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No Free Lunch

Seven M’s for small firms

/ 12:08 AM November 29, 2016

Remember the three M’s supposedly describing the ideal spouse—mabait (kind), mayaman (rich), and malapit nang mamatay (will die soon)? In our language, one can define any number of M’s to describe anything, as nearly all adjectives begin with “ma-” anyway. But Trade Secretary Ramon Lopez has aptly coined seven M’s in English, to sum up the essential elements to strengthen micro, small and medium enterprises (MSMEs): Mindset, Mastery, Mentoring, Markets, Money, Machines and Models. Here’s my take on why each of these hits the right spot.

Mindset has been a formidable obstacle in government, in banks, and in small firms alike. Coordination among government entities, including in improving the enabling environment for MSMEs, has always been hampered by the mindset of turf and silo mentality that can be seen even within a single government department. Banks must assume a missionary mindset to contribute to more inclusive growth, and overcome their usual preference for a small number of large accounts over a large number of small ones. For small firms, the “kanya-kanya” (individualistic) mindset must give way to one of “coopetition,” as small producers occasionally need to be willing to team up and cooperate to meet volume orders from institutional and export buyers. Otherwise they may be doomed to staying small forever.

Mastery—of the technical and financial aspects of their business—spells the difference between small firms that succeed and those that do not. A drive for excellence needs to replace the attitude of “puwede na” for a small firm to sustain itself, let alone grow. Firms need to do basic accounting for banks to take them seriously. And they must study the market and opportunities therein, including preferential access in markets with which we have free trade agreements, like the Asean Economic Community. This is where Mentoring initiatives are crucial, whether by government (the Department of Trade and Industry has ample programs on this; local governments can provide the same), business and professional groups (banks and accountants’ organizations can help with financial management training), or civil society organizations.

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Markets are more accessible when good communication and transport infrastructure link firms readily with their buyers. E-commerce platforms are a rapidly growing medium that allows small firms to sell worldwide just as easily as large multinationals do. And as mentioned above, export opportunities are easier tapped when small firms are prepared to cluster and team up with erstwhile competitors to meet volume orders.

Machines have been a good basis for inducing such clustering. The Department of Science and Technology’s Small Enterprise Technology Upgrading Program and DTI’s Shared Service Facilities are helping groups of small enterprises raise productivity with better technology and equipment.

The Money challenge to SMEs needs little further elaboration. But there’s another mindset change needed here. I’ve found that countries successful in funding their SMEs use public funds to sustain the financial institutions mandated to deliver SME loan or even equity financing; there’s no reason why we shouldn’t be prepared to do the same. Government financial institutions like the Land Bank of the Philippines should not be under pressure to make profits for government when that is not their primary mission. Elsewhere, inherently risk-prone institutions like them are in fact constantly infused with taxpayer money.

Finally, good Models of inclusive business through synergies between large and small enterprises must be made known far and wide. Food giant Jollibee’s deliberate decision to welcome small onion farmers into their value chain by procuring onions from them is a model other large firms would do well to emulate. Such LE-SME synergies have long thrived in Japanese industry, showing why DTI’s MSME focus need not threaten big business. If we make good in pursuing DTI’s 7 M’s, we could well reap the win-win of intensified economic growth on a much broader base than this country has seen to date.

cielito.habito@gmail.com

TAGS: Bank, business, Commerce, firm, Government, opinion, trade
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