Small businesses, big economic impact

By: Linda B. Bolido, Philippine Daily Inquirer, 17 Jan 2020

Zubuchon has successfully ventured out of Cebu through SM malls.

Big businesses may get all the attention but based on government statistics, the real backbone of the Philippine economy are almost a million enterprises ranging from micro to medium.

The Department of Trade and Industry (DTI), using statistics gathered by the Philippine Statistics Authority (PSA), says of the million or so businesses operating in the Philippines as of 2018, 998,342, or 99.52 percent are micro, small and medium enterprises (MSMEs).

Even more significant, these modest ventures generated 5.71 million jobs, or more than half, 63.19 percent, of the country’s total employment. And micro enterprises, the tiniest of these mini enterprises, accounted for the largest share of the employment generation, 28.86 percent, followed by small enterprises with 27.04 percent.

Large enterprises generated only a total of 3.33 million jobs, or 36.81 percent, of the country’s overall employment.

DTI adds, “In terms of value added, the MSME sector contributed 35.7 percent of the total with manufacturing contributing the largest share of 6.87 percent. Wholesale and retail trade and repair contributed 6.58 percent followed by financial intermediation with a share of 6 percent.”

MSMEs also figure prominently in export trade, accounting for 25 percent of the country’s total revenue from sales to other countries. It is estimated that some 60 percent of the country’s exporters are MSMEs. The enterprises contribute to exports through subcontracting arrangement with large firms, or as suppliers to exporting companies.

Despite all this, MSMEs do not always have an easy time getting established. Financing remains a problem and, despite the growing numbers of government-authorized micro-lenders and financing institutions, many are still dependent on loan sharks who impose a 20 percent interest, thus known as 5/6 lenders. A P100 loan has to be repaid P120.

A problem that affects both MSMEs and consumers, however, is meeting the demand. Consumers are frustrated by the fact that they often are unable to get a steady supply of MSME products they like. Many MSME products are available only in trade fairs or tiangge.

While MSMEs can meet the demand, getting their products to consumers is usually not cost-effective because of the transport cost, unless the client orders in bulk.

A growing number of these modest businesses have found a base in SM Supermalls to make their products accessible and to expand their client bases.

Oryspa Solutions, Inc. founder and chief executive officer Sherill Quintana opened her first store in SM Calamba, which, she says, really helped boost sales.