The Department of Trade and Industry (DTI) announced recently that there is now an ongoing initiative to tweak the definition of micro, small and medium enterprises (MSMEs). This is in lieu of changes in the way that these entrepreneurs can now do their business because of digitalization.
“We’re trying to come up with a better way of defining MSMEs,” DTI Secretary Alfredo Pascual said during the launch of the Philippine Fintech Festival and SME Financial Empowerment Program in Taguig recently.
He explains that as entrepreneurs start embracing digital technology, they become more empowered as they are now able to do their business with fewer people and operate with fewer assets.
“With technology, you don’t need to pay too many people and you don’t need a lot of hard assets to do things. It used to be that MSMEs are defined either by (the) number of employees, total assets, or total revenues,” he said.
Sec. Pascual added that by using the “old measures” in identifying MSMEs, the “real extent of the size of the business” is not being captured, which is vital in crafting policies and programs related to providing financial access to MSMEs.
The Philippine Statistics Authority (PSA) classifies an enterprise as micro if it has less than 10 employees with assets of up to PHP3 million. It is classified as small if it has 10 to 99 employees, and has assets of between PHP3,000,001 to PHP15 million. Businesses are considered medium-sized if they have between 100 to 199 employees and have assets amounting to PHP15,000,001 to PHP100 million.
Once a business has exceeded these criteria, then it will already be considered a large enterprise.
Helping MSMEs thrive during post-pandemic recovery
The DTI chief said that they are now working on a program geared for small businesses in the Philippines, which would allow them to grow into medium or large enterprises and increase their contribution to the country’s economy.
Globally, MSMEs constitute 80 percent of all enterprises. These groups of enterprises account for about 99.5% of all registered enterprises in the Philippines.
According to Sec. Pascual, MSMEs should be treated as digitally-driven enterprises, which require enough support for digitalization and innovation. “They also need adequate financial and technical support to sell their products and services in the market,” he added.
The DTI’s financing arm alone, Small Business (SB) Corp., has a clientele of about 48,000 borrowers who are now being served either directly or through partner lending institutions.
“There are millions of these enterprises. We cannot do it alone in DTI through our Small Business Corp. We need the participation of the private sector,” the trade chief said.
Aside from financial access, Sec. Pascual also urged the private sector to help MSMEs in adopting digital technology.
“For them to be able to sell services and products, they need technology. That’s one of the three things we will help MSMEs — provide them with technology. Now that we have the technology and ideas, how can we bring them about? They need finance to be able to produce products and services. After that, they need access to the market,” Sec. Pascual added.
With this, the Monetary Authority of Singapore (MAS), International Finance Corporation (IFC), and the United Nations Development Program (UNDP) have since launched in the Philippines the SME Financial Empowerment Program for MSMEs in Asia and Africa.
The MAS will run the SME Financial Empowerment Program in the Philippines in partnership with the DTI and “Digital Pilipinas,” a private sector-led movement that advocates technological adoption in industries, cities, and regions.
The MAS, IFC, and UNDP launched the SME Financial Empowerment Program last month to build foundational digital financial literacy skills for MSMEs, as well as help them understand cross-border financial services.
These institutions believe that these skills will help MSMEs thrive during post-pandemic recovery.