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MSMEs in the Philippines: An Overview

  • Written by Angelo Castelda

The Philippines’ economy heavily relies on its businesses and MSMEs to grow and help the people. Depending on the scale of the business, it helps reduce poverty and provide jobs. These businesses stimulate the economy, especially in far-flung areas. They serve as a breeding ground for new entrepreneurs who want to make their mark. 

The development of MSMEs is vital for any economic development. As an aspiring entrepreneur, you must know how your business should sustain itself. Knowing the ins and outs of your business will help you know what to manage, even in times of inflation and economic crisis. Read on to know more about MSMEs in the Philippines.

MSMEs At A Glance

MSMEs are known as micro, small, and medium enterprises. These MSMEs take up a majority of the Philippines’ economy. While large corporations operate in the country, 99.58% are MSMEs, as stated by 2021 data from the Department of Trade and Industry. They cover many sectors, with wholesale and retail trade in the lead. Other sectors include food service, manufacturing, financial services, and other service activities. 

Before an MSME can start operating, they should have business permits ready. In any business permit Philippines process, the owner must secure them along with secondary documents related to their business. The business permit also has a validity period, and all businesses should renew it annually. 

Trends In MSMEs

Back in the COVID-19 pandemic, MSMEs were hit hard by its economic effects. According to data from the United Nations, 60% of firms were closed, 55% lay off their employees, and 30% went bankrupt. At the same time, MSMEs reduced their operating expenses and hours to prevent more losses. 

Fortunately, in a post-pandemic world, more and more MSMEs have adapted to digital technologies, inclusive business practices, and improved financial performance. For example, newer businesses consulted with the local government’s Negosyo Centers or Regional Innovation Centers to recover from the many losses. In it, they plan a road map toward a more responsive and resilient economy. 

Challenges Of MSMEs

Despite the many changes MSMEs underwent, there are still challenges to overcome. Remember, change in MSMEs are normal and provide an opportunity to innovate. If your business can survive after many setbacks, it will last many years. 

The challenges of MSMEs include the following:

  • Supply chain management - Depending on the type of supply chain or business model, it can experience delays. These disruptions affect logistics, demand, and raw materials from going in and out of the business.
  • Cashflow - Cash is one of the most important resources MSMEs need to own. It covers the employees’ salaries, tax payments, loan payments, rentals, and working capital.
  • Human resources/workforce - As businesses adapt to newer models, they should consider their workforce’s arrangements. Depending on the company's policies, it can be through a work-from-home setup or a hybrid one. 

Wrapping Up

MSMEs in the Philippines are one of the most important economic sectors. While they are small, they take up most of the workforce, economic activity, and contributions to civil society. Without them, there would be no way to stay afloat and live a better life. Ultimately, MSMEs are the most important sectors for any country to thrive.

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