Last July 2022, the Philippines’ Department of Information and Technology (DICT) announced their intention to create an e-commerce platform dedicated to driving the development of the country’s micro, small, and medium enterprises (MSMEs). The proposed platform would make up an ecosystem that enables both MSMEs and consumers to benefit from digital marketing, online payment systems, and operational digitalization.
The United Nations has classified MSME growth as vital to the Philippines’ economic recovery, especially as the world accelerates into a post-pandemic era categorized by digital innovation and transformation. Initiatives towards empowering MSMEs to digitalize will be crucial in the next few years, as more Filipino consumers embrace a digital-forward lifestyle.
The Importance of MSME Digitalization
According to data from the Senate of the Philippines, MSMEs in the country are defined as “any business activity or enterprise engaged in industry, agri-business and/or services that has: (1) an asset size (less land) of up to PHP 100 million; and (2) an employment size with less than 200 employees.”
In the Philippines, MSMEs make up around 99.5% of all enterprises, and employ around 63% of the local workforce. However, data from the country’s Department of Trade and Industry (DTI) reveals that only 6% of MSMEs employ advanced digital tools for their businesses, with 23% reporting no digitalization at all.
According to our panelists from the YCP Solidiance white paper “Road to Recovery: Post Pandemic Business Outlook in Southeast Asia,” digitalization is vital for MSMEs to scale up and keep up with the changing landscape of Southeast Asia. MSMEs can use their small size to their advantage to surpass big businesses via digitalization, with one panelist adding that “many big businesses have a harder journey to get online than perhaps more nimble entrepreneurs just starting out.” E-commerce, in particular, is highlighted as a key digitalization element where MSMEs have an advantage over larger enterprises.
In the Philippines, digitalization awareness via e-commerce is an at all-time high. Gross merchandise value (GMV) of the sector is projected to hit 15 billion USD by 2025, driven by growing internet consumption among Filipinos—reported to be at 73 million users in 2021—making it even more timely for MSMEs to invest in e-commerce digitalization to stay ahead of the curve.
Further MSME Development in the Philippines
MSMEs who want to accelerate their digital transformation through e-commerce have a bevy of opportunities through partnerships between the government and the private sector, as well as initiatives from related industries such as start-ups.
YCP Solidiance Manager Brett Zambarrano, who works with industries in the Philippines, classifies e-commerce as a pillar of the country’s start-up ecosystem, and highlights the importance of collaboration between industries, between the public and private sectors, and between consumers and businesses to ensure continued growth.
The Philippine government has also extended assistance to MSMEs via the DTI’s digital transformation checklist, an online tool that gives MSMEs a scorecard for their current digital efforts and specific tools to advance their digitalization. Further growth in the DICT’s initiative to create its own e-commerce platform will bolster digital literacy and education among more traditional MSMEs as well, and give them more initiative to discover and implement digitalization.
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