CHAPTER 1

THE PROBLEM AND ITS BACKGROUND

Introduction

“Great things start from small beginnings.” As the famous saying goes,

many of today’s sought-after large companies or corporations all started from

a small vision that turned into a reality. The road towards their success were

not easy, it never was, but the entrepreneurs’ determination to become

successful had driven them to where they and their business or company are

standing right now.

Today, Micro or Small-Scale Enterprises (MSEs) is one of the “in-

demand” type of business in the society. In every streets of the busy metro or

even in the peaceful towns and barrios of the provinces, existence of micro or

small-scale enterprises in the Philippines are very evident. From retail stores,

mini-groceries, eatery, mini food stalls or kiosk, these kind of enterprises are

noticeable. According to an article published by the Senate Economic Planning

Office (SEPO) in 2012, MSEs serves as a breeding ground for new and

aspiring entrepreneurs. Through the conceptualization of creative business

ideas that will cater to the needs and wants of the consumers, these opened

many doors of opportunity to all hopeful entrepreneurs to venture themselves

to this kind of business not only to accommodate the needs and wants of the

consumers but also for the purpose of earning income for the everyday survival

of the entrepreneur and their families.

As one of the major contributors of growth and development in the

business and economic sector, micro and small scale enterprises have

opened employment opportunities and contributed to the development and

improvement on the economic activities of a certain community. Economic

activities are the activities which are concerned with the efficient use of such

scarce means as can satisfy the wants of the man (Jain and Khanna, 2007).

This activity involves the production, distribution, and consumption of

commodities, goods, and services to cater to the needs and unlimited wants

of man. The researcher, through this study, will determine how the current

status of micro or small-scale enterprises serves as a basis for the

enhancement of the economic activities in Barangay North Fairview, Quezon

City.
Background of the Study

In developing countries, Micro and Small Scale Enterprises (MSE)

make up the largest part of the industrial fabric, which makes them one of the

most important development agents in society (Hampel-Milagrosa, 2014).

Through MSE, doors of opportunity for employment, creation of innovative and

creative business ideas, and improvements on national economic growth have

opened and many aspiring entrepreneurs are engaging themselves to this kind

of business venture.

Micro and Small Scale Enterprises, as defined by Philippine

Department of Trade and Industry (DTI), is any business activity or enterprise

that is engaged in industry, agri-business and service, whether single

proprietorship, cooperative, partnership or corporation whose total assets are

up to Php 3,000,000 (for micro) and between Php 3,000,001 and Php

15,000,000 (for small scale), inclusive of those arising from loans but exclusive

of the land on which the particular business entity’s office, plant and equipment

are situated. According to Philippine DTI, Micro or small scale enterprise or

entrepreneurship has contributed to the country in the areas of: rural

Industrialization, rural development and decentralization of industries,

employment opportunities and more equitable income distribution, use of

indigenous resources, earning foreign exchange resources, creation of

backward and forward linkages existing industries and entrepreneurial

development.

Although they are usually low profile, Micro Small and Medium

Enterprises (MSMEs) play a significant role in the country. According to the

latest MSME statistics in 2014 provided by the Philippine Statistics Authority

(PSA), there are total of 946,988 establishments in the Philippines. 99.6% or

942,925 of the total population comprises of the micro, small and medium

enterprises (MSMEs). With this total number of MSMEs, 90.3% or 851,756 are

micro enterprises, 9.3% or 87,283 are small enterprises and 0.4% or 3,886 are

medium enterprises. National Capital Region (NCR) has the majority of the

MSMEs in operation in 2014 with 210,039 business establishments. Alongside

with NCR are Region 4-A (CALABARZON), Region 3 (Central Luzon), Region

7 (Central Visayas), and Region 6 (Western Visayas), these specific regions

in the country completes the top 5 locations in the Philippines with high number

of MSMEs in operation which is accounted for about 61.6% of the total number

of MSMEs establishments in the country.

 History about the establishment of Micro and Small Scale Enterprises

in the Philippines were not definite. However, according to Catane (no date),

one of the factors to the development of small-scale enterprise in the country

was due to those individuals who lived in the rural areas who wanted to be

hired in the urban areas but ended up unemployed because the capability of

those industrial firms to absorb labor force were already been exceeded.

Moreover, these enterprises assumes diverse role as they offer greater

employment opportunities outside the cities and these constitutes that MSEs

are valuable tool for regional development and industrial decentralization

(Catane, n.d).

One of the government initiatives to encourage the formation and

growth of barangay micro business enterprises is through the BMBEs Act of

2002. An Act that was signed into law by the Former President Gloria

Macapagal-Arroyo on November 13, 2003. Barangay Micro Business

Enterprises, also known as BMBE, is defined 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. Its primary objective aims
to integrate micro enterprises in the informal sector into the mainstream of the

economy. By strengthening BMBEs, these would mean a better quality of life

for the Filipinos as these would open more doors of livelihood and employment

opportunities.

There are many government-mandated agencies that focuses on

providing assistance and promotion on the development and growth of the

small scale industry sector in the Philippines. One of these agencies is the

University of the Philippines-Institute for Small-Scale Industries (UP-ISSI). It

was founded on March 2, 1966 through a bilateral agreement of the Republic

of the Philippines and the Kingdom of the Netherlands. Originally, UP-ISSI was

set up as a training institute for Philippine small industries and it progressively

built up its capabilities and stretched out its activities to include research,

extension and information programs. August 4, 1969, through Republic Act

No. 6041, marked its establishment as a research and extension unit of the

University of the Philippines. From then, UP-ISSI conducted numerous

consultancy training courses, seminars, technical studies in the field of small-

scale and medium businesses with emphasis on Philippine industries.

 The researcher selected to pursue this study to perceive how the

current status of Micro, Small Scale Enterprises (MSEs), as the 99.6%

comprises the total number of MSMEs in the Philippines according to 2014

MSMEs statistics, serves as a basis for the improvement on the economic

activities and how these affects the enterprises owners and residents of

Barangay North Fairview. Thus, this study will be beneficial to the barangay

officials of North Fairview, business owners and residents of Barangay North

Fairview and also the results of this study will be very helpful to the future

researchers who would conduct akin studies or researches as these will be an

additional to the field of research and will serve as their guide for future

research endeavors.
 Conceptual Framework

INPUT PROCESS OUTPUT

I. Demographic Profile of the Analysis on the  Improvements
Respondents: current status of Micro on the
 Age and Small Scale economic
 Gender Enterprises as basis activities in
 Civil status for the improvement Barangay North
 Type of business/enterprise on the economic Fairview.
 Nature of the business (Micro activities in Barangay
or Small Scale Enterprises) North Fairview through  Recommended
 Business Ownership the use of survey strategies on
 Location/Address of the questionnaire. Various further
Enterprises statistical tools will be improvements
used for calculating on the
II. Current Status of Micro/Small
the results. economic
Scale Enterprises in terms of:
 Presence of MSEs activities of
 Locally Registered MSEs Barangay North
 Population Fairview thru
 Employment Opportunities Micro and Small
 Sustainability of Business Scale
Establishments Enterprises.
 Standard of Living of the
Residents

FIGURE 1: INPUT-PROCESS-OUTPUT MODEL FOR THE

CONCEPTUAL FRAMEWORK
 For the conceptual framework, the researcher used the Input-Process-

Output (IPO) method, as illustrated in Figure 1, in executing the research

study. For the input, the researcher is targeting those MSE owners, residents

of Barangay North Fairview, and barangay officials as respondents of the

study. The researcher desires to know their perceptions about the current

status of MSEs in their barangay and how these status have contributed to the

improvements in their barangay in terms of their economic activities which

involves the production, distribution and consumption of commodities. The

study will go through a process of analyzing the current status of Micro and

Small Scale Enterprises and how this status serves as a basis for the

improvement of the economic activities in Barangay North Fairview. Survey

questionnaire will be used to collect and gather the data needed for the study.

The data that will be collected from the survey questionnaires will be tallied

and computed using various statistical tools. After the computation of the data

gathered, the researcher will be able to determine how the current status of

MSEs serves as a basis for the improvement of economic activities in the

chosen barangay and also to recommend strategies for further development

of Barangay North Fairview thru Micro and Small Scale Enterprises which is

the output part of the IPO model.

Statement of the Problem

The researcher aims to find answers to the following questions:

1. What is the profile of the respondents in terms of:

1.1 age;

1.2 gender;

1.3 civil status;

1.4 type of business/enterprise;

1.5 nature of the business (Micro or Small Scale)

1.6 business ownership (Sole Proprietorship, Partnership); and

1.7 location of the enterprise?

2. Current status of Micro/Small Scale Enterprises of Barangay North

Fairview in terms of:

2.1 presence of MSEs;

2.2 locally registered MSEs;

2.3 population (number of micro/small scale enterprises

owners);

2.4 employment opportunities/available;

2.5 sustainability of business establishments; and

 2.6 standard of living of the residents.

3. What are the recommended strategies on the improvement of

economic activities of Barangay North Fairview?

Scope and Delimitation of the Study

The study focuses on the current status of MSEs and how these status

serves as a basis for the improvement of economic activities of Barangay

North Fairview. 2014 MSME statistics of Philippine Statistics Authority (PSA)

was used in the study since this is the current MSMEs statistics available as

of today. The research sample is composed of one hundred respondents that

includes MSE owners and Barangay North Fairview residents and local

barangay officials. Data gathered from the survey questionnaire will be used

to determine the improvements in the economic activities of the selected

barangay which is the subject of the research.

Cooperation of the respondents in answering the survey questionnaire

is one of the difficulties that the researcher might encounter during the data

collection for the reason of confidentiality of the respondents. Furthermore, the

researcher also foresees the respondents’ knowledge about MSEs might

affect them in answering the survey. The researcher will be committed to

withhold any information that concerns the respondents of the study. Also, the

researcher will be assisting the respondents in answering the survey and

attend to all the queries that the respondents might inquire while answering

the questionnaire.

Significance of the Study

This study will be beneficial to the following group of individuals:

To the MSE Owners. This research study will be helpful the business

owner as this creates awareness that their business, despite of their business

size, contributes to the improvement and enhancement in the location of their

enterprises in terms of its economic activities.

To the Local Barangay Officials/Local Government Units. Through

this research study, these officials will be able to determine that the current

status of the Micro and Small Scale Enterprises affects the production,

distribution and consumption of commodities within their area. With these

findings, they may propose more barangay programs or activities, such as

seminars and trainings that may promote MSEs and motivate those aspiring

entrepreneurs to establish their own enterprise. Also, the officials may also
design programs that will encourage existing MSE owners to be more creative

and innovative with regards to their present businesses.

To the Future Researchers. This research study will be helpful to the

future researchers who would like to conduct akin research about the current

status of MSEs and how this affects the economic activities of a specific area

or location, whether in a barangay, city or municipality. This study will be an

addition to the field of research and the results of this study will serve as a

guide to future research endeavors.

Definition of Terms

The following terms are defined on how the terms are used in this study.

Backward Linkages. It is the connection between the company and its

suppliers.

Barangay. It is a Filipino term used for a village or district. It was

formerly called barrio or barrios.

 Commodities. It is an economic good that is bought and sold.

Consumption. It is the act or process of consuming. It is also the

utilization of economic goods in the satisfaction of wants or in the process of

production resulting chiefly in their destruction, deterioration, or

transformation.

Decentralization. It is the delegation of power from a central authority

to regional and local authorities.

Distribution. It is the marketing or merchandising of commodities.

Economic Activities. It is defined as the production, distribution and

consumption of commodities.

Enterprise. It is a unit of economic organization or activity especially a

business organization; it is a systematic purposeful activity.

Forward Linkages. It is the connection between the suppliers with its

customer.

Improvement. It is the state of being improved; especially: enhances

value or excellence.

Indigenous Resources. It is a native or original resources in a

particular place.
 Micro Enterprise. It is a small business that employs a small number

of employees. It usually operates with fewer than 10 people and is started with

a small amount of capital and they specializes in providing goods or services

for their local areas.

Production. It is the creation of utility; especially: the making of goods

available for use.

Scarce. It is a deficient in quantity or number compared with the

demand; not plentiful or abundant.

Small-Scale Enterprise. It is a business that employs a small number

of workers and does not have that much of a high volume of sales.

Standard of Living. It is the necessities, comforts and luxuries enjoyed

or aspired to by an individual or group.