Are we prepared to have a sustainable digital economy?

MICRO, small and medium enterprises (MSMEs) have been instrumental in Philippine economic growth and development. While MSMEs serve as a driving mechanism in providing an abundant number of employment and business opportunities in the country, this has also significantly contributed to the growing global workforce in keeping up with international trade. Currently, micro enterprises comprise at least 88 percent of entire businesses operating in the country that generates a significant number of the country’s total employment of more than 5 million jobs where micro enterprises produced the biggest share and closely followed by small enterprises, as per Philippine Statistics Authority recent reports.

Taking into such account, this heavily posits our country’s economic vibrancy and likewise addresses prevalent facets of crisis such as poverty and unemployment rate. And as the pandemic continues to substantially affect most businesses and enterprises that may lead to a worsening poverty case rate, this also calls for a proactive response from the state to ensure and empower all MSMEs through prompt public policies as a matter of urgency.

Thus far, the Philippines has two major laws dealing with MSMEs. First, the Republic Act (RA) 9501, otherwise known as “Magna Carta for Micro, Small and Medium Enterprises,” which further amended RA 8289. While this law is the birth of MSME legislation in the country as it tries to promote entrepreneurship and encourage establishments of MSMEs ascertaining the continued viability and growth to attain countryside industrialization, the said law has to catch up with the current demands of enabling MSMEs’ access to finance. In fact, in a recent study titled “Assessing Mandated Credit Programs: Case Study of the Magna Carta in the Philippines” highly suggests the need to revisit the current MSME lending policy framework. Interestingly, a Senate bill was introduced last September pending for first reading titled “An Act Further Promoting Entrepreneurship by strengthening, empowering and enhancing the Financing and Other Support Programs for Micro, Small and Medium Enterprises,” intending to amend the aforementioned Magna Carta as the bill addresses the need for more effective policies that do not solely cover financial support but also provide support and benefits for equally important aspects of MSME developments such as training and information services.

Second, RA 10644, or the “Go Negosyo Act,” enacted in July 2014 that promotes job generation and inclusive growth for the development of MSMEs. Such a law may have paved the way for the establishment of Negosyo Centers in all provinces, cities and municipalities nationwide and likewise for the establishment of a start-up fund for MSMes from the MSME Development Fund, the law needs further revisit in terms of information and education of expanding such small businesses for potential inclusion in the aspect of international trade.

Corollary, based on studies and as mentioned by the World Bank, the approach in strengthening MSMEs, most especially in developing countries, such as the Philippines, must be holistic. Holistic approach suggests that there must be an implementation of support initiatives in developing and setting up a number of credit guarantee schemes, enhancing access to finance, improving credit infrastructures and introducing innovation in MSME finance such as e-lending platforms and use of alternative data for credit decision-making.

As the Philippine economy evidently struggles in a pandemic, Filipinos are deemed as resilient amid such kinds of circumstances. Hence, it accordingly follows that the government must ensure to adapt at these trying times providing efficient measures to empower businesses and enterprises in the country. While the aforementioned Senate bill might be a great turning point and the present and existing laws intend to develop and strengthen MSMEs in the country — the real question posits: are these laws, on the other hand, sufficient in attending international demands such as providing sufficient policies on credit and finance facilities while addressing the need to strongly reinforce government programs among important sectors in terms of information, skills, training, research and innovation intending to cross a paradigm shift toward a sustainable digital economy?

Francis Beatta Ramirez is a compliance analyst at First Circle who joined the firm in August 2021. She is currently taking up Juris Doctor in San Sebastian College of Law Recoletos. She handles compliance matters, making sure that the firm, as a Securities and Exchange Commission-regulated corporation, is in conformity with the present and existing laws, rules and regulations.