While their name may connote a diminutive size, Pinoy MSMEs (micro, small, and medium enterprises) make up for it in sheer volume and their sizeable effect on the country’s economy.
In fact, according to the Department of Trade and Industry (DTI), in 2017 MSMEs accounted for 99.56% of total businesses in the country — nearly 925,000 Filipino enterprises delivering goods and services to customers every working day. And of this number, 90% were microenterprises or those with total assets of less than Php3,000,000, 9.6% were small enterprises, and 0.4% were medium enterprises.
As we celebrate MSME Day on June 27, as declared by The United Nations in support of their Sustainable Development in promoting innovation, creativity and decent work for all, and MSME week on the second week of July as declared by the Department of Trade and Industry from RA No. 9501, Sec 16, it’s important to understand just how much these mom-and-pop shops, home-based enterprises, and garage startups have had, and continue to have, an impact on the Philippine economy and, subsequently, the lives of Filipino people.
Here are 4 ways how MSMEs play an important role in the Philippine economy:
#1 Giving Employment to Filipinos
With under a million small businesses all over the country, MSMEs contribute a third of the Philippines’ total employment. According to the DTI, MSMEs generated a total of 4.9 million jobs in 2017 versus 2.9 million for large corporations. Those are thousands of families and individuals enjoying the benefits of a regular-paying job, earning and spending, and contributing back to the economy.
Despite this, however, MSMEs in the Philippines still need support in making their business processes and operations more efficient and robust. According to a study from the Asian Institute of Management (AIM), MSMEs have lower productivity than large enterprises. Because of that, they have lower wages that affect their access to skilled labor.
#2 Spearheading Innovation
Because of their small business structure unencumbered by established conventions and red tape, MSMEs have more freedom to be creative and innovate compared to larger companies with rigid rules and set corporate structures.
According to the same AIM study, a majority of MSMEs surveyed are engaged in one or more types of innovation, with a few of them having introduced a new product or service. While the next Zuckerberg may have yet to emerge among the country’s startups, the government and private organizations need to initiate projects that will help drive innovation in these enterprises.
#3 Spreading the Wealth
These small businesses provide significant contributions to regional economic activity. As they operate and grow, they inject capital into the community which, in turn, help support other local businesses. Now, more than ever, consumers need to realize the impact that buying local has on communities and its people.
Developed areas are, obviously, where most MSMEs are located, beginning with the National Capital Region. But according to the DTI, areas like CALABARZON and Regions 3 (Central Luzon), 7 (Central Visayas), and 6 (Western Visayas) have seen significant growth. Absent from the top is Mindanao which is definitely an area that needs more support from the government and private organizations.
#4 Sharing to the World
Despite being small businesses, a number of MSMEs service clients and customers abroad. In doing so, they have also become ambassadors for the country representing hardworking and talented Filipinos.
According to the Philippine Statistics Authority (PSA), MSMEs make up 25% of the country’s total exports revenue, via arrangements with large firms or by supplying to companies that export. The DTI’s Export Marketing Bureau helps MSMEs access export markets. Through the program, businesses are assisted in marketing and promotions, training and capacity building, product development and design, and access to markets through mutual recognition agreements and certifications.
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