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Helping the MSME

Innovation of products and services are likewise key factors for survival and recovery. Cutting costs, particularly fixed expenses, is critical.



Last week, I learned that one of the well-known snack shops in our province was closing down due to financial losses incurred as a result of the pandemic. An Internet shop near my office was also on the verge of closing down for the same reason. This was the same story for a businessman who was renting out equipment for live events. His once thriving business is now at a standstill.

These are stories that I am sure are repeated all over the country by a great number of micro, small and medium enterprises (MSME). They comprise 99.5 percent of business establishments in the country, employ approximately 63 percent of the workforce, and provide 40 percent of gross domestic product. The MSME are the backbone of our economy.

A survey conducted by the United Nations Development Programme after the first enhanced community quarantine (ECQ) last year found the majority of MSME were still temporarily closed or were operating at decreased capacity. Today, after two more ECQ and with the Delta variant, we can presume that the figure has worsened, with a good number of closures being permanent.

The national government has come up with several measures to help MSME. Last year, the Department of Finance, Bureau of Internal Revenue and Social Security System’s Small Business Wage Subsidy program assisted employees of small businesses affected by the ECQ with a wage subsidy of P5,000 to P8,000 per eligible worker. The Bangko Sentral ng Pilipinas, as early as March 2020, gave a grace period for loans due during the ECQ and, up to the present, asks their supervised financial institutions to help borrowers affected by the pandemic. It has also kept interest rates low.

The Bayanihan Acts have also assisted borrowers of MSME with loan grace period provisions. The Department of Trade and Industry provided a 30-day grace period on rent of MSME that had to cease operations due to the ECQ. The Small Business Corporation provides loans on favorable terms to small businesses.

The reduction in the corporate income and other tax rates following the enactment of Republic Act 11534, the Corporate Recovery and Tax Incentives for Enterprises Law, is also a big help to MSME.

There have been other government programs put in place to help small businesses hit by this crisis. Still, given the length and severity of this pandemic, which was worsened by the Delta variant, the plight of MSME has been exacerbated.

There are two realities that MSME have to recognize in order to be able to survive this crisis and recover. First is that this virus will be with us for a long time, and businesses will have to learn to live with it as a given. Second is that government will never be able to assist all the MSME financially, and whatever assistance given will never be enough. MSME will simply have to find ways and means to take care of themselves.

The MSME will only start to recover when people feel that they can go out because they will be safe. Safety begins within the organization, so employers should ensure that their people are all fully vaccinated. The current health and safety protocols, such as masking, sanitation, temperature checking, social distancing and quarantine periods will be here for quite some time. Businesses should factor this into their operations. They should make their clientele, suppliers and other stakeholders feel safe when dealing with them.

In this Covid-19 environment, digitalization is required. It minimizes physical contact and expands the reach of businesses.

Innovation of products and services are likewise key factors for survival and recovery. Cutting costs, particularly fixed expenses, is critical. Negotiating with creditors, suppliers and even employees for better terms in order to ride out this pandemic must also be done.

The government for its part can help MSME primarily by speeding up the vaccination program. It should remove red tape and make dealings with government easy and safe. It can likewise help by having certain government agencies and educational institutions teach MSME effective and efficient ways of doing business in this environment.

Helping our MSME is the key to the country’s economic recovery.