How Filipino MSMEs Can Rise Above COVID-19
Micro, Small, and Medium Enterprises (MSMEs) require more financial and government support than ever to weather the storm of the Covid-19 pandemic.
MSME’s are the backbone of the Philippine economy, accounting for 63% of employment and 99% of registered businesses in the country. Serving Filipino entrepreneurs through financing business possibilities is the core of our mission at First Circle, as a financial technology company providing growth capital to MSMEs. In order to understand the ways the pandemic has affected our partners, we collected over 150 survey responses in late-March to uncover the challenges and explore potential ways we can assist MSMEs during this time.
Crisis met by MSMEs
If you are an MSME facing hard times, know that you are not alone. 77% of respondents report that their business has been negatively affected by the enhanced community quarantine (ECQ). Negatively affected means that their businesses have been forced to close or their income has drastically decreased compared to pre-ECQ. Taking a look at a specific industry for example, 62% of respondents from the construction industry shared that their projects are put on hold or only restricted work can be done on projects sites. Construction companies also said that even if they have operations, their supplies of raw materials are limited. In one response, a customer noted the following: “My collectibles are not collected and my workers in sites are still working because they cannot go home because of [the] travel ban. Instead of stopping work, they opt to continue.”
While our survey respondents vary across many industries, it’s clear that they share many similar challenges. 54% of respondents specifically noted that their business has ceased operations, 24% specifically note instances of customer project or contract cancellations, and 22% reported issues related to collecting payments from their customers. Among other equally challenging circumstances include the challenge in procuring raw production materials, the restriction of delivery for products and services outside their neighborhoods, and difficulty of access of staff located outside of the region of the business. Hardest hit are other non-essential industries which included events, hospitality, travel, manpower and transportation.
While our survey respondents vary across many industries, it’s clear that they share many similar challenges. 54% of respondents specifically noted that their business has ceased operations, 24% specifically note instances of customer project or contract cancellations, and 22% reported issues related to collecting payments from their customers. Among other equally challenging circumstances include the challenge in procuring raw production materials, the restriction of delivery for products and services outside their neighborhoods, and difficulty ofaccess of staff located outside of the region of the business. Hardest hit are other non-essential industries which included events, hospitality, travel, manpower and transportation.
Our respondents echo a similar sentiment expressed by a respondent in the Food & Beverage industry: “We are beginning to dig in for the long haul and shall hope for the best, but prepare for the worst, making sure we are capable of operating and thriving despite the challenges, and again, putting our family’s safety and health first, controlling the business via remote transactions whenever possible.”
Strategies to Sustain Businesses
In the spirit of Filipino entrepreneurship, many businesses are using this time to re-strategize. Businesses have reported to invest greater efforts in online selling, remote staffing, and pivoting to production of essential goods such as food and medical equipment – supplying our hardworking frontliners with masks and other necessities.
While pivoting a business can improve operations in the short term, MSMEs require greater assistance to stay afloat and jumpstart their local economies. 54% of respondents disclosed that their available cash will only last them 30 days or less. A client from the Electronics industry disclosed that prior to ECQ they had five projects ongoing. Now, with the cancellation of these projects, are finding it difficult to pay employee salaries. Another client from the Apparel and Clothing industry asked their employees to take home sewing machines and supplied them raw materials to produce products. Without sufficient capital to cushion the blows from the pandemic and delayed or unpredictable receivables, many MSMEs fear for the worst.
The current actions taken by the government to support MSMEs include advising banks and other financial institutions - including First Circle - to extend the payment dates of business loans as long as there is a lockdown, waiver of utilities/rent expenses for the month, and various programs that releases cash allowance to employees. As we look towards the new ECQ-lift date of May 15th, public and private sector cooperation is critical to ensuring our MSME partners recover and are positioned for success in the New Normal environment.
At First Circle, we are also doing our part to provide flexible payment solutions for our partners. We are currently designing various repayment options for our clients to avail to fit the current situation of their businesses. We are innovating new financial products that provide greater flexibility for partners. And, of course, for businesses operating in the essential industries of food supply, medical equipment, and logistics, we continue to stand with them to finance active projects – in a completely contactless and digital way.
To MSMEs - we hear you, and we are here for you, your families, and your businesses. We look forward to continuing to serve your projects once ECQ is lifted, and once the economy begins to heal and normalize. These are challenging times indeed but we will get through this together.