SME

CHARACTERISTICS
and
STATISTICAL NEEDS
in the
PHILIPPINES

By Benel P.
Lagua
 Small and Medium Enterprises in
the Philippines
 Current State of SMEs in the
Philippine Economy
 Available SME Statistics
 Deficiencies in the present system
of SME statistics
 Current initiatives to develop
SME statistics
 Conclusion
A. SMALL & MEDIUM
ENTEPRISES in the Philippines

Small and medium

enterprises (SMEs) comprise
99.6% of all registered
business in the Philippines
and employ 70% of the
workforce
Recently, Republic Act No. 9178,
otherwise known as the
Barangay Micro Business SMEs
Enterprise (BMBE) Act of 2002
has redefined the categories.
Hence, the present structure,
by law, is as follows :

Micro - up to 3,000,000
Small - P3,000,001 - 15,000,000
Medium - P15,000,001 - 100,000,000
Large - above P100,000,000
B. Current State of SMEs in the
Philippine Economy

1. Number of Establishments and Employees

According to the 2001 statistics of business
establishments published by the National
Statistics Office, there are 811, 589 business
establishments in the country.

Of total, micro-enterprises account for 743,949

(97.1%), small enterprises 61,759 (7.6%), medium
enterprises 2, 923 (.4%), and large enterprises
2,958 (0.3%).
2. Geographic Distribution
The analysis of geographic
distribution of enterprises
throughout the country indicates a
high concentration in the National
Capital Region (NCR), which
accounts for 24.4% of all
establishments and 40.1% of all
employees.

The five regions subject to the present study (NCR, Regions

3, 4, 7 and 11) hold a combined share of 65.0% of total
establishments. Similarly, the regions account for 72.1% of
total employees. As a result, around two-thirds of SMEs are
concentrated in the five regions.
3. Sales and Value Added
by SMEs

The recent trends in value added by SMEs in the

country and their sales indicate a growing share.
SMEs as a whole have been steadily growing year
after year with the overall industrial growth, as
indicated by relevant factors, including the number of
establishments and the number of employees.

Nevertheless, compared to the absolute number of

establishments and employment, SMEs hold
relatively small share of value added and sales, less
than 30%, thus suggesting their development
potential in the country.
C. Available SME Statistics

1. National Statistics Office

The primary source of statistics on
Philippines SMEs is the National
Statistics Office.

NSO is the major statistical agency

at the national level responsible in collecting,
compiling, classifying, producing, publishing, and
disseminating general-purpose statistics. Statistics on
the census of establishments is done every 5 years
2. Loans lent to SMEs
All lending institutions are required to lend set
aside at least 6% of their total loan portfolio to
small enterprises and at least 2% to medium-sized
enterprises.

The Republic Act 6977 enacted in 1991 (the

Magna Carta for Small Enterprises) required
10% more to be diverted to SME’s. Then, it was
amended in 1997 under the Republic Act 8289
to extend the applicable period to 2007 and
lower the minimum level to 6% and 2%.
The Bangko Sentral ng Pilipinas is mandated
by law to monitor this initiative.
3. Tradeline Philippines
Tradeline Philippines is an online
database service that provides
product search listing thousands
of manufactured exported
Philippine products complete
with product specifications and is
a business search allowing users
to contact Philippine exporters,
suppliers and local/foreign buyer
details and the products/services
they manufacture / provide and
export
4. Exponet
The Bureau of Export and Trade Promotion's (BETP)
Export Assistance Network (EXPONET) helps
exporters and prospective exporters’ access
information and resolve specific problems related to
exporting

Exponet provides information on export seminar

schedules, export organizing, export procedures and
documentation, import facilities for exporters, buyer
linkages, export financing and incentives, product
raw material sourcing and other statistical
information. The agency also assists exporters in
export-related problems / trade complaints.
 D. Deficiencies in the present system
of SME statistics
1. Timeliness
Statistics on the census of
establishments (done every 5
years) and the annual survey of
establishments are usually
released 15-24 months after the
year. This makes the data more
or less an imprecise tool for
analysis and decision-making.

In the same manner, BSP collects information on the loans

lent to SMEs (in compliance with the Magna Carta for
Small and Medium Enterprise) every quarter. The data
athered is usually released only after 3 months.
2. Cross compatibility with other
countries for cross country comparisons

The major classification used by most countries to define

SMEs is through assets and employment size.
However, the size ranges of their classification differ,
since developed countries have large industries than
the less developed ones.

Hence, what might be considered as “small” by

developed countries will already fall into the
“medium” or “large” category for developing
countries like the Philippines. Thus, cross
compatibility with other countries for cross country
comparison, is sometimes inappropriate or could not
be used as basis for a policy recommendation.
3. Inadequateness
The scope and coverage of SME statistics are limited to 1)
the number of establishments, 2) employment
contribution, and 3) regional distribution. More
important data which will help policy makers and
businesses to react quickly in a competitive environment
are usually not available. These statistics include:

 Export contribution of SMEs

(direct and indirect contribution)
 Contribution of micro enterprises/
informal SMEs to GDP, etc.
 Sectoral statistics/Growth potentials
of industries.
4. Availability
There are confidentiality clauses in census for
firm level data. This cannot be accessed at the
National Statistics Office because their agency
has to comply with the rules of
confidentiality.

In similar ways, banks also ensure that access to

customer information is limited to selected
bank employees and are very conservative in
disclosing client information.
5. Coverage
The Philippines has a large section of small business
constituting the so-called underground or informal
economy. This refers to the small scale units in the
national economy, which produce and distribute goods
and services without the benefit of official sanction or
control.

They don't register, don't keep books and don't pay taxes.
They operate beyond the reach of the law. They have little
or no access to organized markets, credit institutions,
educational or training centers or public services.
Although efforts are being made by the government to
bring the underground economy to the surface, the nature
of this sector makes it very difficult to gather and process
statistics on them.
E. What are the current initiatives to
develop SME statistics?
1. National Business Registration (NBR) Project
The NBR project aims to address the growing concern of having
consolidated information on all the registered businesses in the
country.
Currently, no government agency has a complete record of all registered
businesses since registration is being done by various agencies. It is
the objective of the NBR project to integrate the information
contained in the various agencies and have a single consolidated
database containing basic information of all registered businesses.
The NBR project is considered a “timely” project for the country in this
day and age of global economy. The NBR will not only enable
Filipino entrepreneurs to find business ventures with fellow Filipinos
but with foreign investors as well.
2. SME Database Project
The SME Database (headed by the DTI SME-Project Management
Office) aims to act as a repository (databank) of the corporate
profiles of SMEs. Its objective is to serve as a tool for monitoring
the assistance given by the different agencies to each SME firm.
The database is also designed to identify individual companies
and to track the kinds of government assistance given to each.

The interim database will enable the much-needed tracking of SMEs

during the crucial first six (6) months of 2003, especially for
measurement against the National SME Agenda objectives. The
final database could act as a master database of all SMEs
nationwide, possibly supporting other organizations outside DTI,
and would allow for more complex analysis and reporting. A
networked database would facilitate the encoding of data from
the provinces at the source of the information

The ultimate benefit of the SMEs is the possibility of minimizing, if

not eliminating the need to register numerous times with various
organizations.
F. Conclusion

While the SME sector is recognized as the focal point

for growth that will ensure that the Philippine
economy moves forward despite the threats of an
unfavorable global environment, the overall fiscal
condition of the country prevents it from being
given utmost financial support.

Development programs have been laid out but

resources are not readily available because of
competing demands for government support.
It is also in this light that the government is
open to learn new modalities in gathering
and analyzing data. The administration has
given outmost policy attention to SME
development and hopes that that through
new and better development initiatives,
stakeholders can move the program
forward.
Thank you very much
and
MABUHAY!!!