Funding, literacy constraints impede Phl MSME upgrade

CEBU, Philippines - An internationally-initiated study revealed that majority of the micro, small and medium enterprises (MSMEs) in the Philippines found upgrading to be extremely hard to sustain due to specific constraints that impede their development.

The report named as “Micro and Small Enterprise Upgrading in the Philippines: The role of Entrepreneur, Enterprise, Networks and the Business Environment” is part of the three-country project conducted by the Department of Competitiveness and Social Development of the German Development Institute entitled “Enterprise Upgrading in Developing Countries.”

It was based on re-tracing success stories of small, medium and large-sized enterprises that grew out and developed from the micro segment.

It aimed to determine critical success factors for enterprise upgrading and derived conclusions and action points for policy makers, decision makers, researchers and other key stakeholders.

During a roundtable workshop with the University of the Philippines Institute for Small Scale Industries (UP ISSI) and local stakeholders in Cebu, agricultural economist Aimee Hampel- Milagrosa tackled about the results and conclusions from the MSME upgrading project in the Philippines.

There were a total of 112 respondents who belong in the food processing, footwear and leather, and textiles and garments sectors in the Philippines.

The core sample consisted of core sample consisted of 21 upgraders and 91 non upgraders.

Milagrosa cited that the upgrading phenomenon in the country occurs among a minority of enterprises and through a multitude of trajectories.

Most of the respondents found it to be difficult to sustain due to constraints such as lack of financial access and literacy, training and motivation of workers, reliable and up-to-date market information, market access and low level technology.

She cited that other challenges include difficulties in sticking to one supplier, competition with imports and lack of stable raw material supply.

She added that success factors on MSME upgrading, on the other hand, also depend on the entrepreneurial characteristics and not just on enabling business environments alone.

Other success factors cited are education and experience of the entrepreneur, portfolio diversification, investments on technology, strong network of buyers and suppliers, membership in manufacturer associations, integration into global value chains and participation in trade fairs and exhibits among others.

Milagrosa further noted that findings also revealed that regulation and state bureaucracy are seen irrelevant to enterprise upgrading but lack of finance remains a chronic constraint.

She, however, said that most successful upgraders employ innovative solutions to financing issues by using personal or family savings, establishing in-kind credit or through the creation of strategic partnerships with investors.

The research then concluded with key messages and policy recommendations for interventions geared towards the promotion of MSME upgrading in the Philippines. 

Milagrosa said that the study encourages entrepreneurs to use a combination of strategies to increase innovation, ensure survival and upgrade their enterprises, simultaneously need to overcome structural and sector specific constraints, establish personal and professional networks, and harmonize industrial development and international trade policies. /JOB  (FREEMAN)