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15 October, 2018
“A lot of people have ideas, but there are few who decide to do something about them now. Not tomorrow. Not next week. But today. The true entrepreneur is a doer, not a dreamer.” — Nolan Bushnell, Entrepreneur
The art of growing a country’s economy is akin to solving a difficult jigsaw puzzle. Every piece of it should be assembled and interlocked in order to complete the picture. In the Philippines, one of the pieces is the empowerment of micro, small and medium-sized enterprises (MSMEs), which account for thirty-five percent (35%) of the Gross Domestic Product.
As early as 1991, the Congress enacted Republic Act No. (RA) 6977, also known as the Magna Carta for Micro, Small and Medium Enterprises (MSMEs), as amended by RA 8289, and as further amended by RA 9501 (Magna Carta for MSMEs), to recognize and strengthen MSMEs’ potential contribution for economic growth.
The Magna Carta for MSMEs provides for a framework on how to start up an MSME in the Philippines. MSMEs are any business activity or enterprise, whether single proprietorship, cooperative, partnership or corporation engaged in industry, agribusiness, trade, and services. They are categorized based on their total assets, inclusive of loans, but exclusive of the land on which the particular business entity’s office, plant and equipment are situated.
The total assets of the MSME will be valued and determined as follows: not more than PhP3,000,000.00 for micro enterprises; PhP3,000,001.00 to PhP15,000,000.00 for small enterprises; and PhP15,000,001.00 to PhP100,000,000.00 for medium enterprises.
If one wants to put up a single proprietorship or a partnership, the business should be wholly-owned (100%) by Filipino citizens. On the other hand, if one wants to put up a corporation, at least sixty percent (60%) of the capital or outstanding stocks should be owned by Filipino citizens. In any case, the business should be engaged in any activity within the major sectors of the economy and must not be a branch, subsidiary or division of a large scale enterprise (total assets are more than PhP100,000,000.00).
Once registered, eligible MSMEs are entitled to a number of incentives, mostly facilitated by the Department of Trade and Industry (DTI).
Through the establishment of Negosyo Centers by local government units and MSME Centers by the DTI, there is ease in registration, renewals of applications, establishing local support networks and market linkages, and facilitating access to grants and financial assistance for MSMEs. All government agencies are required to pursue the principle of minimum regulation and see to it that procedural requirements are minimized.
As to financial assistance, all lending institutions were mandated to set aside at least eight percent (8%) for micro and small enterprises and for medium enterprises, at least two percent (2%) of their total loan portfolio for the past decade. While this mandate has expired, it is an advantageous facet of the Magna Carta for MSMEs which our lawmakers may want to continue.
Additionally, MSMEs may apply for financial assistance and guarantee of loans from the Small Business Guarantee and Finance Corporation (SB Corporation), which is an agency attached to the DTI. Its funds are allotted especially for technology-oriented industries and collateral-free fixed and working capital loans to micro and small enterprises.
Interestingly, on August 17, 2018, the President approved RA 11057 also known as the Personal Property Security Act, which promotes economic activity by increasing access to least cost credit, particularly for MSMEs. Through this law, MSMEs will be able to secure obligations with personal properties as their collaterals. This shows how our government continuously supports and empowers MSMEs’ financial assistance.
Aside from enjoying minimized requirements and easy access to loans from lending institutions, there are projects launched by the DTI with the private sector to support MSMEs’ thrive for success: Project KAPATID, a coaching and mentoring approach where large scale corporations teach micro and small enterprises on different aspects of business operations; Shared Service Facilities (SSF), which is aimed at providing MSMEs with machinery, equipment, tools, systems, skills and knowledge under a shared system, which includes the One-Town One-Product (OTOP) Project; SME Roving Academy (SMERA), an on-site learning institute which integrates business development services, including business modules in the early stages of an enterprise’s journey; and Tradeline Philippines, an online business intelligence platform that aims to deliver timely and relevant information and assistance to exporters and relay information on trade statistics, business matching, export intelligence, export news, and directory.
With these opportunities, an entrepreneur’s guide on how to start a micro, small, or medium-sized business is at his fingertips. However, while there is an initial support system, the entire operations of MSMEs will depend on sustainable growth and business market. One of the obstacles faced by MSMEs in the Philippines is the infiltration of products imported from other countries.
Therefore, our government’s efforts should be directed to arming MSMEs to withstand and even compete with domestic and international market once the businesses have been set up. The remaining pieces of the puzzle include strict execution of other policies, such as exportation and importation rules and taxes, promotion of MSMEs products and services, encouragement of the public (especially large scale enterprises) to favor Filipino products and services, which must coincide with the incentives under the Magna Carta for MSMEs and projects of the DTI.
Even if our government succeeds in igniting entrepreneurs to act on their ideas now, the foregoing programs will become futile in light of the missing pieces of the Philippine economy puzzle still left unsolved.
For further information, please contact:
Maria Mykeana C. Naval, Angara Abello Concepcion Regala & Cruz (ACCRALAW)
mcnaval@accralaw.com
