BMBE is defined under the BMBE Law, RA.

9178 Act of 2002 as “any

business enterprise engaged in production, processing, or manufacturing of
products, including agro-processing, as well as trading and services, with total
assets of not more than P3 million. Such assets shall include those arising from
loans but not the land on which the plant and equipment are located.” The country
recognizes that small businesses are essential to the economic development of the
country. Supporting the growth of BMBEs will increase jobs, provide livelihood, and a
better quality of life for Filipinos. The Act then aims to “integrate micro-enterprises in
the informal sector into the mainstream of the economy.”

Senatorial candidate Martin Romualdez believes that the establishment of

barangay micro-business enterprises—as well as providing these businesses
incentives and benefits—can contribute to economic development and at the same
time give opportunities for small business entrepreneurs. He authored House Bill
1036, an act to promote the establishment of micro-business enterprises (otherwise
known as MBEs).

According to studies, a lot of barangay micro-business enterprises (BMBEs)

remain to be informal, meaning these enterprises have not been woven into the fabric
of the economy due to fear of bureaucratic requirements. Unfortunately, this occurs
despite the existence of the Barangay Micro-Business Enterprises Act of 2002, a law
that ensures the integration of small business enterprises into mainstream economy
while at the same time receiving tax breaks, minimum wage exclusions, numerous
trainings, and marketing assistance. The Leyte solon has expressed his desire to
amend it on account of the estimated 5% decline in registered enterprises, on top of
the 4% in micro enterprises, over the years. According to the NSO, the informal sector
accounts for almost 30% of the service sector in 2008.

Today, the number of registered Barangay Micro-Business Enterprises remains

low. There are around 720,000 potential registrants of small enterprises, but only less
than 7,000 are registered under the BMBE Law. Romualdez sees the insufficiency of
the existing law, seeing how enterprises that avail of said incentives are low. That said,
he pushes for information dissemination, which is to be implemented by the Philippine
Information Agency in cooperation with the DILG, DOLE, and DTI to encourage the
participation of BMBEs. Moreover, he proposes the creation of micro-business
enterprises registry while giving these enterprises the maximum level of five years for
certification renewal. This will enable the enterprises to progress with less than
PhP3,000,000 worth of assets. Moreover, the five-year renewal limits their access to
fiscal incentives, which generates income for the economy.

In the Philippines, about 90 percent of all businesses are categorized as micro

businesses. These consist of enterprises engaged in industry, agribusiness and or
services, whether single proprietorship, cooperative, partnership or corporation. Their
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, have value of
not more than ₱3 million.
Of all micro businesses, about 46 percent are involved in the wholesale, retail and
repair business; 27.6 percent are in the accommodations and food service; 13.5
percent are in manufacturing; while 12.5 percent are engaged in other service
categories.
History

From the late nineties to the present, the provision of non-financial services or
business development services to client-borrowers has become a component of the
various MFIs’ range of products and services. Notwithstanding this fact, however,
MFIs admit that only 1 to 2 percent of their client-borrowers with microenterprises
have been able to “graduate” their businesses into small- or medium-scale
enterprises. The rest or some 98 percent of the MFI clients’ businesses remain at the
micro level.2 A study by the United Nations Conference on Trade and Development
(UNCTAD) study echoes this finding: majority of micro and small enterprises in
developing countries fail to move to higher levels of enterprise activity that would
enable them to contribute to economic growth and job creation.3 Given that
microenterprises in the Philippines make up the bulk of enterprises in the country, and
have the potential to contribute significantly to employment generation and poverty
reduction, MFIs and development organizations (DOs) would like to find out: What
makes the few microentrepreneurs succeed? What factors facilitate the growth of
microenterprises into small- or medium-scale enterprises? At present, MFIs, DOs,
and other BDS providers have yet to find an effective and efficient business model for
providing BDS. As providing BDS is quite expensive per se, it has become imperative
for MFIs and DOs to come up with very strategic BDS interventions for its client
borrowers, strategic especially in terms of cost and quality.

Through a survey of literature this paper looks into the nature of microenterprises,
the challenges and barriers to successful entrepreneurship, as well as the key factors
behind the microenterprises that have successfully grown to higher levels of
enterprise activity. It focuses on the qualities or traits and skills of successful
entrepreneurs based on a content analysis of documented stories, case studies or
profiles identifying their traits and skills at various stages of the development of their
enterprises. The results of this literature review are expected to help identify the type
or kind of microentrepreneurs who manifest greater potential to grow their businesses
into SMEs. In turn, identifying their type should guide MFIs and DOs in crafting the
BDS interventions needed to bring these microentrepreneurs to the next level. The
findings from this paper are also expected to help draw up the variables that will form
part of the parameters for the research survey on successful client-borrowers of
participating MFIs.

Micro, small and medium enterprises (MSMEs) make up the vital engine of the
Philippine economy. Being largely poor and lower-middle class, the composition of
the Philippine population is vastly reflected in the makeup of the economy. According
to the National Statistics Office (NSO), 99.64 percent of all registered businesses
nationwide, which number 783,9236 are classified as micro, small and medium
enterprises. Ninety-one (91.02%) percent of these businesses or some 713,565 are
considered microenterprises. Small enterprises comprise 8.2 percent (64,501), while
medium enterprises account for 0.38 percent (2,980). Large enterprises make up 0.36
percent (2,865) of the total number of businesses in the country.

Meanwhile, the Global Entrepreneur Monitor Philippine Report estimated that 4

out of every 10 adult Filipinos aged 18 to 64 years or about 19 million, were engaged
in business, thereby placing the country second among those countries with the most
number of individuals owning a business. About 10 million of these enterprises in the
Philippines were in the early stage of entrepreneurial (TEA) activity, while the
remaining 9.5 million were established businesses (EB) as of 2006.10 Filipino women
owned 44 percent of the microenterprises, over 80 percent of which were in the rural
areas.

Nature of microbusiness or micro-enterprises

Chua12 (2004) defines microenterprises as activities in which the poor are

engaged. Most of these activities are small in scale--hence, “micro”--in terms of inputs,
processes, outputs and markets. The non-crop production activities of the poor
require few inputs in terms of labor, capital and equipment or assets. The processes
for the poor’s enterprise are also normally simple in terms of technology, skill and
manpower. The volume of goods and services they produce are similarly small.

Chua categorized the focus of microenterprise activities as follows: • Trading –

refers to buy and sell activities; stationary vending (such as that done in sari-stores) or
ambulant vending activities such as market vending, street vending of fish ball, taho,
etc. • Basic processing – e.g., food processing resulting to such products as smoked
fish, baked goods, tocino and ham, fruit preserves. Other examples include sewing,
repacking of rice, spices, etc. and handicraft making. • Service – includes home
service activities like manicure, pedicure, hairdressing, vulcanizing, shoe and
electronic repair shops, tailors, small eateries • Transport – examples include tricycles,
FX taxis or private cars, boats. • Agri-based microenterprises – These do not refer to
crop production but to business activities arising out of the trade, sale and processing
of agricultural products.

The aforementioned are the most common focuses of microenterprises in the

rural and urban areas.

Microenterprises possess other dominant characteristics.

First, most microentrepreneurs operate their microenterprises in their residences

(e.g., sewers and other home-based craft manufacturers, sari-sari storeowners) while
others do not have fixed locations (e.g., ambulant fish or food vendors).

Second, most microenterprise activities are seasonal due mainly to the fact that
the supply of raw materials or the demand for their products is also seasonal, e.g.,
smoked and dried fish. When fresh fish are scarce, the demand for smoked or dried
fish goes up.

Third, microenterprises “have short cash cycles (from sourcing of money, to sale
of goods or services, to collection and to paying back of the money), [ranging] from
one day to several weeks.”

Fourth, “microenterprise activities are relatively easy to engage [in] and also to
exit from.” This is because the enterprise activity, as Chua pointed out and which one
could easily validate, is simply the poor’s attempt to utilize the resources available, for
them to earn an income.

Fifth, microenterprises, in general, show very high rates of return vis-à-vis the
low level of investment needed. A fish vendor, for instance, could realize a return of
25 percent per day, like if he buys five kilos of fish at Php80/kilo then sells this at
Php100/kilo. From such the vendor would earn Php100. Such high rates of return may
be the underlying reason for the microentrepreneurs’ choosing informal moneylenders
to be their source of capital despite the high interest rate charged by the latter.
 Although microenterprises require little in terms of capital, skills, and assets, and
thus permit the poor to enter or exit the sector easily, microentrepreneurs actually
generate only small value added for each business activity. These same features tend
not just to foster intense competition due to the proliferation of microenterprises but
also limit the microenterprises’ potential for growth, Chua explained.13

Microenterprises in the Philippines are sometimes referred to as the “informal

sector.” The two terms differ only in terms of the perspective by which economic
activities are viewed. Most microenterprises lack the aspect of “formality” in terms of
registration, organization, work and management arrangements within the enterprise.
The National Statistics Coordination Board (NSCB) officially defines the informal
sector as consisting of “units engaged in the production of goods and services with
the primary objective of generating employment and incomes to the persons
concerned in order to earn a living. These units typically operate at a low 13 Ibid.
Literature Review on Growth-oriented Microentrepreneurs PinoyME BDS Working
Group 7 level of organization, with little or no division between labor and capital as
factors of production. It consists of household unincorporated enterprises that are
market and non-market producers of goods as well as market producers or services.
Microenterprises are identified on the basis of their size---assets, income, or
employment. There is a huge overlap between informal sector enterprises and
microenterprises. Most microenterprises are informal and most informal sector
enterprises operate at a very small scale and are therefore, microenterprises.”14

According to Alyssa Gregory Updated February 22, 2018

Micro businesses are a vibrant and profitable segment of any growing economy, but
they often get swept up into the same tornado of information that applies to small
businesses in general. But as more members of the workforce become self-employed, the
growth of micro businesses has increased significantly.

There is no universal, or even national, definition that limits a micro business from
also being labeled as a small business, small businesses are identified as for-profit
enterprises that are independently owned and operated, but do not dominant their
industry or local market. Generally, they can staff anywhere from 500 or fewer
employees, and their assets total less than $1 million per year.
Unlike their micro business counterparts, small businesses tend to have less
difficulty securing capital loans or lines of credit, and recruitment as an independent
enterprise is met with less resistance as their companies are seen as more financially
solvent. That solvency comes at a price, however, as many small businesses when
registered as an LLC or corporation will find their taxes are assessed at a corporate
tax rate instead of a personal tax rate commonly used by micro businesses run by
solopreneurs.
Tax structure and recruitment process can also affect small businesses when it
comes to their payroll system. As companies grow, a small business’ in-house team
may require something more robust than a standard bookkeeping system to ensure
payroll taxes, corporate taxes and government fiscal policies are adhered to.
An internal payroll system, or outsourcing to an independent company that
specializes in payroll accounting, can help alleviate the problems that come with
increases in size and logistics.
Although all micro businesses are technically small businesses, the operating
costs and revenue collected is often significantly higher for a small business as it
scales up, even with the addition of only one new employee. Yet, with micro
businesses responsible for more than 41 million jobs in the U.S.’s private sector, it’s
important to not discount why entrepreneurs with a business of five or fewer
employees require their own market representation.

Dal LaMagna, in his humorous recent book “Raising Eyebrows: A Failed Entrepreneur
Finally Gets It Right,” leads with the foundational principle of micro-businesses, which
is to start small. This allowed him to learn enough from all his early mistakes to hit it
big with a global beauty tools company called Tweezerman. He offers several
additional principles as follows:

1. Tailor the business to you. Do you love antiquing? Fishing? Cars?

Cooking? Now, think about what pursuing this passion might mean for
your lifestyle. Think how you want to spend your day; where you want to
live; whether you want to work with people or alone; in the morning or at
night, and so on. Eliminate any aspect of your business that doesn't
create your preferred lifestyle -- and will work against you.

2. Be frugal. Don't spend money you don't have. Don't invest in anything
you don't need. If this means baking cupcakes in the local church
basement and delivering your signature pastries by bicycle to local
stores -- two dozen at a time -- do it. Take the money you make and put
it right back into the business.

3. Record every expense. From the dollar you gave to the homeless guy
on the way to meet a prospective client, to the new tie you bought to
look professional, write down every single penny. The key to launching
a micro-business is to keep expenses under control and fully accounted
for.

4. Keep a monthly profit-loss. For the first two years of your business,
complete a monthly profit-loss statement. This helps you stay on top of
where your business is going, where it could do better, and why it
fluctuates.

5. Find free stuff. Many items needed to start and run your small business
are available for free or next to nothing. Be creative. Use freecycle.com;
ask friends if they have an old computer or printer; or visit a thrift shop
for office furniture or office supplies.

6. Write down agreements. With a very small business, your clients

sometimes make the assumption that they don't have to sign an
agreement. Wrong. Get in the habit of thinking like a company founder
and get promises in writing. And while you're at it, keep your side of
agreements.

7. Keep it simple. When Dal first started Tweezerman, he did nothing but
focus on tweezers and selling them to cosmetic counters, one store at a
time, which he did very well. If you can do one thing well, don't dilute
your efforts until you have been turning a large profit over a consistent
stretch of time.