SOME fought a virus characterized by a corona with Dalgona; and, the creamy-coffee craze began.
The battle against boredom ensued after lockdown measures were imposed in March last year to stem the spread of Covid-19. Some Filipinos sought ways to distract themselves from isolation with a concoction of instant coffee, sugar and hot water. Voila! A mental malaise momentarily muted and a generation of gourmets grew.
Jpegs of gastronomie were generated online: from the ube cheese pandesal to the sushi bake, the latter an adventurous take on a famous Japanese dish.
Likewise, photos of “planTitos” and “planTitas”—those proud of puttering over plants like pampering pets and planting, per se—populated online platforms.
From entertainment, these activities enhanced entrepreneurship and enabled the emergence of a niche market. Some stayed with their simple hobbies; others sustained these into new sources of incomes as the economy spiraled toward a slump.
Victoria Mariz De Mata is one of the latter.
Have cement
WITH the increasing interest in planting and plants, De Mata saw green from the bags of cement stacked on their yard.
She told the BusinessMirror the cement was supposed to be used to build a convenience store their family planned to operate. That was before lockdown measures stalled construction work and other economic activities in the country.
De Mata said she observed that many were already selling plants online. Hence, she decided to sell plant boxes instead.
The young entrepreneur said she and her sister are working together to meet all the orders—molding the cement plant boxes by themselves. De Mata said her sister has more control over the creative side while she is in-charge of the logistics; the tricky side of the business.
De Mata said even after ensuring the products are wrapped well, breakage still occurs during delivery. These, sadly, add costs, she said.
De Mata said operating the business became relatively stable after two months, enough for her to decide to put up an online store via an e-commerce platform to expand further their reach. While this helped make deliveries easier, De Mata said she still accepts orders outside of the platform.
A part of their earnings go to pay for their mother’s hospital bills, she said.
Opportunities in crisis
DE Mata is one of the many who had to innovate as lockdown measures truncated economic growth. Several businesses folded up and an army of the jobless grew.
The economic recession prompted individuals seeking additional sources of income to turn to establishing their own small businesses.
The Department of Trade and Industry (DTI) registered over 80,000 online sellers last year, which is markedly higher compared to around 6,000 from 2018 to 2019.
The DTI noted that the number of registered online-retailers skyrocketed to 8,898 in the first quarter from just 1,848 last year in the same comparable period.
As of April 15, there are a total of over 9,000 online sellers that were newly registered this year.
“An entrepreneurial mindset is necessary to survive the pandemic as it will provide opportunities to earn income, especially for those displaced from their livelihoods or those whose incomes were reduced as a result of decreased business activity from the pandemic,” a trade official told the BusinessMirror.
De Mata would agree that having an “entrepreneurial mindset” can go a long way.
To keep her plant-box offerings fresh, De Mata said she researched potential designs that can be incorporated in their product line. She said she also uses holidays as themes.
Promoting BMBE
WITH more micro-scale, small-scale and medium-scale enterprises (MSMEs) emerging during the pandemic, the DTI has been doing its part in enforcing the Republic Act (RA) 9178 or An Act to Promote the Establishment of Barangay Micro Enterprises (BMBE).
Enacted in 2002, the BMBE (pronounced like the Disney doe character Bambi) law, encourages the formation and growth of barangay micro-enterprises by granting them incentives and benefits, among others.
A BMBE refers to a business entity whose total assets are not more than P3 million. It is an enterprise engaged in production, processing or manufacturing of products or commodities, including agro-processing, trading and services.
Since 2016, the DTI has become the issuing agency of the BMBE Certificates of Authority through Negosyo (business) centers following the amendment of the “Go Negosyo Act” (RA 10644) to the BMBE law. Negosyo Centers are business assistance offices established in all provinces, cities and municipalities, DTI documents explained.
The BMBE Certificate of Authority is issued by the Office of the City or Municipality Treasurer prior to the amendment of the said law. Prior to the latter, these government offices required several supporting documents, according to DTI information materials. These documents include, among others, the following: mayor’s permit; Certificate of Registration from the Bureau of Internal Revenue (BIR); Income Tax Return; Sworn Statement of Assets and Liabilities; and, pictures of the place of business.
The DTI reduced the document requirements to only the business certificate, which include the DTI business name and a certificate of registration from the Securities and Exchange Commission (SEC), among others, after the BMBE registration guidelines were revised via RA 10644.
Exemptions helpful
REPUBLIC Act 9178 exempts BMBEs from the payment of income tax and minimum wage. According to the DTI, this reduces the burden on microenterprises as their operating costs will be much lower.
The Trade department believes these exemptions help “newly-started businesses that need reprieve while learning the potentially overwhelming responsibilities of business operation.” These include regulatory requirements, product development, marketing and logistics.
The provisions are also helpful for business owners who are “hesitant” because they find the process of formal registration with the government as an additional burden in terms of time, cost and energy. Examples of these are applying for permits and periodic filing of taxes.
According to the DTI, the lower operational costs due to exemptions can also help businesses to channel funds to expansion instead.
Despite the exemptions, the DTI explained that BMBEs are still required to pay other forms of taxes such as percentage or value added tax to the BIR and other local government taxes, if applicable.
Likewise, BMBEs still have to file their tax information to the BIR as a monitoring mechanism to ensure that they are compliant with regulatory requirements, DTI documents explained.
Financial barriers
GOVERNMENT interventions—capital infusions, training and marketing, among others—are needed to help microenterprises flourish, especially during a national crisis like the pandemic.
“Government can do so much to help MSMes survive and grow in the immediate term. Wage subsidies prioritizing MSMEs would help keep them operational,” Rizalina Mantaring, Management Association of the Philippines (MAP) national issues committee chairperson, told the BusinessMirror.
“MSMEs face both financial barriers, such as access to finance, high electricity costs, high taxes, among others, and non-financial barriers such as heavy regulations, government bureaucracy, corruption and others. All these serve to make doing business difficult and costly,” Mantaring added.
The Trade department, through its Livelihood Seeding Program-Negosyo Serbisyo sa Barangay (village-based business service) initiative, provides livelihood kits amounting to P3,000 to P8,000 to help businesses recover amid the ongoing health and economic crises.
The DTI said its employees also conduct information awareness programs in barangays to enable aspiring entrepreneurs to extend business development services in their localities.
The DTI said it offers learning and development opportunities for business owners through the Negosyo Centers and the Philippine Trade Training Center-Global MSME Academy. The topics covered in these training sessions include accounting, doing of business and the emerging e-commerce industry, among others.
The agency said it also doesn’t charge MSMEs for booths put up during regional and national trade fairs, conducted in malls and city centers, where there is usually high foot traffic.
But with the pandemic limiting mobility, the DTI said it has pivoted to partnering with e-commerce platforms to link the MSMEs to marketplaces.
Operations affected
THE imposition of an enhanced community quarantine (ECQ)—the strictest form of lockdown measures government used—resulted to most business activities grinding to a halt.
A survey by the DTI on MSMEs in June last year revealed that only 11 percent of the businesses were able to have full operations during the initial implementation of ECQ. This resulted in 90 percent of decreased revenues and 70 percent of businesses scaling down on workforce.
When asked for the reasons of the business closure, the entrepreneurs mostly cited the decline in sales, depleted working capital and restrictions to operate under the omnibus guidelines on community quarantines.
In a DTI survey conducted from January 28 to February 10, 2021, the number of businesses that have stopped operations during a pandemic has gone down to 4.6 percent.
Trade Secretary Ramon M. Lopez was quoted in a statement as saying this figure peaked last year at 34.2 percent. The number of businesses that have stopped operations went down to 10 percent in October and further declined to 5 percent by November last year.
But the recent figure is seen to have worsened with the recent imposition of an ECQ on selected areas, Lopez said. The DTI has yet to release an updated survey.
Restrictions’ impact
THE National Capital Region (NCR) and nearby provinces, including Cavite, Laguna, Bulacan and Rizal—or so-called NCR plus—were placed under ECQ on March 29 to April 11 amid the recent surge in Covid-19 cases. The community quarantine measure in NCR plus was eased to modified ECQ (MECQ) on April 11 until May 14.
Lopez estimated that some 1.5 million workers were displaced during the implementation of ECQ this year but around 500,000 workers are expected to have returned when the NCR plus transitioned to MECQ.
Still, the DTI found it necessary to further ease the restrictions on some business establishments to allow more individuals to have their jobs back.
The government recently approved indoor dining with 10-percent capacity for restaurants and 30-percent capacity operations for personal care services, including beauty salons, beauty parlors, barbershops and nail spas under MECQ.
All these business activities were previously not allowed during ECQ and MECQ.
Lopez said government expects an additional 300,000 workers will return to their employment following the easing of restrictions.
Truly aid
GOVERNMENT’S trade office noted that its survey revealed that half of the MSMEs also need financing assistance.
Having access to finance can truly aid the entrepreneurs in growing their business, Rizal Commercial Banking Corp. (RCBC) Chief Economist Michal L. Ricafort told the BusinessMirror.
“At some point, leverage through financing would help expedite the growth, scale [and] success of entrepreneurs, especially promising MSMEs with great potential to eventually level up into the bigger league; also as a starting point or foundations for long-term partnerships with banks and other financial institutions, amid increased competition among local and foreign banks operating in the country,” Ricafort explained.
The RCBC economist said that the proceeds of loans can be allocated for expansion, capital expenditures and operational expenses, depending on the nature of the business.
For its part, the Trade department adopted online solutions for loan applications and disbursement given the limited face-to-face interactions.
Have loans
ONE of the lending facilities launched by the DTI is the “Covid-19 Assistance to Restart Enterprises,” or Cares, program. It was launched in partnership with the Small Business Corp.
The program offers interest-free and collateral free loans with grace period of up to six months for regular businesses and up to 12 months for certain industries. The loans are payable for 18 months to 30 months.
Under the program, micro enterprises can borrow up to P300,000, small enterprises up to P3 million and medium enterprises up to P5 million.
The lending window was initially launched with only P1-billion allotment. The funding was expanded to P10 billion under the Bayanihan to Recover as One Act (RA 11494).
As of May 5, the program approved 40,647 loan online applications amounting to P3.8 billion.
“Improved access to financing in terms of both availability and cost, reducing documentary requirements, reduction or outright waiver of transactions would help [MSMEs],” Mantaring added.
Enterprise development
THE DTI also opened lending windows to help the tourism sector and the returning overseas Filipino workers (OFWs) who want to venture into entrepreneurship.
The MSMEs in the tourism industry can avail interest-free and collateral-free loan assistance under the “Tourism Rehabilitation and Vitalization of Enterprises and Livelihood,” or Travel, program.
The P6-billion facility will be loaned out to small-scale tourism-oriented enterprises accredited by the Department of Tourism and local governments.
As of April 15, the program released P97 million to 274 MSME borrowers, DTI documents revealed.
Meanwhile, the trade department’s “Helping the Economy Recover thru OFW Enterprise Start-ups,” or Heroes, program offers P100 million worth of loans to repatriated overseas workers looking to establish their own business.
Under this program, OFWs may borrow P10,000 to P100,000 without interest and collateral.
As of April 15, the program released P11 million worth of loans to 190 OFW borrowers, DTI documents revealed.
With the pandemic forcing every business to tighten belts, RCBC’s Ricafort advised MSMEs to use a “conservative approach” in handling their financial resources.
At the same time, he said MSMEs should also be “opportunistic to invest and better prepare themselves if economic conditions eventually improve in the coming years.”
Business shift
THE lockdown measures have prompted many businesses to shift to digital platforms to keep up with new protocols governing the market: decreasing face-to-face interactions and interruptions in mobility.
MAP’s Mantaring quipped that “digital is a great equalizer and is the future.”
The Trade department explained that digitalization is vital for MSMEs as they now use it in doing business.
For example, entrepreneurs use cellular or wireless communication to reach out to suppliers, install software to support business operations such as word processing and spreadsheet and even market their business through social media or e-commerce platforms.
“Technology in general has been necessary to improve the productivity of businesses and more specifically, digital technology is a more efficient and easily accessible solution for empowering businesses to manage through the Covid-19 pandemic,” the DTI said.
FintechAlliance.ph Chairman Angelito M. Villanueva said that digitalization for the MSMEs “do not need to be expensive.”
“In fact, there are a number of free digital services that one may use. These are good starting entry points for entrepreneurs entering the digital sphere for the first time,” Villanueva told the BusinessMirror.
For example, Villanueva noted most banking processes have been made available online, which includes in-application and web transactions. He described these as “easy, safe and convenient alternatives to branch banking.”
Other digital transactions that MSMEs can accomplish anywhere, he said, include check deposit, foreign exchange and account enrollment. Villanueva noted there has been recent multi stakeholder initiative pushing for more accessible and interoperable QR (quick response) payment acceptance.
Electronic commerce
STILL, MAP’s Mantaring emphasized that government should do its part in simplifying processes to encourage MSMEs to establish their businesses in the e-commerce sphere.
“Government can help MSMEs thrive on this platform by streamlining all the rules and regulations which discourage small businesses from going online legitimately,” Mantaring said. “This would at the same time help curb the growth of an underground digital economy where consumer protection may be poor.”
In April, the Anti-Red Tape Authority, DTI, Department of Information and Communications and Technology (DICT) and Department of the Interior and Local Government signed a joint memorandum circular (JMC) ordering local government units (LGUs) to automate their respective business processing and licensing systems by June 17.
This is in line with the provisions of the Ease of Doing Business (EODB) and Efficient Government Service Delivery Act of 2018.
The JMC directs the LGUs to set up an electronic business one-stop shop (eBoss) that can facilitate online submission of business permit applications; digital payment options; and, issuance of electronic versions of permits, licenses or clearances.
The memorandum states that LGUs are encouraged to enforce a partly manual and partly electronic system—which should reduce the number of steps for business permit processing to less than four—as they transition to a fully automated system.
The JMC standardizes the documentary requirements, steps and processing time of business registration. For example, it mandates the creation of a unified application form of LGUs, which can be used for business permit, fire safety and inspection certificate and locational clearance, among others.
The memorandum, likewise, capped the maximum number of signatories on permits to three persons.
However, government data showed that only 39 percent (593 LGUs out of the total 1,516) have set up an eBoss as of April 14.
Meanwhile, the first phase of the Central Business Portal (CBP)—a platform that aims to contain all business-related information—had been launched. It reduced both the number of forms and documentary requirements and the processing time to three days to four days from over 10 days previously.
The second phase of the CBP is already “under way and will further expand the coverage to integrate the registration with other agencies,” Lopez said earlier. It will incorporate the “Philippine Business Number PHBN” which will serve as a unique business identification system.
SME Development Plan
TO further its initiatives, the DTI earlier launched the MSME Development Plan 2017-2022. The plan outlines government’s policy direction in implementing programs and projects to support MSMEs with specification of priority areas.
The 5-year plan aims to enhance the business climate by reforming bureaucracy to facilitate the creation of MSMEs and the delivery of frontline services and to promote availability of financial services for the sector.
The blueprint wants to improve the management and labor capacities of the MSMEs. The DTI hopes to do this by developing the knowledge and skills of entrepreneurs, business managers and even employees through its various programs.
The DTI, under the development plan, is looking to bridge the gap in technology and innovation. The Trade department intends to “equip MSMEs with appropriate machines and equipment to increase production capacities and improve product quality.”
Lastly, the DTI said it is intensifying efforts for business-matching activities and trade fairs to attract retail and wholesale buyers for the MSMEs.
Taking stock
INDEED, Philippine Chamber of Commerce and Industry (PCCI) Chair Alegria Sibal Limjoco characterized MSMes as the “backbone of our economy” as these “create thousands of entrepreneurs and generated millions of jobs.”
MSMEs comprise 63 percent of the total employment and 99.5 percent of total enterprises in the Philippines.
Limjoco said the PCCI is committed to helping grow the MSME sector, especially during an economic turmoil. One way of doing this is through promoting franchising, she said, noting this could help retired and retrenched employees and repatriated OFWs.
While supporting the “backbone” of the economy is an arduous task, De Mata said she will do more on her own to grow her online business and cement her future.