SMEs seen as major economic growth driver

MANILA, Philippines - At the onset of a new year, the Philippines is being emphasized as one of the promising global markets with an overall positive economic outlook.

Aside from the big corporations driving such impressive growth, small and medium enterprises (SMEs) have been putting in significant numbers to the nation’s economic upswing.

According to a recent data from the Department of Trade and Industry,  SMEs account for 99.6 percent of total registered enterprises. Out of the 820,255 businesses which operated in the country, 816,759 were SMEs while only 3,496 were large enterprises. Of these, 91 percent (743,250) were microenterprises, 8.6 percent (70,222) comprised of small firms, and less than one percent (3,287) made up medium-sized companies.

In 2011, Philippine SMEs also accounted for 32 percent of the country’s GDP, according to former Sen. Edgardo Angara, who lauded their invaluable contributions in his keynote address at the Philippine Home-Based Business and Career Summit Expo, saying that “MSMEs (micro, small and medium entrepreneurs) are the real backbone of our economy. People do not realize that (their) businesses have greater direct impact on Filipinos’ lives than do big players. But more than this, (they) provide opportunities to those who could not have started businesses otherwise.”

Small and medium enterprises (SMEs) are also said to “stimulate domestic demand through job creation, innovation, and competition,” making them “a driving force behind a resilient national economy,” according to  a report from the Asian Development Bank.

The report said this sector has the “potential to encourage international trade” and that “prioritizing SME development is therefore critical for promoting inclusive economic growth in most economies in Asia.”

MSMEs also play a big role in the country’s employment and job generation. With 3.872 million jobs created in 2011, the sector accounted for 61 percent of the local workforce. This was more than the 2.473 million employment opportunities generated by large enterprises.

In its May 2013 report titled “Philippine Economic Update: Accelerating Reforms to Meet the Jobs Challenge,” the World Bank asserted that “to create more and better jobs, the government will need to urgently accelerate comprehensive reforms across a range of sectors to create a business environment conducive to private sector job creation, in particular job creation by small and medium enterprises.”

Challenges and opportunities

Like in any other industry, the MSME sector is not without challenges. In a report titled “ASEAN Economic Community 2015 SME Development: Narrowing Development Gap Measure,” R. Aldaba wrote access to finance is still one of the most critical factors that affect the competitiveness of MSMEs.

To further support the growth of this sector, the 2011-2016 Micro, Small and Medium Enterprise (MSME) Development Plan aims to address the key challenges and constraints that continue to prevent this sector from realizing its full potential and boosting the country’s industrial growth.

 It is looking at raising the economic contribution of SMEs to 40 percent of gross value added and generating two million new and sustainable jobs by 2016.

The 2011-2016 MSME Development Plan also aims to develop a vibrant MSME sector by creating an enabling business environment as well as providing government support to strengthen MSME productivity and competitiveness. Aldaba also suggests that “to boost SME competitiveness, pursuing promotion and development of outsourcing arrangements would be important.” 

Since most successful entrepreneurs start out small, the MSME sector also provides a training ground for start-up businessmen in managing and growing their business. These budding entrepreneurs would soon become the top players in the business sector. The sector is a rich source of innovation and ideas, what with all the many types of business concepts people come up with or get into.

The DTI also listed business environment, access to finance, access to markets, and productivity and efficiency as four areas where SMEs face challenges. While statistics and the lure of a fledgling business can be promising, the attrition rates for startup MSMEs can also be a cause of discouragement for some, which can go as high as 50 percent.

The need for a trusted business advisor

Because MSMEs face a lot of risks, they need a trusted partner for their needs, especially in information and communications technology (ICT) that enables optimal and cost-efficient business operations. This is the reason why Globe myBusiness, the ICT arm of leading telecommunications company Globe Telecom, is strengthening its partnerships with these MSMEs so that it can address and serve their current and emerging needs well.

“There is a renewed focus mainly because of the economy. With its continued growth, you will see a lot of SMEs flourishing. It makes a lot of business sense for Globe to focus on this segment,” says Martha Sazon, senior vice president for Globe myBusiness. “In a fast-growing economy, you will have more people who will risk and are willing to try it out on their own. The thriving environment allows them to do that.”

According to Sazon, Globe myBusiness has immersed itself in understanding the MSME community so that they may be able to design their products and services according to their customers’ needs.

“Each business is unique. One business may need a certain product but another business of its kind may not. We think of how we can serve their needs more than what products we can sell them. It’s about giving them what they want, empowering them to customize the services that they want and design how they want to be serviced.”

For MSME clients, excellent service is a must because unlike in consumer markets, every second that the communication lines falter, business opportunities are lost.

“The one who gives the best and the most consistent service, who shows the most care, wins,” explains Sazon.

For Sazon and her team in the Globe Business Small and Medium Business Group, earning the trust of their customers and growing with them remains to be a paramount task: “In Globe, we choose to be a partner and a trusted business advisor to these customers so that their inherent business size will not limit their ability to grow. We believe that it is an underserved segment so we are setting high standards deserved by the MSME community and give our best to live up to it.”

Sazon also stated that, “it is our aspiration for all our clients in Globe myBusiness: to grow with them from the beginning until they expand their businesses. That is the true essence of being their trusted business advisor.”