Update 18 of SEDPI’s Rapid Community Assessment (RCA) October – December 2022
As the world slowly recovers from the pandemic, the economic landscape remains uncertain, especially for nanoenterprises. A recent survey conducted by our organization, Social Enterprise Development Partnerships, Inc. (SEDPI), reveals that 99% of nanoenterprises have resumed operations as of December 2022, indicating a promising recovery for this crucial sector of the economy.
Despite the positive news, recovery remains fragile with 52% of nanoenterprises surveyed experiencing weak demand. Access to supplies has been a continuing concern with 27% of nanoenterprises still reporting difficulties in obtaining the necessary supplies.
SEDPI’s latest self-rated poverty survey reveals that the impact of the pandemic on poverty levels remains significant. For 2022, 54% of respondents rated themselves at the poverty line, a decrease from 81% in 2021. The number of respondents who rated themselves as poor is steady at 3% and 4%. On a positive note, the number of respondents who no longer consider themselves poor nearly tripled from 16% in 2021 to 41% in 2022.
According to the Social Weather Stations, which conducts the survey at the national level, self-rated poverty was recorded at 48% in 2021 and 51% in 2022. The considerably elevated self-rated poverty at the national level suggest that a greater number of nanoenterprises that SEDPI serves experienced better economic conditions.
Over the past three years, SEDPI has conducted an impact assessment to evaluate its support for nanoenterprises through self-evaluation or perception surveys. The results are as follows:
Dec 19
Dec 21
Dec 22
Help in growing business
82%
100%
98%
Education of children
70%
85%
98%
Improve housing
67%
99%
98%
Improve nutrition
81%
100%
100%
Increase income
82%
100%
97%
The perception survey suggests that SEDPI’s assistance plays a crucial role in alleviating hardships among nanoenterprises in areas such as business growth, education, housing, nutrition, and income. This may be the reason why the highly significantly lower self-rated poverty data among SEDPI nanoenterprises compared to the national survey. Additional interventions and strategies in the areas of disaster risk reduction, housing and health are necessary to enable a more comprehensive and lasting escape from poverty.
The majority of respondents are nanoenterprises (45%), owned and operated by women, with an average age of 43 and 73% being married. Of these nanoenterprises, 40% rely on other sources of income, such as employment, while 12% are unpaid family members, and 2% are unemployed.
SEDPI is a microfinance institution dedicated to providing ethical financing to nanoenterprises in Agusan del Sur, Davao de Oro, Davao del Norte, and Surigao del Sur. Their efforts have led to significant improvements in various aspects of the beneficiaries’ lives, such as business growth, education, housing, nutrition, and income.
The COVID-19 pandemic has had a profound impact on nanoenterprises (NEs) worldwide, with various stages of recovery, demand trends, and access to supplies experienced throughout the course of the pandemic. This article examines the chronological analysis of NEs’ recovery, demand trends, and access to supplies from March 2020 to December 2022, based on the Rapid Community Assessment conducted by the Social Enterprise Development Partnerships, Inc. (SEDPI). By analyzing these trends, we can better understand the challenges faced by NEs and the factors contributing to their resilience and adaptability.
March 2020: Initial Pandemic Impact, Demand Shift, and Supply Chain Disruptions
At the beginning of the COVID-19 pandemic in March 2020, 34% of NEs stopped their operations due to lockdowns and social distancing measures, while 66% resumed operations. Demand was characterized by 8% of NEs experiencing no buyers, 78% experiencing weak demand, and 13% witnessing strong demand, as consumers’ priorities shifted towards essential goods and services. Supply chain disruptions affected NEs, with 36% facing difficult access to supplies and 64% having access to necessary resources.
June 2020: Early Recovery, Persistent Weak Demand, and Supply Chain Struggles
In June 2020, the recovery of NEs continued, with 91% resuming operations and only 9% remaining closed. However, demand remained weak, with 7% of NEs having no buyers, 72% facing weak demand, and 21% enjoying strong demand. Access to supplies was a significant challenge, as 81% of NEs had adequate access while 19% faced difficulties due to ongoing supply chain disruptions caused by the pandemic.
December 2020: Relief, Recovery, Improved Demand, and Better Supply Access Amid Typhoon Vicky’s Impact
By December 2020, government relief packages and easing of lockdown restrictions helped many NEs recover, with 3% remaining closed and 96% resuming operations. Demand improved slightly, with 4% of NEs having no buyers, 75% facing weak demand, and 21% enjoying strong demand. The holiday season likely contributed to increased consumer spending. Access to supplies significantly improved, with 90% of NEs having access and only 10% experiencing difficulties.
However, during this period, Typhoon Vicky hit the region, causing agricultural production losses in rice, corn, high-value crops, and livestock. The typhoon also triggered floods and landslides, resulting in damaged or destroyed homes in coastal areas. The natural disaster added challenges to the recovery process of nanoenterprises, particularly those in the affected areas and those dependent on agricultural production. Although the overall trend in December 2020 indicated progress in recovery, improved demand, and better access to supplies for nanoenterprises, the recovery would have been even more significant if not for the added challenges brought about by Typhoon Vicky.
March 2021: Steady Recovery, Increased Strong Demand, and Improved Supply Access
By March 2021, the situation for NEs had improved, with 97% resuming operations and only 3% remaining closed. Demand patterns shifted, with only 1% of NEs having no buyers, 52% experiencing weak demand, and 47% enjoying strong demand, likely due to the easing of restrictions and ongoing vaccination campaigns. Access to supplies improved, with 73% of NEs having adequate access and 27% still facing difficulties.
June 2021: Full Recovery, Diverse Demand, and Enhanced Access to Supplies
By June 2021, 100% of NEs resumed operations, marking a full recovery in this period. Demand varied, with 2% of NEs having no buyers, 64% facing weak demand, and 34% experiencing strong demand. Access to supplies continued to improve, with 82% of NEs having adequate access and only 18% facing difficulties.
September 2021: Delta Variant Surge, Granular Lockdowns, and Nanoenterprise Adaptation
In September 2021, the Delta variant surged in the Philippines, prompting the government to implement granular lockdowns as opposed to the general lockdowns previously imposed. This new approach aimed to prevent the wholesale disruption of jobs and livelihoods while still addressing the public health crisis. Despite the surge and the implementation of granular lockdowns, 96% of NEs continued to operate, while only 4% temporarily stopped their operations.
Demand patterns during this period fluctuated, with 12% of NEs having no buyers, 66% experiencing weak demand, and 22% witnessing strong demand. As the granular lockdowns targeted specific areas with high infection rates, many nanoenterprises had to quickly adapt to the changing circumstances and market conditions. Access to supplies remained relatively stable, with 77% of NEs having adequate access and 23% facing difficulties.
The September 2021 period demonstrated the resilience of nanoenterprises in the face of new challenges posed by the Delta variant and the government’s shift in lockdown strategy. Despite the hurdles, the sector continued to adapt and maintain its operations, contributing to the nation’s economic recovery.
December 2021: Continued Recovery, Increased Strong Demand, and Moderate Access to Supplies
By December 2021, widespread vaccination campaigns allowed for more relaxed social distancing measures and a resurgence in consumer demand. The percentage of stopped NEs remained at 3%, while 97% resumed operations. Demand for NE products and services further improved, with 9% of NEs having no buyers, 65% facing weak demand, and 26% experiencing strong demand. Access to supplies became more moderate, with 77% of NEs having access and 23% facing difficulties.
March 2022: Steady Operations, Persistent Weak Demand, and Improved Access to Supplies
By March 2022, the status of operations remained consistent, with 4% of NEs stopped and 96% resumed operations. Demand continued to lean towards weakness, as 8% of NEs had no buyers, 67% faced weak demand, and 26% experienced strong demand. However, access to supplies significantly improved, with 85% of NEs having access and only 15% facing difficulties.
September 2022: Temporary Setbacks, Fluctuating Demand, and Slightly Reduced Access to Supplies
In September 2022, the temporary increase in stopped NEs to 4% could be attributed to localized outbreaks and new COVID-19 variants. Despite these setbacks, 96% of NEs remained operational. However, demand patterns fluctuated, with 15% of NEs having no buyers, 36% experiencing weak demand, and 49% witnessing strong demand. Access to supplies slightly declined, with 73% of NEs having access and 27% facing difficulties.
December 2022: High Inflation Impact on Nanoenterprises, Demand Patterns, and Purchasing Power
In December 2022, the Philippines’ headline inflation increased to 8.1 percent, as reported by the Philippine Statistics Authority (PSA). The high inflation rate led to a decrease in purchasing power, resulting in reduced consumer spending, particularly among low-income households. Despite the inflationary pressures, 99% of NEs remained operational, while only 1% stopped their operations, showcasing the resilience of the sector.
Compared to September 2022, when 36% of NEs faced weak demand, the percentage increased to 52% in December 2022, illustrating the heightened challenges for these enterprises due to reduced consumer spending amid high inflation. The decreased purchasing power of consumers, especially in low-income households, contributed to the fluctuations in demand patterns for nanoenterprises.
Access to supplies remained relatively stable, with 73% of NEs having access to necessary resources and 27% facing difficulties in acquiring them. The December 2022 period highlighted the challenges faced by nanoenterprises due to high inflation and its impact on consumer spending, while also demonstrating the adaptability of the sector in sustaining operations amid economic challenges.
Conclusion:
Throughout the COVID-19 pandemic and various external challenges, such as natural disasters and high inflation, nanoenterprises have consistently demonstrated resilience and adaptability in maintaining operations, responding to fluctuating demand, and navigating supply chain disruptions. As of December 2022, the sector has reached a near full recovery, with stabilizing demand patterns and steady access to supplies. The findings from SEDPI’s Rapid Community Assessment underscore the importance of continued support and empowerment for nanoenterprises, as they play a crucial role in local economies and communities. As the world moves forward from the pandemic’s impact, fostering collaboration between government, business, and community organizations will remain vital in ensuring the sustained success and growth of nanoenterprises in the face of ongoing and future challenges.
Respondents:
In December 2022, the Rapid Community Assessment (RCA) conducted by SEDPI garnered responses from 1,398 respondents across the provinces of Agusan del Sur, Davao de Oro, Davao del Norte, and Surigao del Sur. The profile of respondents in this edition of the survey was similar to that of previous editions. The majority of respondents were female (86%), with an average age of 43, and 73% of them were married. When it came to sources of income, 40% were employed, 45% were nanoenterprise owners, 12% were unpaid family members contributing to the family business, and 2% were unemployed.
Nanoenterprises are typically unregistered livelihoods of self-employed individuals or informal solo-preneurs with asset size ranging from PhP3,000 to PhP150,000. They operate businesses alone or with the help of unpaid family members targeting their immediate local communities. Microenterprises are mostly registered enterprises able to hire employees albeit on a minimum wage rate. There are approximately 8.1 million nanoenterprises in the Philippines as of 2022.[1]
Most government programs and private sector engagement fall under the banner of microenterprises, that grossly misrepresents the needs and largely excludes the magnitude of nanoenterprises. Making nanoeterprises visible means more effective and customized policies and programs that should provide them the opportunity to grow into a more sustainable enterprise that would lift them out of poverty.[2]
There are 30 million Filipinos considered as poor based on a survey the Department of Social Welfare and Development conducted in 2022.[3] Directly addressing the needs of the 8.1 million estimated nanoenterprise will reduce this number by 27% which is a great leap forward for a truly inclusive Philippine economic development.[4]
The table below is a brief summary that compares and contrasts nanoenterprises from microenterprises.[5]
Nanoenterprise
Microenterprise
Assets
PhP3,000 to PhP150K
>PhP150K to PhP3M
Employees
0
1 to 9
Approximate number
8,100,000
1,000,000
Enterprise registration
Mostly unregistered
Mostly registered
Economic status
Mostly poor
Mostly non-poor
This paper attempts to provide a more comprehensive profile of nanoenterprises in terms of the following: livelihood characteristics, access to finance, market participation, coping mechanisms in times of emergencies – climate crisis and disasters, digital inclusion, and access to government programs and services.
Livelihood characteristics
Examples of nanoenterprises include sari-sari stores operators, carinderia, small holder farmers and fisherfolks, dressmakers, and ambulant vendors. Those who participate in the gig economy are also largely considered as nanoenterprises such as delivery riders, and ride share drivers. Freelancers could also be considered as nanoenterprise such as graphic artists, video editors, content creators, writers etc.
Nanoenterprises use rudimentary and obsolete equipment in manufacturing products or delivering services or they may have more advanced equipment that they lease. Microenterprises typically have better equipment and have ownership of these.
Most nanoentarprises are individuals who typically have low educational levels and hardly maintain bookkeeping records. Microenterprises typically have higher educational levels compared to nanoenterprises and could maintain some level of record keeping. Microenterprises also pay business permits and taxes that nanoenterprises hardly pay since they are mostly unregistered.
Both nano and microenterprises lack managerial and technical skills to grow their livelihood and are forced to be entrepreneurs due to lack of employment opportunities. They also have limited access to technology, information and financing that leads to low productivity and low product quality.
Access to finance
Nanoenterprises heavily rely on loans to afford basic needs – food, education, shelter utilities – and recover from a disaster. Loans are also typically used to grow their livelihoods and to finance major life events such wedding, anniversaries and death.
NEs typically access loans from informal sources which make them vulnerable to predatory financing practices. Aside from this, most of them also borrow money from cooperatives, rural banks, microfinance NGOs and pawnshops. Majority also borrow from family and friends albeit in limited amounts.
This goes to show how NEs are trapped in debt. There are very few savings and insurance products available in the market that cater to their needs and preferences – simple, fast, accessible and affordable. Savings and insurance products are more appropriate for disaster risk mitigation and financing major life events. Microfinance institutions, in their continuous drive for growth and profitability, aim to increase their loan portfolio. It is also far simpler for MFIs to offer loans and gain profit to address NE needs compared to designing savings and insurance products for profit that address the same. This are the reasons why most MFIs use loans as the financial product to address livelihood needs, coping in times of emergencies and financing major life events.
It has been shown that low-income individuals can save and will pay premium for insurance if these financial products are designed according to their needs and preferences.[6] Most NEs have extremely limited savings and insurance coverage due to the lack of financial product that directly cater to their needs and preferences.
On average, nanoenterprises borrow a small sum of money ranging from PhP3,000 to PhP20,000 to finance their livelihoods. Although in the proposed definition of naneoneterprises, their loans could be up to PhP150,000.[7]
Microfinance institutions offer them short-term, collateral-free loans to them usually payable in three to six months with interest rates ranging from 2% to 5% per month. SEDPI, a microfinance institution, has a loan portfolio composed of 95.7% with less than PhP20,000 in terms of loan size. Four percent (4%) of loans extended are greater than Php20,000 but less than PhP50,000. A miniscule 0.3% have loans greater than PhP50,000.
Market participation
High cost of raw materials, labor, limited market access, lack of market information, outdated technology, inadequate services and infrastructure hampers overall business environment of NEs. The poor are more than mere victims of circumstance. They are creative individuals. A major barrier preventing NEs from exiting poverty is the problematic market environment. An effective development strategy is to remove the barriers that stand in the way of NE’s ability to help themselves and enhance their ability to participate in markets.
Developing markets and improvements in market linkages and market infrastructure will strengthen the participation of NEs in value chains. The government and development organizations should design programs that lead to sustainable solutions. These interventions should be designed using the following development principles – achieves high impact, specific and focused interventions, sustainable, cost-effective and market-driven.[8]
Coping mechanisms in times of emergencies
The Philippines topped the world disaster risk index in 2022. The Philippines scored high in its exposure, vulnerability, susceptibility, lack of coping capacities, and lack of adaptive capacities in the face of disasters.[9] Impacts of climate change and the global economic crisis are compounding the threats faced by people living in poverty around the world.[10]
The top coping mechanisms, pre-pandemic, of NEs in times of extreme natural events are accessing loans, finding additional work, asking for help from family members, assistance from government and charitable institutions, and selling of assets. Other coping mechanisms mentioned were saving, praying, damayan ang insurance.[11]
Loans topping the coping mechanisms is not surprising but a lot are not aware that this is not good for one’s financial health. Loans should be used for productive purposes only, a cardinal rule when borrowing money. In times of emergencies, loans will be used for consumption – to buy food, rebuild or repair houses, medicines for the sick etc. The loan purpose is not bad but the financial product used is incompatible with the purpose. There is no return from the loan use and loans accessed in times of emergencies typically have high interest rates.
The appropriate financial tool used should be insurance and savings. It is a stark contrast that these two are at the bottom of the coping mechanism strategies of the poor while accessing loans is on top. Insurance is specifically design as a protection strategy against emergencies and external shocks. Savings on the other hand provides a cushion or a buffer to smoothen the impact of financial shocks.
The pandemic made matters worse for NEs since this added to their vulnerabilities – extreme natural events due to the effects of climate crisis. During this period, the coping mechanisms of NEs changed. This time the top coping mechanism used was getting assistance from the government. This was followed by insurance, savings, accessing loans, damayan and distress selling of assets.[12] When strict lockdowns were enforced, NEs could not operate their livelihoods that’s why they did not seek loans as a top coping mechanism. Finding additional work was not mentioned as a coping mechanism unlike before the pandemic. Mobility restrictions imposed during lockdowns prevented NEs from working.
Insurance and savings ranked higher in the coping strategies during the pandemic which is an improvement when these two were at the bottom before the pandemic. This is because microfinance institutions offering savings and insurance products have already penetrated all municipalities in the Philippines. There was less market penetration a decade earlier that made these products inaccessible then.
Although access to savings and insurance products already improved, there are still opportunities for improvement to make these more effective. For example, microfinance institutions should promote savings mobilization rather than provision of higher loan amounts to finance the growth of NEs. MFIs should not merely treat savings from its borrowers as collateral to loans but also a means to smoothen expenditures especially in times of emergencies.
Insurance products for NEs could be improved by offering coverage for disasters that would enable them to restart their livelihoods so that NEs need not be too dependent on loans. Turnaround time in processing claims could also be improved from current practices which takes months due to voluminous documentary requirements. These all could be simplified through streamlining processes and procedures.
Digital inclusion
The Philippines has been dubbed as the social media capital of the world. Meltwater, an Oslo-based social listening and social media analytics company, ranks the Philippines as second in the world in terms of social media use.[13]However, this social media use does not seem to translate to positive economic changes, especially to the poor.
Digital Inclusion refers to the activities necessary to ensure that all individuals and communities, including the most disadvantaged, have access to and use of Information and Communication Technologies (ICTs).[14] Internet access and ownership of gadgets are therefore important in order to take advantage of opportunities in the digital age. This is where the challenge starts for NEs since only 40% of them have access to the internet, 52% of have smart phones and only 8% have laptops.[15] Aside from this, there is also the challenge of the cost of smart phones and internet subscription. NEs, especially in the rural areas, have difficulty getting mobile phone signals due to lack of infrastructure.[16] Not owning a phone, having basic phones and limited access to the internet prevents NEs from accessing information and taking advantage of opportunities online.
These ICT challenges of NEs constrained their participation in e-commerce. SEDPI’s research shows that in 2022 only 19% of NEs are into online selling and 13% buy products online. There was a short-lived participation in e-commerce in 2021 but this was not sustained due to the lifting of mobility restrictions and high cost of deliveries of products ordered online.[17]
Digital financial inclusion among NEs is low. Only 23% of them have bank accounts, 3% have mobile wallets and 3% know how to do online banking.[18]
Access to government programs and services.
At the personal level, they also lack civil registry documents such as birth certificates and marriage certificates that makes it challenging for them to access government welfare services such as SSS, Pag-IBIG and PhilHealth. These civil registry documents are typically required to get government identification cards such as a driver’s license, voter’s ID, passports. These government-issued identification cards are then required to apply for membership in SSS, Pag-IBIG, PhilHealth and other government programs.
Due to the lack of government-issued identification cards, NEs experienced delays in getting the cash assistance program the government provided to its citizens during the pandemic. Lockdowns started on March 14, 2020.[19] A month after, only 60% of NEs under SEDPI received cash assistance. This improved to 98% by the end of the month when local government units started easing requirements.[20]
As of May 2021, there are 3.36M self-employed individuals who are members of the SSS. This is the membership classification where NEs fall. However, they comprise minority since self-employed members also include professionals, proprietors of businesses, farmers, fisherfolks and the informal sector. Even if the 3.36M self-employed members of SSS were all considered as NEs, this will only make up 41% of the 8.1M estimated NEs.
Nanoenterprises lack support from the government because they are lumped with the microenterprise sector. Nano and microenterprises clearly have different profile, behavior and needs. Microenterprises are defined as having up to Php150,000 in assets as defined under the Republic Act 8425 (Social Reform Agenda) and Republic Act 10693 (Microfinance NGO Act). However, the Bangko Sentral ng Pilipinas defines loans extended to microenterprises at a maximum of PhP300,000. Meanwhile, the Department of Trade of Industry defines microenterprises as entities with up to PhP3M in assets.
In reality, MFIs serve mostly NEs, who are considered mostly poor, but have financial products and services designed for MEs, who are considered mostly non-poor. Financial products designed for microenterprises focus more on repayment history, capacity to pay and using savings as collateral. These designs are inappropriate for NEs since they face more vulnerabilities. There should be more social safety net mechanisms for financial product designed for NEs such as using savings for emergency purposes, capacity building for livelihood development, insurance coverage for disasters and subsidies from the government.
The inconsistencies in the definition of various government agencies on what microenterprises are, barring the fact that nanoenterprises are rendered invisible, leads to ineffective and inappropriate policies and programs. Microfinance institutions design their financial products and services according to the criteria set by government financial institutions geared towards microenterprises. Thus, the needs and financial product preferences of NEs are not addressed which may explain why they have a hard time escaping poverty.
Way forward
Making nanoenterprises separate and distinct from microenterprises means more effective and customized policies and programs that should provide them the opportunity to grow into a more sustainable enterprise that would lift them out of poverty.
A more robust welfare and social safety net programs should be in place to allow NEs to not just cope or survive in their current situation but to recover and thrive to transition as a micro or even a small enterprise. This strategy would complement existing market-based approaches that would reduce vulnerabilities of NEs.
The sheer number of nanoenterprises as distinguished from microenterprises should make them more visible to the government and private sector. Upscaling nanoenterprises renders tremendous multiplier effect. If NEs eventually transition as MEs, they will provide employment that starts at the bottom of the pyramid. They should be recognized as a pillar in socio-economic development since lifting them out of poverty will propel the Philippines to a developed country through inclusive growth.
[11] Based on SEDPI’s research conducted in 2008 with Opportunity International, 2014 with Cordaid and 2015 with People In Need. There were 79 FGDs conducted all over the Philippines.
[12] SEDPI conducted a research in 2020 in CARAGA region to determine coping mechanisms used by NEs during the pandemic.
According to the Department of Trade and Industry (DTI), there are nearly a million microenterprises in the Philippines. DTI considers any business with less than PhP3 million in assets and less than 10 employees as microenterprise.
The challenge with this classification in the social development perspective is that it lumps together poor and non-poor enterprises in one huge bucket. It attempts to describe a very broad base enterprises that have largely varied capacity in terms of management capacity, use of technology, access to finance, and general sophistication of products and services offered.
Enterprise classification in the Philippines
Assets
# of employees
Approximate number
Large
>PhP200M
≥200
5,000
Medium
>PhP15 to PhP200M
100 to 199
5,000
Small
>PhP3 to PhP15
10 to 99
106,000
Micro
Up to PhP3
1 to 9
1,000,000
Source: Department of Trade and Industry
This paper intends to provide a case for nanoenterprises that is distinct and separate from microenterprises. The purpose is to aid in policy development for the government, as well as program intervention design and implementation of development organizations, so that their needs are addressed at its core.
The lowest asset base of a microenterprise in DTI’s definition is vague since it could mean as low as one peso or no asset at all. The microenterprise category is very important because this is where the poor belongs. However, microenterprises that have assets greater than a million pesos could not be classified as poor.
What is a nanoenterprise?
Government policies and programs of development organizations can better respond to the needs of the poor belonging to the microenterprise sector if there is a clear delineation between poor and non-poor microenterprises. Poor mircoenterprises are rendered invisible since non-poor microenterprise needs are prioritized and is the basis for most policies, programs and engagement.
Let us use nanoenterprises to refer to poor microenterprises. The table below shows the difference between a nano and microenterprise.
Nanoenterprise
Microenterprise
Assets
PhP3,000 to PhP150K
>PhP150K to PhP3M
Employees
0
1 to 9
Enterprise registration
Mostly unregistered
Mostly registered
Approximate number
8,100,000
1,000,000
The Social Reform Agenda or Republic Act 8425 of 1998 defined a microenterprise with a maximum capitalization of PhP150,000. The same amount is set as the maximum amount for microfinance loans. This figure could be used as a good basis to separate nanoenterprises from microenterprises.
SEDPI proposes that PhP150,000 be used as the maximum asset size for nanoenterprises while those that exceed this but is less than PhP3 million would be classified as microenterprise. Nanoenterprises use rudimentary and obsolete equipment in manufacturing products or delivering services or they may have more advanced equipment that they lease. Microenterprises typically have better equipment and have ownership of these.
Nanoenterprises are typically unregistered livelihoods of self-employed individuals or informal solo-preneurs. They operate businesses alone or with the help of unpaid family members targeting their immediate local communities. Microenterprises are mostly registered enterprises able to hire employees albeit on a minimum wage rate.
As of March 2022, SEDPI estimates that the total outreach of microfinance is 9.1 mllion based on reports from the Bangko Sentral ng Pilipinas, Cooperative Development Authority and Securities and Exchange Commission.[1] One will observe the gross underestimation DTIs 1 million microenterprises versus the 9.1 million microenterprises the microfinance industry serves. This is mainly because DTIs estimate is based on registered microenterprises that are mostly non-poor. Removing the one million microenterprises accounted for by DTI, that leaves the number of nanoenterprises to be at 8.1 million.
Why nanoenterprises?
The sheer number of nanoenterprises as distinguished from microenterprises should make them more visible to the government and private sector. Most government programs fall under the banner of microenterprises, that grossly misrepresents the needs and largely excludes the magnitude of nanoenterprises. Thus making a concrete case to add nanoenterprises as the smallest size in classifying enterprises.
As it is, nanoenterprises lack support from the government and has limited engagement with the private sector This is because they are lumped into the microenterprise sector that clearly have different profile, behavior and needs. Making nanoeterprises visible means more effective and customized policies and programs that should provide them the opportunity to grow into a more sustainable enterprise that would lift them out of poverty.
There are 30 million Filipinos considered as poor based on a survey the Department of Social Welfare and Development conducted in 2022.[2] Directly addressing the needs of the 8.1 million estimated nanoenterprise will reduce this number by 27% which is a great leap forward for a truly inclusive Philippine economic development.
At least one out of four nanoenerprises are now either selling their products online, or are buying products to be sold in their local communities to cope with granular lockdowns imposed by local government units. Out of 7,675 respondents, 26% sold products and 29% bought supplies online, to augment their livelihood operations.
Nanoenterprise is a SEDPI-coined term that refers to unregistered livelihoods of self-employed individuals that have capitalization of less than PhP50,000 to operate. SEDPI estimates that the vast majority of entrepreneurial poor in the Philippines are nanoenterprises, numbering around 8 million.
Nano level risk diversification
More than half of the respondents or 52% also claimed that they added other kinds of livelihoods in response to the pandemic. Nanoenterprises refer to this as “diskarte” to be able to survive the negative economic impact of the pandemic. Diskarte is the ability to use creativity and resourcefulness to respond to challenges and adversities.
Nanoenterprises involved in the agricultural sector were better able to weather the pandemic compared to their non-agri counterparts. Eighty nine percent of the respondents said that those with farms were able to adjust and fair better.
Farming households were able to harvest produce for consumption. The surplus farm produce were then sold in local markets through ambulant vending and online selling. This resulted in reduced expenses for food and at the same time provided ample additional income
Status of nanoenterprises
A year after the Enhanced Community Quarantine (ECQ) imposed in the whole country, all
nanoenterprises reported that they already resumed operations. At the peak of the ECQ last year, 69% of them stopped operations which prompted the government to distribute cash assistance.
As of March 2021, four out of ten respondents said that they have fully recovered from the negative economic impact of the pandemic; while 55% said that it will take them up to 2 months more, before they get back to their pre-pandemic levels.
During the first quarter of the year most areas in the country were under Modified General Community Quarantine (MGCQ), the lowest quarantine level imposed by the Philippine government. These reinvigorated the local economy due to ease in the flow of goods and mobility of customers.
Social Enterprise Development Partnerships, Inc. (SEDPI)
SEDPI provides capital to nanoenterprises through joint ventures to approximately 10,000 low-income households in Agusan del Sur, Davao de Oro and Surigao del Sur. Its members also benefit from life insurance as well as medical and disaster relief assistance through damayan. SEDPI also partnered with SSS and Pag-IBIG to bring social safety net programs of the government closer to nanoenterprises in rural areas.
This research is part of a series of rapid community assessments that determines the economic impact of COVID-19 to nanoenterprises. SEDPI began the research last March 2020. This latest update was conducted on April 2021 to cover the first quarter of 2021.
The 7,695 respondents is not a representative sample of the entire Philippines. It is highly localized to SEDPI members. However, this is a good case study that reflects the situation of nanoenterprise and the local economy in the countryside. SEDPI believes that the nationwide picture is not far from its research results.
Summary of findings:
Out of 7,675 SEDPI nanoenterprise respondents 26% sold products and 29% bought supplies online to augment their livelihood operations
100% are resumed livelihood operations a year after the hard lockdown
52% added other kinds of livelihoods in response to the pandemic
89% said that those with farms were able to adjust and fair better
40% fully recovered from the negative impact of the pandemic
55% said it will take them up to 2 months more before they get back to their pre-pandemic levels
Previous rapid community assessment updates. The titles are hyperlinked. Click on the titles to full read article online.
“Sagol nerbyos hadlok lagi kay basi manganaod kay paspas kaayo ang pag taas sa tubig og sulod kaayo.”
“Magkahalong nerbyos at takot dahil baka maanod kasi mabilis ang pagtaas ng tubig at pumapasok talaga.”
Ito ang naramdaman ni Roxanne Amigo habang rumaragasa ang baha na dala ng bagyong Vicky.
Kasama sa binaha at na-landslide ang mga residente ng Agusan del Sur at Surigao del Sur, kung saan mayroong microfinance operations ang SEDPI Development Finance, Inc.
Mula sa 10,000 SEDPI members, 1,884 ang apektado sa mga bayan ng Trento, Santa Josefa, Barobo, at Rosario sa Agusan del Sur at Lingig at Bislig sa Surigao del Sur. Dalawa ang inanod ng baha ang bahay. Isa naman ang na-landslide.
Agad nakapagbigay ng relief goods noong December 2020 ang SEDPI at ang Office ni Senator Risa Hontiveros sa nasalanta ng bagyong Vicky.
Hindi man madalas na mabagyo ang Mindanao, naging handa ang SEDPI sa pagtulong sa mga members dahil sa Social Welfare Protection Program (SWEPP) nito.
SWEPP ay ang hybrid microinsurance program ng SEDPI na pinagsasama ang “damayan” o pagtutulungan ng kapwa; formal life insurance mula sa CLIMBS Life and General Insurance Cooperative; at social safety nets mula sa gobyerno na binibigay ng SSS at Pag-IBIG Fund.
Maliban sa regular contributions sa SSS at Pag-IBIG, nagcocontribute ang mga members ng PhP360 every six months para ma-cover ng SWEPP.
Ang bahagi ng kontribusyon ay linalaan para sa “damayan”. Ginagamit ang naiambag ng mga members para tulungan ang kamember nila sa panahon ng kamatayan, pagkakasakit, sunog, o kalamidad.
Ito ang naging pondo para makabigay ng relief goods sa mga nabaha at dagdag na PhP5,000 sa tatlong na-wipe out ang bahay.
Bawat pack ng relief goods ay naglaman ng limang kilong bigas at ilang groceries na good for one week para sa pamilya na may limang miyembro.
“Naibsan ang pag-aalala ko dahil may makakain na kami kahit papano. Dumating ang aming pinapanalangin,” masayang nasabi ni Roxanne.
Naging malaking tulong ang donasyon na 134 sakong bigas na galing sa Liwanag at Lingap Program ng opisina ni Senator Risa Hontiveros.
Ang programang ito ay nagsimula noong bagyong Rolly bilang isang typhoon relief effort. Sinundan pa ito ng tulong sa mga apektado ng mga bagyong Ulysses at Vicky.
Mensahe ni Senator Risa Hontiveros, “Tuloy-tuloy ang pagpapadala natin ng Liwanag at Lingap sa mga kababayan nating naapektuhan ng kalamidad at nawalan ng kabuhayan. Umaasa akong sa munting paraan ay makatulong ang relief operations na ito para matugunan ang immediate needs gaya ng pagkain.”
Naging maganda ang pagtutulungan ng komunidad, SEDPI at ng opisina ni Senator Risa Hontiveros. Sa unang linggo matapos ang bagyo at baha ay nakatuon ang mga nasalanta sa pag-aayos sa kanilang mga bahay at gamit at hindi sa paghahanap ng kanilang makakain.
Ani ng Vince Rapisura, Presidente ng SEDPI, “Systemic and institutionalized safety nets talaga ang kailangan natin. Kailangan po talaga ay hindi lang yung sarili natin yung nag-eeffort pero nandyan ang private sector, nandyan ang public sector, nandyan ang community.”
Agad na nag-abot ng tulong ang SEDPI at Ambagan PH sa 1,884 na nasalanta ng bagyong Vicky sa Agusan del Sur at Surigao del Sur.
Matapos ang tuloy-tuloy na ulan na dulot ng bagyong Vicky sa Mindanao nagdulot ito ng pagbaha at landslide.
Kasama sa naapektuhan ay ang mga residente ng Agusan del Sur at Surigao del Sur, kung saan mayroong microfinance operations ang SEDPI Development Finance, Inc.
Mula sa 10,000 SEDPI members, 1,884 ang apektado sa mga bayan ng Trento, Santa Josefa, Barobo, at Rosario sa Agusan del Sur at Lingig at Bislig sa Surigao del Sur. Dalawa ang inanod ng baha ang bahay. Isa naman ang na-landslide.
Bago pa mabagyo ang Mindanao, naging handa ang SEDPI sa pagtulong nito sa mga nasalanta dahil sa Social Welfare Protection Program (SWEPP).
SWEPP ay ang hybrid microinsurance program ng SEDPI na pinagsasama ang “damayan” o pagtutulungan ng kapwa; formal life insurance mula sa CLIMBS Life and General Insurance cooperative; at social safety nets mula sa gobyerno na binibigay ng SSS at Pag-IBIG Fund.
Maliban sa regular contributions sa SSS at Pag-IBIG, nagcocontribute ang mga members ng PhP360 every six months para ma-cover ng SWEPP.
Ang bahagi ng kontribusyon ay linalaan para sa “damayan”. Ginagamit ang naiambag ng mga members para tulungan ang kamember nila sa panahon ng kamatayan, pagkakasakit, sunog, o kalamidad.
Pondo mula sa SWEPP Damayan ang pinagkuhanan para sa relief goods sa mga nabaha at dagdag na PhP5,000 sa tatlong na-wipe out ang bahay.
Ani ng Vince Rapisura, Presidente ng SEDPI,“Ito ay isang patunay na ang mahihirap ay kaya nilang tulungan ang mga sarili nila kung merong maayos na sistema at hindi kinukurakot.”
Nadagdagan ang pondo para sa relief operation nung nag-donate ang Ambagan PH sa SEDPI Foundation, Inc. ng PhP20,000.
Ang Ambagan PH ay isang network ng volunteers at initiatives na nabuo para tumugon sa mga krisis, tulad ng bagyong Vicky. Donasyon at crowdsourcing ang pangunahing pinagmumulan ng kanila resources.
Sa karanasan nila mula ng October 2020 na-realize nila na, “Walang maliit o malaking ambag. Sa panahon ng krisis, lahat ng ambag ay dakila.”
Bawat pack ng relief goods na napamigay ng SEDPI at Ambagan PH ay naglaman ng limang kilong bigas at ilang groceries na good for one week para sa pamilya na may limang miyembro.
Pasalamat ng SEDPI member na si Dondon Ocsema, “Malaking tulong iyon para suportahan ang ilang araw na kakainin lalo na ilang araw akong hindi nakapamasada.”
Dahil meron na silang makakain para sa isang linggo mas nabigyang tuon ng mga nasalata, tulad ni Dondon, ang pag-aayos sa kanilang mga bahay at gamit.
Isa itong full-circle experience para kay Angelica Reyes o Anj na SEDPI Senior Program Officer at Co-Founder at Spokesperson din ng Ambagan PH.
Nagsimula ang 2020 nang mag-interview si Anj, kasama ang iba pang taga SEDPI, ng members sa Agusan del Sur at Surigao del Sur para malaman ang impact ng microfinance program.
Anj Reyes kasama ang ilang SEDPI members nung February 2020
Nagtapos ang taon na pinagtagpo ni Anj ang SEDPI at ang sinimulan niyang grupo na Ambagan PH para tumulong sa mga taong minsan ay nakadaupang-palad niya.
“Malaki ang pasasalamat ko sa SEDPI dahil marami sa organizational at administrative skills ko ay natutunan ko mula sa pagiging program officer ng SEDPI. Higit sa lahat, lalong napatibay ng SEDPI ang advocacy ko na makatulong sa kapwa.” – Angelica Reyes
Para sa mga gustong mag-ambag, pumunta lang sa facebook.com/ambaganph at i-click ang sign up link.
Pandemic or not, farmers in Mindanao tirelessly till the soil. This is why the Department of Agrarian Reform, together with SEDPI, continue to work while majority of the population are on a standstill to bring the most awaited agri-input investments from the DAR – Italian Assistance to ARC Development Support Program (IARCDSP) to our farmers.
Five (5) Agrarian Reform Beneficiaries and Farmers Organizations in Sultan Kudarat received the first tranche of the promised agricultural inputs that shall kickstart their agricultural businesses supporting farmers in their Agrarian Reform Communities (ARC).
Josephine Balicaw, officer of Marguez United Irrigators Farmers Association (MUIFAI) in Pag-asa ARC, couldn’t help but shed tears when around PhP1.5M sacks worth of inputs were unloaded from a 10-wheeler truck and brought to what was once an empty warehouse. They have been preparing for this through the capacity interventions of SEDPI and now the moment has come for them to put theory into action.
Josephine Balicaw, third from left, together with other officers and members of Marguez United Irrigators Farmers Association in Pag-asa ARC.
In the same way, Noria Gapor, officer of Sigay Ka Tamontaka 4 Association (SKTFA) from Kutawato ARC, was reeling with disbelief when she was told that all the sacks were to be offloaded and not brought elsewhere. “Akala ko ilang sako lang para sa amin. Lahat pala!” (I thought we’re only getting a few sacks of inputs but we’re getting them all!), said Gapor.
It is quite an emotional experience as well for our farmers in Naldan Creek Irrigators Association (NCIA) in Lambayong ARC, Kalayaan Communal Irrigators Association (KCIA) in Lutayan ARC, and Taguisa Agrarian Reform Beneficiary Multi-Purpose Cooperative (TARBMPC) in Lebak ARC. For these ARBOs, now that the inputs are here, they will be able to provide farmer-friendly agri-input financing, farm machineries rental, and hauling services to fellow farmers in their community.
This is one of the foreign- assisted projects being implemented by the Department of Agrarian Reform and funded under the loan agreement executed with the Government of Italy. This project involves not only millions worth of agricultural inputs, farm machineries and equipment, hauling trucks, but also intensive capacity building training on microfinance management tools and monitoring & evaluation systems spearheaded by SEDPI.
There is a total of 35 Agrarian Reform Beneficiaries/Farmers Organizations involved in the DAR – IARCDSP Project covering Sarangani, Sultan Kudarat, Maguindanao, and Lanao del Sur Provinces.
SEDPI offers Group Renewable Term Insurance (GYRT) in partnership with CLIMBS, a service more catered to common Filipino households.
Term insurance provides protection against emergencies for a specific period of time. As lifetime coverage is not always needed, term insurance provides cheaper premiums with larger benefits. On average, investment-linked insurance schemes charge PhP80,000 in premiums.
For the same PhP1 million coverage, individual term life insurance premiums can be as low as PhP5,500 for ages 21-30 and cap around PhP21,000 for ages 51-60. SEDPI’s Group Yearly Renewable Term has PhP500,000 life benefits and PhP500,000 accident benefits. For ages 18-60, the premium is PhP4,000. This makes it even more affordable compared to individual term insurance policies. Due to its affordability, participation in group insurance is high.
Group insurance means that one contract is issued to cover a group of people. In this case, SEDPI is the policyholder. As a SEDPI member, one is entitled to access this group insurance program, even if they are abroad.
OFWs dealing directly with Philippine-based insurance agents are constrained by a lack of international selling licenses. Since SEDPI is the policyholder an directly deals with CLIMBS, OFWs can participate in the insurance program. Eligibility is determined by membership to SEDPI, and the process does not require rigorous underwriting due to the large number of members.
Yearly Renewable insurance indicates that the insurance protection coverage is active for one year. The annual premium must be paid in order to restart coverage for the following term.
The group’s performance based on mortality rates is evaluated each year. A higher mortality rate may mean a higher adjusted premium the following year, but a lower mortality rate than average can lead to a lower premium for the group.
SEDPI members in Mindanao have exhibited lower mortality rates, and SEDPI is in negotiations with CLIMBS to lower the premium for this group.
Enter keyword GYRT on Vince Rapisura’s Facebook messenger to join.
SEDPI offers the Social Welfare Protection Program (SWePP), where members can avail microinsurance coverage for their families in the Philippines or themselves. SWePP is a consolidated microinsurance and social safety net program and provides security and protection to low-income SEDPI members.
As a hybrid form of insurance, it adopts formal, informal, and government social insurance programs. It partners with a formal insurance provider, has a damayan portion, and also partners with government agencies – Social Security System (SSS) and Home Development Mutual Fund’s Pag-IBIG or Pag-IBIG.
SEDPI serves to make government services more available to poorer communities. Low income households, which make less that PhP240,000 a year; microenterprises such as farmers and fisherfolks, and OFW family members are recommended to get SWePP.
SWePP provides (1) CLIMBS Life Insurance, (2) access to SSS and Pag-IBIG, and (3) Damayan for fire and calamity assistance. SEDPI is in talks with PhilHealth to include health insurance in the future.
SWePP benefits include up to PhP80,000 life and accident insurance from CLIMBS; and PhP5,000 for fire protection and PhP500 worth of relief goods from the damayan component. These benefits are offered for an annual membership fee of PhP720.
SEDPI is an accredited collection agent of SSS, meaning that payments can be remitted through SEDPI to be paid to the SSS. Becoming a member of the SSS and making one contribution entitles members to a PhP20,000 death benefit. The minimum contribution is PhP360.
For a one time payment or contribution, SSS provides lifetime benefit of funeral protection. With three contributions per year, members are eligible for sickness and maternity benefits.
If a member makes 36 payments before the age of 65, they are given lifetime coverage for disabilities as well as additional death benefits. If a member makes 36 payments, then up to the age of 60, they can also enjoy unemployment benefits.
Making 36 to 119 contributions will gain the benefit of a lump sum pension. Making at least 120 contributions will give the benefit of monthly pensions. Vince Rapisura, SEDPI Group President, recommends that members aim to make approximately 500 contributions to their SSS. More contributions equal higher pensions.
SEDPI’s is also an accredited collection agent of Pag-IBIG. When one becomes a member of Pag-IBIG, one contribution every six months provides a PhP6,000 death benefit.
Pag-IBIG is a complement to retirement funds of Filipinos because of its high dividends. As the national savings program of the government, members are eligible to receive their total accumulated value, which is equivalent to personal contributions, employer contributions, and your dividends. The returns are promising, and they compound.
Pag-IBIG also grants access to socialized housing loans at a 3% per annum interest rate, up to a maximum of PhP580,000. OFWs are charged market rate, but this amount typically hovers around 5% – 7% per annum. Up to PhP6 million can be loaned.
For its microfinance operations in Mindanao, SEDPI is planning socialized housing projects for its members in partnership with Pag-IBIG. It has already acquired 7.1 hectares of land and is in the process of acquiring 4 hectares more in the provinces of Agusan del Sur and Surigao del Sur. Construction and development are planned for 2021.
Term insurance provides protection against emergencies for a specific period of time. As lifetime coverage is not always needed, term insurance provides cheaper premiums with larger benefits. On average, investment-linked insurance schemes charge PhP80,000 in premiums.
SEDPI offers the Social Welfare Protection Program (SWePP), where members can avail microinsurance coverage for their families in the Philippines or themselves. SWePP is a consolidated microinsurance and social safety net program and provides security and protection to low-income SEDPI members.