nestor a espenilla, jr : coming together for msme development speech by mr nestor a espenilla, jr, governor of bangko sentral ng pilipinas ( bsp, the central bank of the philippines ), during the moa signing of the bsp, dti, mcpi and append, manila, 17 september 2018. * * * department of trade and industry ( dti ) secretary ramon m. lopez ; mr. kamrul h. tarafder, board trustee of the microfinance council of the philippines, inc. ( mcpi ) ; mr. edgardo f. garcia, chairperson of the alliance of philippine partners in enterprise development, inc. ( append ) ; members of the monetary board ; co - workers in government ; fellow bspers and advocates of financial inclusion and msme development ; ladies and gentlemen ; good afternoon. the msme sector is a crucial driver of the economy, making up 99. 6 % of our country ’ s enterprises or registered business firms. msmes generate 61. 6 % of employment. thus, developing, empowering, building the capacities of msmes and including them in the financial system, fuels the foundation of our economy as the engine for broad - based growth. there are currently many existing initiatives for msmes. dti ’ s negosyo centers, among many other programs, serve as “ one - stop - shops ” for msme registration, business development and advisory services, and market exposure, among others. our network of microfinance nongovernment organizations ( mf ngos ) is a significant source of financial products and services for our country ’ s microentrepreneurs. but despite existing efforts, challenges with msme development still persist. these challenges include lack of access to resources such as technology, skilled labor, and information. today, however, we shall focus on the particular issue of financial access. msmes are unable to reach their full potential because of difficulty of credit and financial access. currently, only 6. 6 % and 9. 8 % of total loans in the banking system and total businesses comprise investments to msmes. this low level of investment in msmes translates to capital constraints compelling msmes to resort to internal savings or earnings. a world bank report states that 81. 2 % of philippine enterprises rely mostly on internal funds to finance their investments. only 10. 1 % of enterprises use bank financing. as a staunch advocate of financial inclusion and of promoting

of the shortfall in income since 2007 compared to its pre - 2007 trend ( brazier 2019 ). 2 for example, acemoglu and zilibotti ( 1997 ), arestis and demetriades ( 1997 ), and beck and levine ( 2004 ) provide evidence that the financial sector has a positive role on economic growth. 3 the ‘ efficient market hypothesis ’ was popularised by fama ( 1970 ). complete markets were theorised by arrow and debreu ( 1954 ). 4 for example, markets could be inefficient due to information asymmetries, transaction costs, market psychology, sticky prices, monopolistic competition, or credit constraints. 5 drehmann et al. ( 2012 ) and lang et al. ( 2020 ) highlight the importance of cyclical risk for financial stability. 6 glasserman and young ( 2015 ) and acemoglu et al. ( 2015 ) discuss the risk of contagion in the financial system. 7 woods ( 2022 ) discusses alternative approaches to buffer usability. 6 / 7 bis central bankers'speeches 8 see bank of england ( 2021 ). 9 see chatterjee ( 2022 ) for a comparison of the uk financial conditions index for the gfc and covid. 10 lloyd et al. ( 2021 ) shows that foreign shocks are a key driver of domestic macroeconomic tail risks. bluwstein et al. ( 2020 ) also show that global factors can predict financial crises. 11 see czech et al. ( 2021 ). 12 bank of england ( 2021 ) provides more details on vulnerabilities associated with market - based finance and liquidity mismatch in open - ended funds, in particular. 13 in q1 2022 financial stability in focus bank of england sets out the role of cryptoassets and defi in the financial system and identified potential risks associated with them. 14 breeden ( 2022 ) talks about the economy ’ s transition to net - zero, and the role central banks can play to support it. 7 / 7 bis central bankers'speeches