Micro, Small,

and Medium Enterprises

(MSMEs)
Presenter: Engr.Eufemia A. Santos
DM 201 Strategic Management of n Engineering
Enterprise
Professor: Jo B. Bitonio, DPA
 MSMEs Defined
Micro, small, and medium enterprises (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
Recently, Republic Act No. 9178, otherwise known as the
Barangay Micro Business Enterprise (BMBE) Act of 2002
has redefined the categories. Hence, the present structure,
by law, is as follows :

By Asset Size
 Republic Act (RA9501): Magna Carta
for Small Enterprises of 2008

•a law to promote, support, strengthen and encourage the

growth and developments of MSMEs in partnerships with the
private sector.
•Banks be it private or government are mandated to increase
their loan portfolios from 6 to 8 percent for micro and small and
maintain the 2 percent allocation for medium-sized companies.
The penalty for non-compliance is not below P500,000.
•To avail of this financial assistance, these enterprises must be
registered first with appropriate government agencies (DTI, SEC,
CDA, LGUs).
RA No. 9178: Barangay Micro Business Enterprises Act of
2002
Provided a business capital or assets do not exceed P3
million, a registered enterprise is entitled to the following:
(a)guaranteed registration approval within 15 working
days
(b)reduced local taxes and fees
(c) exemptions from income tax and minimum wage
(d)availability of special financing and credit guarantees
windows under DTI’s SME Unified Lending
Opportunities for National Growth (SULONG)
program
(e) technology transfer; product and management
training, and marketing assistance.
Role and Importance of MSMEs
MSMEs play a major role in the country's
economic development through their
contribution in the following:
• rural industrialization
• rural development and decentralization of industries
• creation of employment opportunities and more
equitable income distribution
• use of indigenous resources
• earning of foreign exchange (forex) resources
• creation of backward and forward linkages with existing
industries
• and entrepreneurial development.
•They are vital in dispersing new industries to the
countryside and stimulating gainful employment.

•MSMEs are quick in assimilating new design trends,

developing contemporary products, and bringing
them to the marketplace ahead of the competition.

•MSMEs are quick in assimilating new design trends,

developing contemporary products, and bringing
them to the marketplace ahead of the competition.
•MSMEs 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

•MSMEs can act as the seedbed for the development

of entrepreneurial skills and innovation.
MSMEs' Contribution to the Economy
•MSMEs contribute to the creation of wealth, employment, and
income generation, both in rural and urban areas, thus, ensuring
a more equitable income distribution.

•MSMEs 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
Statistics
These types of businesses account for 99.6 percent of all
registered businesses in the country and employ 70
percent of the country's workforce. MSME's also produce
about 30 percent of the Philippines' total output.

employs 70% of the

workforce (Benel P. Lagua )
“MSME's are the real backbone of our economy.
People do not realize that your businesses have
greater direct impact on Filipinos' lives than do
big players,”
Senator Edgardo J. Angara during the launch
of the Philippine Home-Based Business and
Career Summit Expo 2011 last August 12 at the
SM Megatrade Hall.
But more than this, MSME's provide
opportunities to those who could not have
started businesses otherwise. Studies have
shown that through MSME's, disadvantaged
members of society, like the elderly and
disabled, are able to earn income. In fact,
about 30 percent of the poor in our country
have turned to entrepreneurship to get by
An Asian Development
Bank (ADB) study shows
that 50 percent of
innovations during the
20th century were
generated by new and
small firms
Number of Establishments

As of 2009 count, there are 780,437

business enterprises operating in the
Philippines. Of these, 99.6% (777,357)
are micro, small, and medium enterprises
(MSMEs) and the remaining 0.4% (3,080)
are large enterprises. Of the total
number of MSMEs, 91.4% (710,822) are
micro enterprises, 8.2% (63,529) are
small enterprises, and 0.4% (3,006) are
medium enterprises.
 Sectoral Distribution
Majority of the 777,357
MSMEs in operation in 2009
are in the wholesale and
retail trade industries with
385,610 business
establishments; followed by
manufacturing with 111,987;
hotels and restaurants with
97,298; real estate, renting,
and business activities with
47,654; and other
community, social, and
personal services with 44,313.
These industries accounted
for about 88.4% of the total
number of SME
establishments.
Geographical Spread of MSMEs

Top Five (5) Locations of MSME

Establishments in the Philippines
1.National Capital Region
2.Region-4A CALABARZON
3.Region 3
4.Region 7
5.Region 6
 Geographical Spread of MSMEs
Majority of the MSMEs in
operation in 2009 can be found
in the National Capital Region
(NCR), with 210,648 business
establishments; Region 4-A
(CALABARZON) with 114,676;
Region 3 (Central Luzon) with
79,445; Region 7 (Central
Visayas) with 45,427; and
Region 6 (Western Visayas) with
45,382. These top five (5)
locations accounted for about
63.7% of the total number of
MSME establishments in the
country..
Employment
MSMEs generated a total of 3,595,641 jobs
in 2009 versus 2,094,298 for the large
enterprises. This indicates that MSMEs
contributed almost 63.2% of the total jobs
generated by all types of business
establishments that year. Of these, 30.4%
or 1,731,082 jobs were generated by micro
enterprises; 25.5% or 1,449,033 by small
enterprises; and 7.3% or 415,526 by
medium enterprises.
 Employment
By industry sector, MSMEs in the wholesale and retail trade
generated the most number of jobs (with 1,250,453) in 2009
followed by MSMEs in manufacturing, 637,524; hotels and
restaurants, 482,357; real estate, renting, and business
activities, 284,406; and education, 225,016

Majority of the jobs are generated by MSMEs in

the National Capital Region (NCR) with
1,360,440 jobs; followed by MSMEs in Region 4-
A (CALABARZON), 466,648; Region 3 (Central
Luzon), 319,340; Region 7 (Central Visayas),
235,091; and Region 6 (Western Visayas)
193,543.
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.
Loans lent to SMEs
All lending institutions are required to lend
set aside at least 6% of their total loan portfolio
to small enterprises and at least 2% to medium-
sized enterprises.
The Republic Act 6977 enacted in 1991 (the
Magna Carta for Small Enterprises) required
10% more to be diverted to SME’s. Then, it was
amended in 1997 under the Republic Act 8289
to extend the applicable period to 2007 and
lower the minimum level to 6% and 2%.
The Bangko Sentral ng Pilipinas is
mandated by law to monitor this initiative.
Sales and Census Value-Added

•MSMEs contribute around 35.7%

of the total sales and census value-
added in the manufacturing
industry, according to the National
Statistics Office (NSO - 2009) .
Tradeline Philippines
Tradeline Philippines is an online database
service that provides product search listing
thousands of manufactured exported
Philippine products complete with product
specifications and is a business search allowing
users to contact Philippine exporters, suppliers
and local/foreign buyer details and the
products/services they manufacture / provide
and export
5. Exponet

The Bureau of Export and Trade Promotion's (BETP)

Export Assistance Network (EXPONET) helps exporters
and prospective exporters’ access information and
resolve specific problems related to exporting

Exponet provides information on export seminar

schedules, export organizing, export procedures and
documentation, import facilities for exporters, buyer
linkages, export financing and incentives, product raw
material sourcing and other statistical information. The
agency also assists exporters in export-related problems
/ trade complaints.
Deficiencies in the present system of SME statistics
1. Timeliness
Statistics on the census of establishments (done every 5
years) and the annual survey of establishments
are usually released 15-24 months after the year.
This makes the data more or less an imprecise tool
for analysis and decision-making. In the same
manner, BSP collects information on the loans lent
to SMEs (in compliance with the Magna Carta for
Small and Medium Enterprise) every quarter. The
data athered is usually released only after 3
months.
 2. Cross compatibility with other
countries for cross country comparisons
The major classification used by most countries to
define SMEs is through assets and employment size.
However, the size ranges of their classification differ,
since developed countries have large industries than
the less developed ones.
Hence, what might be considered as “small” by
developed countries will already fall into the
“medium” or “large” category for developing
countries like the Philippines. Thus, cross
compatibility with other countries for cross country
comparison, is sometimes inappropriate or could not
be used as basis for a policy recommendation.
3. Inadequateness
The scope and coverage of SME statistics are
limited to:
1)the number of establishments,
2)employment contribution, and
3)regional distribution.
More important data which will
help policy makers and businesses to react
quickly in a competitive environment are
usually not available. These statistics include:
4. Availability
There are confidentiality clauses in census
for firm level data. This cannot be
accessed at the National Statistics Office
because their agency has to comply with
the rules of confidentiality.

In similar ways, banks also ensure that

access to customer information is limited
to selected bank employees and are very
conservative in disclosing client
information.
5. Coverage
The Philippines has a large section of small
business constituting the so-called underground or
informal economy. This refers to the small scale
units in the national economy, which produce and
distribute goods and services without the benefit of
official sanction or control.
They don't register, don't keep books and don't
pay taxes. They operate beyond the reach of the
law. They have little or no access to organized
markets, credit institutions, educational or training
centers or public services. Although efforts are
being made by the government to bring the
underground economy to the surface, the nature of
this sector makes it very difficult to gather and
process statistics on them.
What are the current initiatives to develop SME
statistics?
1. National Business Registration (NBR) Project

The NBR project aims to address the growing concern of having consolidated
information on all the registered businesses in the country. Currently, no
government agency has a complete record of all registered businesses since
registration is being done by various agencies. It is the objective of the NBR
project to integrate the information contained in the various agencies and
have a single consolidated database containing basic information of all
registered businesses.
The NBR project is considered a “timely” project for the country in this day and
age of global economy. The NBR will not only enable Filipino entrepreneurs
to find business ventures with fellow Filipinos but with foreign investors as
well.
 The SME Database (headed by the DTI SME-Project Management
Office) aims to act as a repository (databank) of the corporate profiles
of SMEs. Its objective is to serve as a tool for monitoring the assistance

2. SME
given by the different agencies to each SME firm. The database is also
designed to identify individual companies and to track the kinds of
government assistance given to each.
Database
The interim database will enable the much-needed tracking of SMEs

Project
during the crucial first six (6) months of 2003, especially for
measurement against the National SME Agenda objectives. The final
database could act as a master database of all SMEs nationwide,
possibly supporting other organizations outside DTI, and would allow
for more complex analysis and reporting. A networked database
would facilitate the encoding of data from the provinces at the source
of the information. The ultimate benefit of the SMEs is the possibility
of minimizing, if not eliminating the need to register numerous times
with various organizations.
References
http://www.dti.gov.ph/dti/index.php?p=532
http://www.dti.gov.ph/dti/index.php?p=321
http://mb.com.ph/node/346922/micro-
Fajardo, Feliciano.Entrepreneurship. Philippines, 2009
http://www.entrepreneur.com.ph/ideas-and-opportunities/article/how-smes-play-
an-important-role-in-the-philippine-economy. Ideas and Opportunities
Benel P. Lagua https://docs.google.com/viewer?
a=v&q=cache:rOuiQTBvwIYJ:www.oecd.org/dataoecd/3/49/15004719.ppt+c
ontribution+of+SMEs+to+Philippine+economy&hl accessed Nov. 2012