MICRO, SMALL AND MEDIUM ENTERPRISES (MSMES)

About MSME
MSMEs Defined

Micro, small, and medium enterprises (MSMEs) are defined as any business activity/enterprise engaged in industry, agri-business/services, whether single proprietorship, cooperative, partnership, or corporation whose 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, must have value falling under the following categories:

By Asset Size*

            Micro:                  Up to P3,000,000
            Small:                  P3,000,001 - P15,000,000
            Medium:               P15,000,001 - P100,000,000
            Large:                  above P100,000,000

Alternatively, MSMEs may also be categorized based on the number of employees:

            Micro:                   1 - 9 employees
            Small:                  10 -- 99 employees           
            Medium:              100 -- 199 employees
            Large:                   More than 200 employees

*As defined under Small and Medium Enterprise Development (SMED) Council Resolution No. 01 Series of 2003 dated 16 January 2003

Role and Importance of MSMEs
  • MSMEs play a major role in the country's economic development through their contribution in the following: rural industrialization; rural development and decentralization of industries; creation of employment opportunities and more equitable income distribution; use of indigenous resources; earning of foreign exchange (forex) resources; creation of backward and forward linkages with existing industries; and entrepreneurial development.
  • They are vital in dispersing new industries to the countryside and stimulating gainful employment. A country like the Philippines where labor is abundant has much to gain from entrepreneurial activities. MSMEs are more likely to be labor-intensive. Thus, they generate jobs in the locality where they are situated. In this sense, they bring about a more balanced economic growth and equity in income distribution.
  • MSMEs are quick in assimilating new design trends, developing contemporary products, and bringing them to the marketplace ahead of the competition. MSMEs tend to be far more innovative in developing indigenous or appropriate technology, which may be grown later into pioneering technological breakthroughs.
  • They are able to effectively increase the local content or the value added in final goods that are processed and marketed by large manufacturing firms.
  • MSMEs are notably skillful in maximizing the use of scarce capital resources and are able to partner with large firms by supplying locally available raw materials in unprocessed or semi-processed forms.
  • Also, MSMEs can act as the seedbed for the development of entrepreneurial skills and innovation. They play an important part in the provision of services in the community. They can make an important contribution to regional development programs.
MSMEs' Contribution to the Economy

MSMEs contribute to the creation of wealth, employment, and income generation, both in rural and urban areas, thus, ensuring a more equitable income distribution. They also provide the economy with a continuous supply of ideas, skills, and innovations necessary to promote competition and the efficient allocation of scarce resources.

In the last five years, the MSME sector accounted for about 99.6% of the registered businesses in the country by which 63% of the labor force earn a living. Around 35.7% of the total sales and value added in the manufacturing come from MSMEs as well.
Monday, April 21, 2014 3:13PM GMT+8

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