SME in the Philippines. ASEAN 2017

1. Situation of MSMEs
in the Philippines
Maria Luisa Aquino
Rowena Cabingas
Darius Dasig
Clarence Paredes
Josefino Pascual Jr.
Manny Zabat

2. SITUATION OF MSMES IN THE
PHILIPPINES
Presentation Content:
MSMEs In The PH – Going Beyond
survival, ASEAN opportunities, issues
and trend
Defining MSMEs – What you need to
Know
Government Programs for MSMEs –
Opportunities you should know
Conclusions
Inspiring Stories
Open Forum

3. PHILIPPINE MSMES: GOING BEYOND
SURVIVAL
• In ASEAN, small and medium-sized
enterprises (SMEs) account for more
than 90% of all enterprises, employ 50-
99% of the domestic workforce and
contribute around 32-77% of total
domestic output in their respective
countries. In the Philippines, the
number of SMEs grew by 66% from
492,510 in 1995 to 816,759 in 2011.
Similarly, the numbers of those
employed by these firms have grown
by 45.7% from 2.7 million in 1995 to 3.9
million in 2011.

4. PHILIPPINE MSMES: GOING BEYOND
SURVIVAL
• Overall, SMEs face numerous constraints to
further growth and productivity, including
credit constraints, cumbersome registration
procedures and strict regulatory
environments, and other challenges related
to an economic playing field that is not level
between large and small firms. SMEs,
especially start-ups, have lower probabilities
of survival than larger firms, leading to high
rates of market entry and exit across nearly
all economic sectors.

5. THE PHILIPPINE MSME SITUATIONS AND
ITS ASEAN NEIGHBORING SME
• Streamlining regulations
Examining the Philippine policy
environment for SMEs, compared to its
ASEAN neighbors – economist find
disparity between performance of SMEs
to the large number of barriers prevalent
in the country’s business climate.

6. THE PHILIPPINE MSME SITUATIONS AND
ITS ASEAN NEIGHBORING SME
The assessment noted SMEs weakness
specifically –
limited access to finance, technology and
skills;
 the persistence of information gaps;
and difficulties with product quality and
marketing.
In spite of substantial trade and investment
liberalization, penetrating the export market
and making SMEs internationally competitive
remain persistent challenges.

7. THE PHILIPPINE MSME SITUATIONS AND
ITS ASEAN NEIGHBORING SME
The Philippines receives mediocre scores – barely average
in ASEAN – on the eight policy dimensions measured by
the ASEAN SME Policy Index developed by the Economic
Research Institute for ASEAN and East Asia (ERIA). This
index spans the key aspects of the policy and business
environment for SMEs,
 spanning institutional framework;
 cheaper and faster start-up and better legislation and
regulation for SMEs;
 access to information and supporting services; access
to finance;
 technology and technology transfer;
 international market expansion;
 promotion of entrepreneurial education;
 and developing stronger, more effective representation
for SMEs’ interests.
Indications: simplified and streamlined registration
processes as well as broader governmental support for
business start-ups could be further enhanced in the
Philippines

8. THE PHILIPPINE MSME SITUATIONS…
• Supporting women entrepreneurs
In an examination of the extent of corporate
entrepreneurship, or entrepreneurial behavior in
established mid-sized and large organizations, studies
finds evidence of a shortage in the number of
employees taking on leadership roles in the
entrepreneurial activities of their respective
organizations in the country.
**According to demographic characteristics, it
confirms the potential of SMEs to foster women’s
empowerment as they consistently show greater
involvement in leadership capacity for both new idea
development and the implementation of these ideas
across both full-time and part-time categories.
(Source: Global Entrepreneurship Monitor 2013)

9. THE PHILIPPINE MSME SITUATIONS…
• Boosting crisis resilience of SMEs
researchers find that limited access to
government-issued credit, and the numerous
procedures and fees required of firms to secure
government aid are among the factors that
slowed (and in some cases may have prevented)
the recovery of enterprises in the typhoon-hit
areas.
(source: Asian Institute of Management Policy Center, a case study
of the recovery efforts of a handicrafts enterprise in Eastern Samar,
in the wake of Super Typhoon Yolanda in 2013)
The Challenge for Agriculture entrepreneurs to
face recovery when Typhoon hits them.

10. MICRO, SMALL AND MEDIUM
ENTERPRISES – WHAT YOU NEED TO
KNOW• Republic Act 6977: Magna Carta for MSMEs
MSMEs are defined as any business activity/enterprise engaged in industry, agri-business/services, whether
single proprietorship, cooperative, partnership, or corporation whose total assets, inclusive of those arising
from loans but exclusive of the land on which the particular business entity's office, plant and equipment are
situated, must have value falling under the following categories:
A. By Asset Size*
Micro: Up to P3,000,000
Small: P3,000,001 - P15,000,000
Medium: P15,000,001 - P100,000,000
Large: above P100,000,000
B. Alternatively, MSMEs may also be categorized based on the number of employees:
Micro: 1 - 9 employees
Small: 10 -- 99 employees
Medium: 100 -- 199 employees
Large: More than 200 employees

11. MSME BY NUMBERS
A. Number of Establishments
Based on 2015 statistical data
provided by the Philippine Statistics
Authority (PSA), there are 900,914
establishments in the Philippines. Of
these, 99.5% (896,839) are micro, small,
and medium enterprises (MSMEs) and
the remaining 0.5% (4,075) are large
enterprises.
FIGURE 1.1 DISTRIBUTION OF ESTABLISHMENTS BY ENTERPRISE SIZE

12. MSME BY NUMBERS
B. SECTORAL DISTRIBUTION
Majority of the 896,839 MSMEs in
2015 are in the wholesale and retail trade;
repair of motor vehicles and motorcycle
industries with 417,094 business
establishments; accommodation and food
service activities, 119,037; manufacturing,
113,949; other service activities, 56,904;
information and communication, 35,171; and,
financial and insurance activities, 34,384.
These industries accounted for about 87.0%
of the total number of MSME establishments.
FIGURE 1.2 DISTRIBUTION OF MSMES BY INDUSTRY

13. MSME BY NUMBERS
C. GEOGRAPHICAL SPREAD OF MSMES
Majority of the MSMEs in
operation in 2015 can be found in the
National Capital Region (NCR), with
190,166 business establishments; Region
4-A (CALABARZON), 131,011; Region 3
(Central Luzon) with 100,880; Region 7
(Central Visayas) with 53,218; and Region
1 (Ilocos), 47,996. These top five (5)
locations accounted for about 58.4% of
the total number of MSME
establishments in the country.
FIGURE 1.3 DISTRIBUTION OF MSMES BY REGION

14. MSME BY NUMBERS
D. EMPLOYMENT
MSMEs generated a total of 4,784,870 jobs in 2015 versus 2,981,819 for the large
enterprises. This indicates that MSMEs contributed almost 61.6% of the total jobs generated by
all types of business establishments that year. Of these, 29.4% or 2,285,634 jobs were
generated by micro enterprises; 25.3% or 1,968,452 by small enterprises; and 6.8% or 530,784
by medium enterprises.
By industry sector, MSMEs in the wholesale and retail trade; repair of motor vehicles
and motorcycles generated the most number of jobs with 1,707,103 in 2014 followed by
MSMEs in manufacturing, 764,184; accommodation and food service activities, 666,254;
education, 273,838; and financial and insurance activities, 230,137.
Majority of the jobs are generated by MSMEs in the National Capital Region (NCR)
with 1,471,465 jobs; followed by MSMEs in Region 4-A (CALABARZON), 676,201; Region 3
(Central Luzon), 484,084; Region 7 (Central Visayas), 324,780; and Region 11 (Davao), 234,716.

15. MSME BY NUMBERS
FIGURE 1.4 DISTRIBUTION OF ENTERPRISES BY TOTAL EMPLOYMENT
Do you agree that
MSMEs can reduce
unemployment rate
in the country?

16. MSME BY NUMBERS
• SALES AND CENSUS VALUE-ADDED
In terms of value-added, the MSME sector contributed 35.7%1 of the total with
manufacturing contributing the largest share of 6.87%. Wholesale and retail trade and repair
contributed 6.58% followed by financial intermediation with a share of 6%.
Within the sector, small enterprises accounted for the largest share of 20.5%.
Medium enterprises followed with a share of 10.3% while micro enterprises registered a share
of 4.9%.
Among small enterprises, wholesale and retail trade and repair contributed with the
most with a share of 4.07% followed by manufacturing with a share of 3.82% while financial
intermediation was next with a share of 3.35%. For medium enterprises, manufacturing
accounted for the biggest share of 2.77% followed by electricity, gas, and water with a share
of 1.92% and financial intermediation with 1.87%. For micro enterprises, wholesale and retail
trade and repair represented the largest contribution of 1.73%.

17. MSME BY NUMBERS
• FIGURE 1.5 2006 VALUE ADDED (IN MILLION PESOS)*
*LATEST AVAILABLE DATA

18. MSME BY NUMBERS
F. EXPORTS CONTRIBUTION OF MSMES
MSMEs account for 25% of the country’s
total exports revenue. It is also estimated
that 60% of all exporters in the country
belong to the MSME category. MSMEs
are able to contribute in exports through
subcontracting arrangement with large
firms, or as suppliers to exporting
companies.

19. ROLE AND IMPORTANCE OF MSMES
MSME play a major role in the country’s economic
development through their contribution in the
following;
• Rural development and decentralization of
industries
• Rural industrialization
• Creation of employment opportunities and more
equitable income distribution
• Use of indigenous resources
• Entrepreneurial development

20. ROLE AND IMPORTANCE OF MSME
• They are vital in dispersing new industries to
the countryside and stimulating gainful
employment.
• SMEs are quick in assimilating new design
trends, developing contemporary products,
and bringing them to the marketplace ahead
of the competition.
• SMEs are notably skillful in maximizing the use
of scarce capital resources and are able to
partner with large firms by supplying locally
available raw materials in unprocessed or
semi-processed forms.
• SMEs can act as the seedbed for the
development of entrepreneurial skills and
innovation.

21. MSME CONTRIBUTION TO THE
ECONOMY
• SMEs contribute to the creation of wealth,
employment, and income generation, both in
rural and urban areas, thus, ensuring a more
equitable income distribution.
• SMEs provides the economy with a
continuous supply of ideas, skills, and
innovations necessary to promote
competition and the efficient allocation of
scarce resources.
• As of 2009, the MSME sector accounted for
about 99.6% of the registered businesses in
the country by which 63% of the labor force
earn a living. Around 35.7% of the total sales
and value added in the manufacturing come
from MSMEs as well.

22. GOVERNMENT PROGRAMS FOR MSMES
– THE OPPORTUNITIES WE SHOULD
KNOW
1. Pondo para sa Pagbabago at Pag-asenso
(P3) - is a funding program to provide
microenterprises an alternative source of
financing that is easy to access and made
available at a reasonable cost.
This program gives a boost to the
development of the MSME sector, particularly the
microenterprises that comprise about 90% of
registered enterprises in the country. Loanable
amount has interest rate ranging from 20 to 25%
per annum with no collateral requirement. This
rate is substantially lower than what is being
charged by 5-6 loan sharks.

23. GOVERNMENT PROGRAMS FOR MSMES
– THE OPPORTUNITIES WE SHOULD
KNOW
• P3 Program Funding is in line with the
President’s directive to provide
affordable micro-financing program for
MSMEs. The 2017 General
Appropriations Act (GAA) included Php
1.0 Billion for financial assistance
subsidy to microenterprises under the
P3 Program. Depending on the
performance of this initial funding, P3
may be scaled up and included in the
GAA for subsequent years.

24. GOVERNMENT PROGRAMS FOR MSMES
– THE OPPORTUNITIES WE SHOULD
KNOW
2. The Livelihood projects of the national and
local government to improve the socio-
economic conditions in disadvantaged
communities in the Philippines by encouraging
the establishment of small-scale or alternative
income-generating activities by conducting of
training, granting of capital, donation of
machine/equipment/tools. (even for farming
business such as hand tractor, rice tresher, rice
reaper).

25. • Fact Check – the DTI was given by the
national government 770 million pesos
to fund all its project in supporting
MSMEs related to improving its
production facility.
• One good example is 3 million budget
given to Gapan Tsinelas cooperative
last year, from which this has to make
priority of providing equipment and
facility to help cutting procedure easier,
thus improving their efficiency in
tsinelas production

26. 3. Construction of business center
building like OTOP Store or known as
Tindahang Pinoy which shows the
creativity, ingenuity, values and culture of
the people of the different places of the
Philippines.
• The DTI wants to provide an
opportunity that boost Filipino
entrepreneurial minds, to be creative in
a sense that one can create product
that is value added instead of mere
producing raw materials.
GOVERNMENT PROGRAMS FOR MSMES
– THE OPPORTUNITIES WE SHOULD
KNOW

27. ASSISTANCE PROVIDED TO OTOP
ENTREPRENEURS
• Business counseling
• Skills and entrepreneurial training
• Product design and development
• Appropriate technologies
• Marketing
***The Medium-Term Philippine Development
Plan (MTPDP) 2004-2010 outlines the dual
strategies of product development through OTOP
and credit provision through SULONG (SME
Unified Lending Opportunities for National
Growth) to support 3 million entrepreneurs and
generate 6 to 10 million jobs.

28. REPUBLIC ACT 10644 THE GONEGOSYO
ACT OF 2015
4. GoNegosyo
The Act seeks to strengthen
micro, small and medium enterprises
(MSMEs) to create more job
opportunities in the country. It was
signed into law by the President Benigno
S. Aquino III on 15 July 2014, and which
took effect on 13 January 2015. The
Department of Trade and Industry (DTI)
issued Department Administrative Order
(DAO) No. 14-5 Series of 2014:
“Implementing Rules and Regulations for
Republic Act No. 10644".

29. GO’NEGOSYO FEATURES
• The law seeks to promote “job generation
and inclusive growth through the
development of MSMEs” in the country
• Establishment of “Negosyo Centers” in all
provinces, cities and municipalities to
promote “ease of doing business and
facilitate access to services for MSMEs
within its jurisdiction”
• Technology transfer, production and
management training, and marketing
assistance for MSMEs

30. GO’NEGOSYO FEATURES
• Establishment of a Philippine Business
Registry Databank under the Department of
Trade and Industry (DTI) to serve as a
database of all business enterprises in the
country
• Establishment of a Start-up Fund for
MSMEs “to provide financing for the
development and promotion of MSMEs in
priority sectors of the economy to be
sourced from the MSME Development
Fund and BMBE Fund
• Recomposition of the MSME Development
Council and its additional functions.

31. GO’NEGOSYO UPDATE
• Last June 17, 2017 the DTI report state
that there are 538 Go Negosyo Centers
around the country. The centers
believed to provide one stop center for
start-up entrepreneur to register their
business, get assistance in training and
development of each registered
business.

32. CONCLUSION
• At the onset of a new year, the Philippines is being emphasized as one of the promising
global markets with an overall positive economic outlook.
• Aside from the big corporations driving such impressive growth, small and medium
enterprises (SMEs) have been putting in significant numbers to the nation’s economic
upswing.
• In 2011, Philippine SMEs also accounted for 32 percent of the country’s GDP, according
to former Sen. Edgardo Angara, who lauded their invaluable contributions in his
keynote address at the Philippine Home-Based Business and Career Summit Expo,
saying that “MSMEs (micro, small and medium entrepreneurs) are the real backbone of
our economy. People do not realize that (their) businesses have greater direct impact
on Filipinos’ lives than do big players. But more than this, (they) provide opportunities
to those who could not have started businesses otherwise.”

33. CONCLUSION
• Small and medium enterprises (SMEs) are also said
to “stimulate domestic demand through job
creation, innovation, and competition,” making
them “a driving force behind a resilient national
economy,” according to a report from the Asian
Development Bank.
• The report said this sector has the “potential to
encourage international trade” and that
“prioritizing SME development is therefore critical
for promoting inclusive economic growth in most
economies in Asia.”
• MSMEs also play a big role in the country’s
employment and job generation. With 3.872 million
jobs created in 2011, the sector accounted for 61
percent of the local workforce. This was more than
the 2.473 million employment opportunities
generated by large enterprises.

34. CHALLENGES AND OPPORTUNITIES
• To further support the growth of this
sector, the 2011-2016 Micro, Small and
Medium Enterprise (MSME)
Development Plan aims to address the
key challenges and constraints that
continue to prevent this sector from
realizing its full potential and boosting
the country’s industrial growth.

35. • It is looking at raising the economic
contribution of SMEs to 40 percent of gross
value added and generating two million
new and sustainable jobs by 2016.
• The 2011-2016 MSME Development Plan
also aims to develop a vibrant MSME sector
by creating an enabling business
environment as well as providing
government support to strengthen MSME
productivity and competitiveness. Aldaba
also suggests that “to boost SME
competitiveness, pursuing promotion and
development of outsourcing arrangements
would be important.”

36. • Since most successful entrepreneurs start out small,
the MSME sector also provides a training ground for
start-up businessmen in managing and growing their
business. These budding entrepreneurs would soon
become the top players in the business sector. The
sector is a rich source of innovation and ideas, what
with all the many types of business concepts people
come up with or get into.
• The DTI also listed business environment, access to
finance, access to markets, and productivity and
efficiency as four areas where SMEs face challenges.
While statistics and the lure of a fledgling business
can be promising, the attrition rates for startup
MSMEs can also be a cause of discouragement for
some, which can go as high as 50 percent.

37. INSPIRING STORIES
• CHOCOLATE WARRIOR
The success story of Mrs. Raquel
Chua – tagged as the chocolate queen in
Cebu. She owned the Ralfe Gourmet located
in Cebu, that sold tablea products sold
domestically and even internationally.
In order to protect the company’s
innovative ideas, DTI assisted Chua to register
her intellectual property with the Intellectual
Property Office of the Philippines IPOPHL), an
attached agency of the department.
Chua started encouraging cacao farmers to plant,
provide a market for them and later discover the idea
of adding value to such raw material.

38. INSPIRING STORIES
• THE SWEET LIFE OF THE CALAMADERAS
OF BOHOL
“I support the development of the calamay
industry. In the activities that required our
presence, I was among those who attended
and encouraged others to participate in the
meetings and trainings. I was also one of those
who participated in the crafting of the calamay
strategic plan,” Maribiel Bucog, a Boholana
micro-entrepreneur, said.
From a simple cottage industry, calamay making has transformed
into a real community based business --- truly a sweet success.

39. INSPIRING STORIES
• Human Nature Philippines
Human Nature (Gandang
Kalikasan Inc.) began humbly, but it
always had lofty goals: to make
ecofriendly and sustainably produced
cosmetics and toiletries, while
incorporating Gawad Kalinga’s vision to
help disadvantaged Filipinos. The success
that met the company—measured not
just by profit, but by the number of lives
changed—exceeded expectations. From their living room, Maloto sisters started
changing the lives of the Filipino poor
communities, not until they realized what
could’ve impacted the nation by now– a bigger
enterprise.

40. While working as volunteers for Gawad Kalinga (GK)
in the U.S., sisters Anna and Camille Meloto,
together with Anna’s husband, Dylan Wilk, saw the
trend of natural and organic products and dreamt of
a way to make these products, while also involving
GK communities.
While working as volunteers for Gawad Kalinga (GK)
in the U.S., sisters Anna and Camille Meloto,
together with Anna’s husband, Dylan Wilk, saw the
trend of natural and organic products and dreamt of
a way to make these products, while also involving
GK communities.
Human Nature was meant to be a model client,
using only all-natural ingredients bought at fair
prices from GK farmers who engage in sustainable
practices. “We have experimental farms that
propagate [plants like] sunflowers, soy, and
passionfruit, which we could then buy,” says Anna.
One of the most successful Social Entrepreneurs to date,
Human Nature continues to impact the lives of million
Filipinos.

41. The Melotos bootstrapped the entire
enterprise, working from home, and doing
everything—from bottling the products and
slapping on labels to selling and delivering
the first batches—themselves.However, they
realized that they could have more impact
along the value chain if they also engage
resellers for their products.
Dylan noted that public schoolteachers with a
monthly salary of P6,000 could augment their
income via Human Nature. “Most salaried
workers in the public school system, and in
the rank-and-file [of public and private
companies] don’t earn enough... They always
need a sideline,” says Anna.

42. To date, there are 30,000 individual dealers in the
Philippines alone. These are mostly women, aged 25
to 40, each one of whom, Anna says, could earn as
much as P30,000 monthly from direct selling.
Human Nature didn’t stay home-based for long, as
the fledgling company moved to its first office in
February 2009.
It’s a far cry from the small business the sisters initially
envisioned.
Quoting her husband, however, Anna points out, “If
you really want to help, you can’t keep it small,
because the problem is so big that the solution can’t
be small also. The problem that we identified was
poverty and unemployment in the Philippines. So if
we were to employ a lot of people, it needs to be a
big business.”

43. INSPIRING STORIES
• Man Pomade and Gears Corporation
When he was much younger, Brian Baylosis, the 22-year-old
CEO and Founder of Man Pomade and Gears Corporation,
was already fond of experimenting with different
hairstyles. He had his hair shaved, grew it long, cut it short,
sported emo bangs, and even once had a mohawk. It's safe
to say that, even as a kid, he was not afraid to take risks,
always game to experiment with his mane. The problem
was, back then, men's grooming products were very limited.
There were so many haircuts and hairstyles to try, yet, there
weren't too many hair products specifically made for men.
"Before, I used clay, wax, and gels," Brian tells FHM.com.ph.
"But as I grew older, I became curious with what oldies
called pomada. So when my cousin asked me to try it, I
obliged, and true enough, I was satisfied. I used it every day
since then. Then one day, an idea came to me, 'What is
pomade and what if I make some on my own? I researched,
sought help from professionals, and eventually, Man
Pomade was born."
This 22-Year-Old Is The CEO Of His
Very Own Pomade Company

44. INSPIRING STORIES
Two years ago, Brian started building the business all by himself.
Driven and determined to succeed, he used the knowledge he'd
learned studying business at De La Salle Lipa to fuel his
passion. "Mag-isa lang ako nung simula kasi ayaw pa maniwala
ng parents ko na papatok yung pomade business. Binigyan lang
nila ako ng puhunan, tapos ako na bahala sa lahat, he
remembers. I started selling my products online. I created an
Instagram account and Facebook page for it. Dati I would do
meet-ups sa Batangas City and distribute my product sa mga
local barbershops. Naalala ko dati nung meet-ups, naghihintay
ako for two hours para lang sa isang customer na bibili ng isang
product, yung smallest pa.“
The young boss started the business in their backyard. "I
remember, sa simpleng kawali pa kami nag-be-brew ng pomade
nun, he fondly recalls. But through the years, the demand for his
product has increased, forcing him to hire more people and
open two workstations, one in Batangas and another in Manila.

45. INSPIRING STORIES
My parents were shocked with the sales.
Kahit ako di ko in-expect na dadami yung
orders. Dahil sa lakas ng demand, we
decided to put up a store sa Taft, sa tapat
lang ng DLSU. Noong opening day,
nakakagulat kasi yung pila hanggang sa
labas ng building. Ako pa mismo ang
nag-cashier noon.

46. In September of 2016, Brian opened two
branches in SM Sta. Rosa and SM North
to test if his pomade could actually
compete with other more popular
products. True enough, there was a
growing market of grooming-obsessed
men to be tapped. Sales were beyond
good. There were also a number of
franchising inquiries. Most of them were
and still are shocked to know that the big
man behind the business is only 22 years
old.

47. INSPIRING STORIES
"Maybe the reason why they love our
product is that, maliban sa effective ito,
ay napapaganda rin ang buhok nila," he
explains. "I made sure that the formula
that we created suits any type of hair,
and won't leave your hair damaged,
unlike yung ibang products na nakakasira
ng buhok. Iba pa rin kasi pag di lang
maayos yung buhok mo tingnan, kundi
maayos din ito pag hinawakan at
binanlawan mo na yung pomade. Para na
rin silang nagpapa-hair treatment pag
gumagamit sila ng Man Pomade.“

48. INSPIRING STORIES
Man Pomade has gained a cult following
among grooming-loving Pinoys online,
thanks in large part to various forums
and websites that have featured their
products. "We are really thankful for all
the positive reviews sa Internet," he
shares. "Kundi dahil sa kanila, and sa
word of mouth, di naman makikilala ang
Man Pomade."

49. INSPIRING STORIES
• "I'm not into the business for the
money. Gusto ko lang talaga na
merong choice ang mga lalaki na
magandang product for them. And
gusto ko makatulong sa local industry.
Kaya kung tatanungin niyo ako, ang
secret lang sa pomade na ito ay
passion, and I want to make the
country proud.“
-- Bryan Baylosis, 22. CEO

50. Dr. Richard Simangan – Chairperson for SME
operations, Department of Trade and Industry –
Nueva Ecija.

51. OPEN FORUM