capital market,” Monzon said.
Hand-holding novices
“They need capital and they have no access to loans, and they don’t know how to do an initial public offering, or IPO, so we walk them through and we call that hand-holding,” he added.
At the height of the pandemic in 2020, when almost the entire society was paralyzed, the Philippine Statistics Authority revealed that MSMEs accounted for 99.51 percent of businesses nationwide.
To encourage the participation of fledglings in the stock market, PSE has liberalized its IPO listing rules through the Listing Engagement and Assistance Program, or LEAP, according to Monzon.
An IPO involves a privately owned company listing its shares on a stock exchange, making them available for purchase by the general public.
Furthermore, the local bourse has introduced a sponsor model provision for listing applicants in the SME board. Accredited sponsors by the PSE can endorse applicants who may not qualify based solely on the listing requirements. It also reduced the operating history requirement for SME board applicants from three years to two years.
Monzon said he believes that when capital markets are efficient, businesses can raise funds more quickly and easily, allowing them to invest in expansion, research and development, and new opportunities. It also leads to a lower cost of capital for businesses.
For him, democratized access to financial tools and services will also help businesses not just achieve their long-term goals, but also to absorb financial shocks.
He added that encouraging more companies to go public will simultaneously increase the liquidity of financial assets; therefore making it easier for investors to buy and sell securities.
For this year, Monzon said the PSE expects at least six maiden offerings or IPOs.
“We are expecting six IPOs for the year, starting with the listing of Citicore Renewable Energy Corp. Since no new REITs were added in 2023, we hope to see REIT IPOs make a comeback this year,” Monzon said.
The anticipated capital raising for the year, according to Monzon, could likely reach P175 billion, P40 billion of which would come from maiden listings.
Aside from opening up the PSE for more offerings, the PSE will also pursue this year the reduction of the stock transaction tax from 0.6 percent to 0.1 percent and the reduction of the dividend tax to non-resident aliens from 25 percent to 10 percent to harmonize the cash and property dividend rate.
The PSE’s strategic priorities for 2024 to 2026 include expanding the bourse’s product portfolio, improving market liquidity, and pursuing new growth areas.
To support these, a proposed board lot amendment was put in place to cut the minimum investment to buy stocks at the PSE to as low as P100.