Definition and Statistics

SMEs in the Philippines have created an important presence in terms of economic activity. There are also two other business categories aside from small and medium enterprises: the micro and large enterprises. MSMEs or micro, small, and medium enterprises are defined by the Department of Trade and Industry (DTI) as “any business activity/enterprise that is engaged in industry, agri-business/services, whether single proprietorship, cooperative, partnership, or corporation whose total assets, inclusive of those arising from loans but exclusive of the land on which the particular business entity’s office, plant and equipment are situated, must have value falling under the following categories:

By asset size: Or alternatively by the number of employees:
Micro up to PHP3,000,000 1 to 9 employees
Small between PHP3,000,001 and PHP15,000,000 10 to 99 employees
Medium between PHP15,000,001 and PHP100,000,000 100 to 199 employees
Large more than PHP100,000,000 more than 200 employees

DTI emphasizes the significance of MSMEs in the country’s economic growth. The agency reports that MSMEs contributed much to the following areas: “rural industrialization; rural development and decentralization of industries; creation of employment opportunities and more equitable income distribution; use of indigenous resources; earning of foreign exchange resources; creation of backward and forward linkages with existing industries; and entrepreneurial development.”

MSMEs are also collectively recognized for their major roles, including the following: (1) significant contribution to national economic activity, (2) main source of economic dynamism, (3) key source of provision of outsourcing products and services, and (4) positive impacts on local, regional, and community economic developments.

Statistics, on the other hand, reveal that SMEs represent over 99.6% of all businesses registered in the Philippines, employ 70% of the country’s total workforce, and contribute 32% to the economy. Due to their importance, the national government has become more concerned about giving the sector a wide-ranging and integrated strategy for their sustainable growth and development. In fact, the former administration included the creation of 6 to 10 million jobs (within a 6-year period) in a 10-point national development agenda. One of the benefits presented by the agenda is the increase in the amount of loans to be awarded to SMEs nationwide. Though this plan was eventually realized, not all small and medium-sized businesses had the chance to take advantage of this worthwhile program. As a result, many of them sought financial assistance from private lending companies.