We should never think small when we talk about micro, small, medium enterprises (MSMEs).
The implementation of stricter health lockdowns in the first quarter of 2020 to prevent the spread of COVID-19 had severely affected businesses, including Micro, Small, and Medium Enterprises (MSMEs).A National Economic and Development Authority (NEDA) survey conducted together with the World Bank (WB) revealed that around 60% of MSME respondents were forced to stop operations, reduce their working hours, or temporarily lay-off workers.
Fortunately, majority of the businesses interviewed did not permanently lay-off employees. This implies that businesses were absorbing whatever losses they had experienced to protect their workers. This is important to consider, given that as of 2018, MSMEs account for 99.5% of total businesses and employ 63.2% of the total workforce in the Philippines, or the equivalent to 5.7 million jobs.
Like most businesses, ARETEI Foods Corporation was forced to temporarily stop its operation during the Enhanced Community Quarantine (ECQ). Relying mostly on tourists, balikbayans, and mall-goers, the impact of the pandemic and lockdown had been tough for the business. When we talked to its owner and COO, Tricia Castrodes, she shared that they initially tried to keep all of their staff. They worked hard to adapt to the situation and offered new products as well as door-to-door deliveries.
Unfortunately, the efforts weren’t enough given the stiff competition, which she attributed to a hyper local community (or the increase of the informal entrepreneurs within the community that they had to compete against). Because of this, they had to let go of some of their long-time employees—with proper separation pay—and only retained half of their regular staff by October 2020.
The impact of quarantine restrictions on MSMEs was reflected later with the overall GDP for 2020 slipping to -9.5%, and a record -16.9% during the second quarter of the year. But with the gradual and calibrated reopening of the economy, we saw some signs of recovery as our third quarter GDP climbed back to -11.5% and then -8.3% at the fourth quarter. While we aim to bring back up our GDP numbers to pre-pandemic levels and even higher, it remains crucial that the government’s economic recovery plan includes support for MSMEs.
The government’s policy on adjusted loan repayments (via the Bayanihan Act) and cash support to employees and employers have proven beneficial by giving MSMEs like ARETEI the flexibility to rebuild the business and support its employees. Likewise, a PHP 10 billion fund was allocated from Bayanihan 2to the Small Business Corporation(SBCorp) — the financing arm of the Department of Trade and Industry (DTI)—and itsCOVID-19 Assistance to Restart Enterprises (CARES) program. This program provides collateral and interest-free loans to MSMEs affected by the pandemic, and entrepreneurs can avail of the loan by just paying a processing fee of 4-8%, depending on the term of the loan.
The DTI also launched the “Buy Local, Go Lokal” advocacy to further aid in recovery. Through “Buy Local, Go Lokal,” MSMEs are able to bounce back. For instance, Germano’s Chilli benefited from being a DTI-Go Lokal partner, easily transitioning its business online through a Shopee on boarding seminar that the agency provided in partnership with the platform. This allowed the business to sell its remaining inventory during the lockdown.
Business owner Gerome Panlilio banked on the GoLokal banner to leverage and attract customers and reconnect with loyal patrons. Gerome said he feels lucky to have recovered as the company now operates at a capacity similar to before the pandemic. But now, he is equipped with the skills and platform to help navigate the “New Normal.”
A bottom-up approach in stimulating the economy is one way for Filipinos to help in the country’s recovery, and they can do this by supporting the local economy. Through the “Buy Local, Go Lokal” campaign, money can be kept moving within the local communities, which would support domestically-manufactured goods, neighborhood stores, and local farmers.
The DTI intends to support more MSMEs and encourage entrepreneurial individuals to start businesses to help our economy to bounce back. But it is interesting to note that 98% of business name registration last year happened during the lockdown. This goes to show how enterprising and creative Filipinos can be during a crisis.
With Filipinos prioritizing purchases from homegrown businesses, we will see more local businesses flourishing. This, in turn, would help our economy—and our country—to recover.
(Photo of Sec. Lopez from Mark Ches Ang)
 Based on Nov 2020 Data from this speech: https://www.dti.gov.ph/speeches/2020-financial-education-stakeholders-expo/