The Philippines holds the foundations of a growing startup nation. Its large population, low median age and high GDP growth are reminiscent of Malaysia prior to its startup “boost”. The government is also doing its part, looking to the Singapore ecosystem as a model.
Digital connectivity in The Philippines
Much like its ASEAN neighbours, the Philippines has great untapped potential in its digital space. Mobile penetration exceeds the population but internet and social media levels are lower. Despite this, the Philippines has been branded as the most “social” nation in the world. Filipinos spend, on average, 4 hours 17 minutes on social media each day.
A McKinsey Global Institute report shows that improving financial inclusion in the South East Asian region could increase economic contribution from $17 billion to $52 billion by 2030. FinTech is identified as the catalyst to achieving this.
The Philippines is considered as a mobile payments leader in the ASEAN region with a prevalence that surpasses even Singapore. This is attributed to the entrance of Smart’s Smart Money in 2001 and Globe’s GCash in 2004. These companies were the earliest pioneers in mobile money and both originated in the Philippines. There has been a discernible uptake of their services since and, as a result, Filipinos have a stronger acceptance of mobile payments. An alternative explanation is that many people do not have a personal bank account. Comparatively, Malaysian’s have a stronger preference for internet payments. Either way, the important of FinTech in the Philippines is undeniable.
Recent deal flow
Startup deals have been quite stagnant in the Philippines, especially when it is juxtaposed to the rapid growth experienced by other ASEAN countries. There has been little change to the number of deals closed from 2015 and 2016. However, deal value has increased, amounting to US$6.7 million in 2016 – this is more than double the average deal value compared to the previous year. As such, it is still significantly underdeveloped compared to the region.
The FinTech sector shows much more promise for Filipino startups – 14% of FinTech deals closed in 2016 were from the Philippines. This ranks them second only to Singapore at 52%.
Goverment initiates to develop the ecosystem
The Filipino government devised a 3 stage strategy aimed at developing the startup ecosystem.
First, the Philippine Development Plan looks to set the building blocks of the overall initiative on a domestic level. Over the 5 year roll out period, from 2011 to 2016, they focused on 2 areas: competition and innovation, especially in the industry and services sectors. Filipinos are encouraged to start their own businesses, be creative about solving societal problems and improve existing systems.
The next phase, the Philippine Export Development Plan positions the country to be more attractive on an international scale.
The Roadmap to Digital Startups was announced concurrently to complement this stage.By creating an “innovation ecosystem” for startups and other businesses, the government plans to enhance the innovative capacity of the export sector and achieve 500 startups by 2020.
Finally, the Startup Ecosystem Development Plan was established in 2016. It is an action agenda devised by the Department of Trade and Industry (DTI), amalgamating the essential steps and prioritising those that are most impactful. More specifically, it lays out plans to improve inter-enterprise linkages in the small-medium enterprise space and reinforce the progress achieved in the previous stages of the strategy.