Module 2 Enterprise Development in the Philippine Setting PDF

**Module 2 Enterprise Development in Philippine Setting** **Introduction** Enterprise development in the Philippines has been a key driver of economic growth, poverty reduction, and job creation. The country\'s entrepreneurial landscape is shaped by its strong small and medium-sized enterprise (SM...

**Module 2 Enterprise Development in Philippine Setting** **Introduction** Enterprise development in the Philippines has been a key driver of economic growth, poverty reduction, and job creation. The country\'s entrepreneurial landscape is shaped by its strong small and medium-sized enterprise (SME) sector, which constitutes over 99% of all registered businesses and employs a significant portion of the workforce. The government, through agencies like the Department of Trade and Industry (DTI), has implemented various programs and policies to support and enhance the growth of local enterprises. The country's enterprise development strategy focuses on creating a conducive environment for businesses to thrive by reducing bureaucratic barriers, improving access to financing, promoting innovation, and fostering partnerships between the public and private sectors. Initiatives like the \"Negosyo Centers,\" aimed at providing support and services to aspiring entrepreneurs, as well as efforts to promote digital transformation and e-commerce, have played vital roles in modernizing businesses and making them competitive locally and globally. Moreover, the Philippines has an active startup ecosystem that is growing, supported by both private investments and government efforts. However, despite these advancements, enterprises still face challenges such as inadequate infrastructure, uneven access to technology, and the need for upskilling the workforce to adapt to changing global business environments. In summary, enterprise development in the Philippines is marked by robust SME participation, supportive government policies, and emerging opportunities for digital entrepreneurship, though it still requires addressing structural and infrastructure challenges for sustained progress. **Learning Outcomes: At the end of the lesson, the students should be able to:** 1\. Know the Enterprise Development in the Philippine Setting 2\. Discuss the nature and types of MSMEs 3\. Evaluate the MSMEs development programs. **What is Enterprise development in the Philippines** Enterprise development in the Philippines refers to initiatives, policies, and practices aimed at fostering the growth and sustainability of businesses across various sectors. It encompasses efforts to enhance entrepreneurship, small and medium enterprises (SMEs), and larger corporations, with a focus on innovation, competitiveness, and inclusive growth. Here are some key aspects of enterprise development in the Philippines: **1. Government Support and Policies** - The Philippine government provides support through agencies like the **Department of Trade and Industry (DTI)**, which helps promote SMEs by providing access to resources, training, and financing. - **Republic Act No. 9501** (Magna Carta for Small Enterprises) was established to support the development of small and medium enterprises through incentives, technical assistance, and access to credit. - Programs like **Kapatid Mentor ME** and **Go Negosyo** aim to educate and mentor Filipino entrepreneurs. Government support and policies in enterprise development are essential to fostering business growth, enhancing competitiveness, and driving economic inclusivity. In the Philippines, the government has implemented various programs, laws, and initiatives that provide support across different aspects of enterprise development. Below are the key forms of government support and policies in this area: **1. Republic Act No. 9501 -- Magna Carta for Small Enterprises** - The **Magna Carta for Small Enterprises** is a law that promotes the growth of micro, small, and medium enterprises (MSMEs) by providing support in terms of financing, access to government programs, and technical assistance. - This act mandates the government and financial institutions to allocate a certain portion of their loanable funds to SMEs. - Provides tax incentives, marketing support, and assistance in technology adoption for SMEs. **2. Republic Act No. 11293 -- Philippine Innovation Act** - The **Philippine Innovation Act** focuses on fostering innovation across industries to enhance global competitiveness and promote sustainable growth. - It establishes the **National Innovation Council (NIC)**, which formulates and supports innovation policies and coordinates innovation strategies across public and private sectors. - Promotes investments in research and development, technology, and innovation, particularly for startups and SMEs. **3. Republic Act No. 11032 -- Ease of Doing Business Act** - The **Ease of Doing Business and Efficient Government Service Delivery Act** aims to streamline government processes and reduce red tape to create a more business-friendly environment. - It establishes simplified procedures for securing permits, licenses, and other government approvals, particularly for SMEs. - Encourages the use of electronic platforms to make business registration and transactions more efficient. **4. Department of Trade and Industry (DTI) Programs** - **Negosyo Centers**: DTI has set up over 1,000 Negosyo Centers across the country to provide training, mentoring, and consultation services to MSMEs and aspiring entrepreneurs. These centers serve as a one-stop-shop for business registration, access to financing, and marketing assistance. - **Kapatid Mentor ME Program**: This program, in collaboration with Go Negosyo, provides mentorship to entrepreneurs, helping them scale their businesses and improve competitiveness. - **Shared Service Facilities (SSF)**: DTI\'s SSF program provides MSMEs with access to machinery and equipment that improve productivity and product quality. **5. Pondo sa Pagbabago at Pag-asenso (P3) Program** - The **P3 Program** provides low-interest, easy-access loans to MSMEs, particularly in underserved communities. It is implemented by the **Small Business Corporation (SBCorp)** and is part of the government's effort to curb informal lending practices (commonly known as "5-6" lending). - The program aims to provide affordable credit for small entrepreneurs to fund their operations, expansion, or startup costs. **6. Go Negosyo Act (Republic Act No. 10644)** - This law promotes job creation and entrepreneurship by supporting MSMEs through the establishment of **Negosyo Centers**. - These centers assist entrepreneurs in registering their businesses, provide advisory services, and offer access to government programs related to financing, market access, and training. **7. Tax Incentives and Subsidies** - Enterprises, especially those in priority sectors such as agriculture, manufacturing, and technology, may benefit from tax incentives provided under various laws like the **Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act**. - The **Philippine Economic Zone Authority (PEZA)** also grants incentives to businesses that set up operations in economic zones, such as tax holidays and exemptions from import duties. **8. Export and Trade Support** - The government provides export promotion programs through the **Export Development Council (EDC)** and the **Center for International Trade Expositions and Missions (CITEM)**. - MSMEs are given assistance in promoting their products in international markets through participation in trade fairs, trade missions, and export capacity-building programs. **9. Sustainability and Social Enterprise Support** - The government promotes eco-friendly business practices through programs like the **Green Jobs Act** and the **Green Enterprise Development Program**. - Social enterprises, which aim to address social and environmental issues, are given financial support and technical assistance. **10. Industry-Specific Support** - **Agriculture Sector**: Programs like **Kadiwa ni Ani at Kita** promote direct selling from farmers to consumers, reducing the cost of middlemen and helping agricultural enterprises grow. - **Information and Communications Technology (ICT) Sector**: Initiatives under the **Digital Startup Development Program** focus on supporting tech startups and increasing digital adoption across industries. **11. Business Continuity and Crisis Support** - The government has created initiatives to assist businesses in times of crisis. For example, during the COVID-19 pandemic, the **Bayanihan to Recover as One Act (Bayanihan 2)** provided financial assistance, wage subsidies, and loan programs to help enterprises recover. **12. Infrastructure and Connectivity Initiatives** - Programs like **Build, Build, Build** enhance infrastructure to improve connectivity and access to markets for enterprises across the country. - Investments in digital infrastructure, such as internet access and telecommunication services, help boost the productivity and reach of businesses, especially in rural areas. Bottom of Form Types of MSMEs in the Philippines Micro, Small, and Medium Enterprises (MSMEs) in the Philippines are the backbone of the country\'s economy, playing a critical role in employment generation and inclusive growth. These enterprises are categorized based on asset size, annual revenue, and the number of employees. The definitions, as per the **Department of Trade and Industry (DTI)**, are as follows: **1. Micro Enterprises** **Key Characteristics of Micro Enterprises in the Philippines:** 1. **Number of Employees**: - 1 to 9 employees. 2. **Asset Size**: - Up to PHP 3 million in total assets (excluding land). 3. **Typical Sectors**: - **Retail trade**: Sari-sari stores (neighborhood convenience shops), market vendors, small groceries. - **Food services**: Street food vendors, small-scale eateries (carinderias), bakeries. - **Agriculture**: Farmers, fisherfolk, and small-scale agricultural product traders. - **Services**: Home-based services like tailoring, repair shops, hairdressing, and small transportation businesses (e.g., tricycle operations). - **Manufacturing and crafts**: Small-scale production of handicrafts, home-based food production, tailoring, and small furniture shops. 4. **Informal Nature**: - Many micro enterprises operate informally without formal registration or adherence to regulatory requirements, especially in rural or marginalized areas. - They often lack access to formal financing and rely on family savings, microfinancing institutions, or informal lending (e.g., \"5-6\" money lending system). 5. **Limited Market Reach**: - Most micro enterprises serve local communities, targeting neighborhood customers. - Their business activities are typically small-scale, with limited capacity to expand or tap into broader markets. 6. **Challenges**: - **Access to Capital**: Micro enterprises usually face difficulties in securing loans from formal financial institutions due to their size, lack of collateral, and informal nature. - **Skills and Knowledge**: Many micro entrepreneurs have limited business training or formal education in areas like financial management, marketing, and operations. - **Technology and Innovation**: Micro enterprises often struggle to adopt new technologies or shift to digital platforms, which hampers their growth potential.**Regulatory Burdens**: Registering a micro business and complying with tax requirements can be difficult and costly for small entrepreneurs, especially for those in remote areas. 7. **Support Programs**: - The **Philippine government**, through the Department of Trade and Industry (DTI), promotes various initiatives to support micro enterprises: - **Negosyo Centers**: Provide assistance with business registration, training, and mentoring. - **Microfinance Programs**: Organizations like the **People's Credit and Finance Corporation (PCFC)** and microfinance NGOs provide loans to help fund micro enterprises. - **KAPATID Mentor ME** program: Mentorship program to help micro entrepreneurs improve their business skills. - **Go Negosyo** and other private sector-led programs aim to promote entrepreneurial culture and provide resources for micro businesses. 8. **Contribution to the Economy**: - Micro enterprises make up the **vast majority of MSMEs** in the Philippines, accounting for about **89% of all registered businesses**. - They are critical to employment, especially in rural and low-income communities, providing jobs and livelihoods for millions of Filipinos. **Examples of Micro Enterprises in the Philippines:** - A **sari-sari store** owner selling basic household goods to neighbors. - A **street food vendor** selling snacks like banana cue, fish balls, and kwek-kwek. - A **farmer** growing and selling vegetables at a local market. - A **small tailoring shop** offering clothing repairs and custom sewing services. - A **home-based bakery** producing pastries and bread for sale within the community. In summary, micro enterprises are small businesses with a critical role in promoting inclusive growth and reducing poverty in the Philippines, especially at the local and community levels. They are essential for grassroots development, but they face challenges in formalizing, scaling, and accessing the resources needed for growth.Bottom of Form **2. Small Enterprises** - **Number of Employees**: 10 to 99 employees - **Asset Size**: Between PHP 3 million to PHP 15 million - **Characteristics**: - These businesses tend to have more structured operations compared to micro enterprises. - They can be found in various sectors, such as retail, food service, manufacturing, and small-scale construction. - Small enterprises usually operate with some formal business practices, although they may still have limited resources for expansion and innovation. - Examples include neighborhood grocery stores, small restaurants, local manufacturing units, and service providers like repair shops. **3. Medium Enterprises** - **Number of Employees**: 100 to 199 employees - **Asset Size**: Between PHP 15 million to PHP 100 million - **Characteristics**: - Medium enterprises are generally more sophisticated in terms of organization, business processes, and market reach. - These businesses often cater to larger markets and may have regional or even national operations. - Examples include mid-sized manufacturing plants, export-oriented businesses, and larger service providers such as logistics companies or specialized contractors. - They usually have better access to financing, skilled labor, and technology compared to smaller businesses. **Nature of MSMEs in the Philippines** - **Dominance of MSMEs**: MSMEs account for **99.58%** of all registered businesses in the country, according to the DTI. They are responsible for over **63% of total employment** in the Philippines. - **Industry Concentration**: Most MSMEs are concentrated in the **wholesale and retail trade sector**, followed by manufacturing, accommodation, and food service activities. Service-related MSMEs, especially in education, health, and personal services, are also prominent. - **Urban vs. Rural Distribution**: MSMEs are prevalent both in urban and rural areas, but the concentration is higher in cities and metropolitan areas like Metro Manila, Cebu, and Davao. Rural MSMEs, often agriculture-based, play a crucial role in community development. - **Challenges Faced by MSMEs**: - Limited access to financing and capital. - Difficulty adopting new technology and digital transformation. - Competition from large enterprises and imported goods. - Regulatory burdens and bureaucratic processes. - **Support Programs**: The government has established various programs to support MSMEs, such as the \"Negosyo Centers,\" providing capacity-building, mentoring, and business registration services. In addition, programs like **KAPATID Mentor ME**, **Go Lokal**, and e-commerce initiatives help MSMEs scale and modernize. - MSMEs form the backbone of the Philippine economy, comprising about 99.5% of all registered businesses. - MSMEs contribute significantly to employment and regional development. The government has introduced programs to boost MSMEs\' competitiveness, particularly in areas like digital transformation and export potential. Despite relying on the category of an MSME, enterprises can have significant distinctions. If you wonder what are the **differences between micro, small, and medium enterprises**, stay tuned till the end. It will cover in detail the features and benefits of each enterprise. **What are Micro, Small, and Medium Enterprises?** -------------------------------------------------- MSMEs are a broad set of firms defined by the size of their operations and investment amount. These businesses play an essential role in economic development by creating jobs and supporting inclusive growth. MSMEs are classified differently in each nation but often include characteristics like investment in plant and machinery, turnover, and staff numbers. Micro-enterprises are the smallest, followed by small and medium-sized businesses. Furthermore, these businesses operate in a variety of industries, including manufacturing and commerce. Governments frequently establish measures to assist MSMEs in recognising their relevance in improving economic resilience and decreasing poverty by allowing citizens to engage in productive economic activities. **Classification of MSME** -------------------------- There are three types of enterprises that come under MSMEs. All three of them are classified as follows: ### 1. Nature-Based classification #### #### A. Micro Enterprises Micro enterprises are the smallest businesses. They have a low investment limit and operate with minimal resources. Some of its examples include small neighbourhood shops and tiny manufacturing units. #### #### B. Small Enterprises Small enterprises are slightly larger than micro-enterprises. They have higher investment limits. Small enterprises play a crucial role in various sectors and contribute significantly to local economies. #### #### C. Medium Enterprises Medium-sized businesses are the largest category that falls under MSMEs. They operate with higher investments. Medium-enterprises contribute substantially to economic growth and innovation. ### 2. Investment-Based Classification #### #### A. Micro Enterprises The total investments in an enterprise to fall under MSMEs as micro-enterprises is up to ₹1 crore. #### #### B. Small Enterprises The total investments for a business to be seen as a small enterprise under MSME should be between ₹1 crore and ₹10 crore. #### #### C. Medium Enterprises Investments in a medium enterprise under MSME must be between ₹10 crore and ₹50 crore. ### ### 3. Turnover-Based Classification #### #### A. Micro Enterprises Micro-enterprises must only have a turnover of up to ₹5 crore. #### #### B. Small Enterprises Turnover of small enterprises must be between ₹5 crore and ₹50 crore. #### ####. Medium Enterprises A medium-sized MSME enterprise must have a turnover between ₹50 crore and ₹250 crore. ### Features of Micro Enterprises #### #### 1. Low Entry Barriers Micro enterprises stand out for their accessibility, requiring minimal capital and resources. This characteristic allows a diverse range of individuals to enter and participate in business activities. #### #### 2. Simple Structure Micro-enterprises boast a straightforward organisational structure with their limited scale and close-knit teams. This simplicity facilitates ease of management and operation, allowing owners and small teams to easily access their business. #### #### 3. Flexibility and Adaptability Micro enterprises are remarkably able to adapt swiftly to customer preferences and changing market demands. Their small size enables quick decision-making. This makes it easier to pivot strategies and offerings as needed. #### 4. Strong Local Connections Deeply rooted in communities, micro-enterprises cultivate strong local connections. This contributes to a sense of social capital and positions these businesses as integral components of the local economy. Further, supporting and being supported by the community. #### #### 5. Diversity of Sectors Micro enterprises showcase versatility by operating across a wide range of industries. Their presence spans diverse sectors, from traditional trades to emerging technology ventures. This reflects their adaptability to varying market landscapes. ### ### Benefits of Micro Enterprises #### #### 1. Job Creation One of the most significant contributions of micro-enterprises is the generation of employment opportunities. These businesses are crucial in providing jobs and livelihoods to a substantial portion of the workforce, especially in areas with limited formal employment options. #### #### 2. Poverty Alleviation Micro enterprises alleviate poverty by providing income and livelihood opportunities, particularly in marginalised communities. They contribute to improving the living standards for individuals and families through their economic activities. #### #### 3. Entrepreneurial Spirit Micro enterprises embody the entrepreneurial spirit, encouraging innovation and promoting a culture of self-reliance. Their small scale often allows owners to experiment with new ideas and approaches. This drives creativity and business innovation. #### #### 4. Economic Development Micro-enterprises drive local economic growth by channelling resources and generating business activity. Their contributions extend beyond mere survival, actively participating in the development and sustainability of the communities they serve. #### #### 5. Sustainability Micro enterprises often prioritise sustainable practices by utilising local resources and knowledge. This promotes environmental consciousness and contributes to their operations' long-term viability. **What are Small Enterprises?** ------------------------------- Small businesses in India account for a sizable portion of the MSME market. These companies have a little greater scale and personnel than micro-businesses. They normally employ between 10 and 50 people and have a more defined organisational structure. Small businesses act as a vital link between micro and medium-sized businesses. They are critical for providing a varied range of products and services while remaining focused on the local market. Manufacturing and construction enterprises, as well as tourism agencies, contribute to 50% of total exports together.  ### ### Benefits of Small Enterprises #### #### 1. Job Creation Small businesses play an important role in job creation by providing steady and skilled employment opportunities. This helps to develop the workforce and promotes economic growth by providing folks with meaningful employment. #### #### 2. Innovation These businesses promote a culture of risk-taking and innovation, which leads to the development of new and unique goods and services. Their versatility and agility enable experimentation and an entrepreneurial attitude, which drives breakthroughs in various industries. #### 3. Market Efficiency Small businesses contribute to market efficiency by confronting larger firms. They provide healthy competition via personalised service and particular market knowledge. This dynamic environment promotes market innovation, efficiency, and ongoing progress. #### #### 4. Regional Development Small businesses serve as economic growth engines in their areas. Their operations stimulate economic activity, which improves infrastructure and living conditions in the areas where they operate. This regional growth has a rippling influence on the community's overall well-being. #### #### 5. Skill Development Small businesses improve their workforce's employability by offering skill development and training opportunities. Employees frequently learn varied skills and experiences. This makes them more versatile and adaptive to changing job market demands. What are Medium Enterprises? ---------------------------- Medium Enterprises operate with substantial investments and turnovers compared to their smaller peers. It is defined by its highest range of investment and turnover in the MSME category. Medium enterprises exhibit a more complex structure and enjoy a wider market reach. Despite constituting just 0.5% of all registered businesses in India, medium enterprises still have a significant economic influence. They are crucial for driving economic growth by being partly responsible for the employment of 11 crore individuals by MSMEs. These enterprises are often pioneers in innovation and technology adoption, as they lead to advancements in manufacturing and pharmaceuticals. ### ### Features of Medium Enterprises #### #### 1. Formalised Organisation Medium-sized businesses have a well-defined organisational hierarchy with specialised divisions and management teams. This formalised framework aids in effective decision-making and smooth operations. #### #### 2. Robust Infrastructure These businesses use the latest technology and equipment to improve operational efficiency and provide strict quality control methods. Their dedication to cutting-edge infrastructure distinguishes them in terms of production. #### #### 3. Wider Market Reach Medium enterprises build high brand exposure and distribution networks by catering to national and worldwide markets. Due to their expanded market reach, they may majorly contribute to the economy. #### #### 4. Diversification Medium-sized businesses are always looking for new goods, services, and technology. This dedication to diversity and innovation supports economic development and increases market competitiveness. #### #### 5. Potential for Scalability Medium Enterprises play an essential role in supporting economic growth and job creation since they have the potential to grow into huge enterprises. Their scalability contributes to the corporate landscape's dynamic character. ### ### ### ### Benefits of Medium Enterprises #### #### 1. Creating Jobs Medium-sized businesses provide high-skilled and well-paying job possibilities. This helps to develop talent and promotes upward mobility in the workplace. #### #### 2. Transfer of Technology Medium enterprises drive technological developments and knowledge transmission. This boosts overall economic output and encourages industrial innovation. #### #### 3. Regional Improvement Medium-sized businesses attract investments and infrastructural improvements. This improves living conditions and social amenities in the areas where they operate. #### #### 4. Exports Medium Enterprises contribute to India's export market, increasing foreign exchange revenues and promoting global competitiveness. This significantly improves the country's economic status. #### #### 5. Corporate Social Responsibility Medium Enterprises actively promotes sustainable development and community well-being through social welfare and environmental projects. This exhibits a commitment to corporate social responsibility. -end-