Often referred to as the lifeblood of the Philippine economy, the micro, small and medium enterprise (MSME) sector is on the brink of collapse.
As of May 2019, 99.56 percent of business establishments in the country were MSMEs, growing in number to 1.42 million from 900,000 in 2017. Of this, 90 percent were microenterprises or those with total assets of less than P3 million and employing less than 10 workers. According to the Department of Trade and Industry (DTI), nearly seven out of every 10 employed Filipinos work in the MSME sector.
Given their small size individually in terms of operations, capital, and employment, they are most at risk during economic adversities, such as the unprecedented disruption caused by the COVID-19 global pandemic.
The Luzon-wide lockdown has put the operations of many of these MSMEs on hold, yet they have to take care of their workers who are suddenly out of jobs. The malls have all closed temporarily, shutting down a big venue for many of these small enterprises to showcase and sell their products.
This sector needs immediate help.
First, from the national government in terms of support for their employees who are suddenly out of work. While some MSMEs catering to the beleaguered tourism sector will be covered by the P27-billion initial financial stimulus package approved by the Duterte administration, the government should include those MSMEs outside of tourism in the new stimulus package being drawn up by the economic team, with more than P200 billion in financing identified so far from budget realignments and low-interest loans from multilateral lenders such as the World Bank and the Asian Development Bank. The DTI, in fact, can draw up a separate stimulus package tailor-fitted for these small enterprises.
The government cannot focus too much on those who are “too big to fail” in crafting an economic stimulus plan. Many times, those huge corporations have the means to survive. They can on their own negotiate with their lenders for relief or better credit terms. But not the MSMEs, some of which still rely on informal lenders or financing companies that charge higher loan rates than banks.
MSMEs also need help from their “big brothers” — the mall owners and property lessors who are their landlords. It appears that the one-month reprieve in rent will not be enough. Big businesses need to provide more to their MSME partners — either as tenants in their malls or suppliers in their manufacturing or retail operations. Waiving rent once the lockdown is extended, or reducing rent temporarily when malls are allowed to reopen, will give these MSMEs breathing room to restart. Providing MSMEs that are suppliers to big businesses with cash advances will also help them resume operations.
Another “big brother” will be the banks, which can aid their MSME clients by giving them more than just a month of reprieve in loan amortization. They should be given more months of payment holiday, or even a sharp reduction in interest rates if freezing payments will be a problem for some banks.
Finally, these MSMEs need help from us, ordinary consumers. When this pandemic is over, we have to patronize our own MSMEs. Studies have shown that these small businesses provide critical contributions to regional economic activity. As they expand, they infuse capital into the communities that, in turn, helps support other local enterprises.
Now is the time for consumers to realize the impact that buying local has on communities and their citizens. When the lockdown is lifted and businesses are allowed to reopen, Filipinos can help bring the economy back to life by patronizing the country’s valiant MSMEs.
In one forum on MSMEs, Trade Secretary Ramon Lopez hailed these small firms: “With every job created, you are saving one person from poverty.” Today, every MSME that shuts down may end up pushing a number of people into poverty. Multiply that with the thousands of MSMEs that are at risk because of the current health pandemic, and the country will have another major crisis at hand. These small enterprises urgently deserve all the help they can get.