‘Sariling diskarte’: The heavy impact of lockdown on micro, small businesses

Pauline Macaraeg

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‘Sariling diskarte’: The heavy impact of lockdown on micro, small businesses
Micro enterprises make up 88.5% of businesses in the country and employ as much as 28.9% of total private sector employees. They are struggling to survive as they await government.

MANILA, Philippines – Summer was supposed to be the most profitable season for Joseph*, a computer shop owner in Makati.

Joseph, a 50-year-old entrepreneur, has operated his computer shop for over two years now. On normal days, the shop would earn P4,000 a day. But last summer, that increased to P6,000 to P7,000 a day on average.

On March 17, however, the government imposed an enhanced community quarantine or lockdown on Luzon and its over 57 million people. This limited the movement of people to prevent the spread of the novel coronavirus.

The lockdown meant only private establishments “providing basic necessities and such activities” are allowed to remain open during the quarantine period. Only a selected few are authorized to leave their homes. (READ: LIST: Services considered essential during Luzon lockdown)

Joseph had to close down his computer shop in Makati. His only two employees who take turns in managing the shop for 24 hours also had to stop working.

Sobrang naapektuhan kasi wala na talagang income (I am heavily affected because I really don’t have any source of income now),” Joseph said.

Micro, small, and medium enterprises in the Philippines

Joseph’s computer shop is just one of the 998,342 micro, small, and medium enterprises (MSMEs) in the Philippines. These establishments make up 99.52% of all businesses in the country as of 2018, according to the latest List of Establishments from the Philippine Statistics Authority (PSA).

As the table below shows, establishments in the country are classified either by their employment or asset size. By definition, Joseph’s computer shop is a micro-enterprise because he has less than 10 employees. 

Micro enterprises like Joseph’s computer shop make up the majority (88.5%) of businesses in the country. They are also next to large enterprises or corporations in terms of employment, employing as much as 28.9% of the total labor force in businesses nationwide.

Small enterprises come second in terms of number of establishments and third in terms of employment.

(See graph below which breaks down by establishment type the total number of establishments as well as total workforce employed by such establishments.)

About 80 kilometers from Joseph’s shop in Makati, another business owner in Laguna closed down due to the lockdown.

Ben Pasco owns a halo-halo store in San Pablo, Laguna called Ben’s Halo-Halo. On his best days, Pasco sells over 500 glasses of the local favorite in a day with one glass costing P90.

Compared to Joseph’s computer shop, Pasco’s business is larger and is considered a small enterprise due to its employment size. He owns one company-owned store, which employs 14 workers, and two commissaries, which have 19 employees.

Like Joseph, Pasco’s most profitable months are also during the summer. He had a huge tarpaulin made to promote discounts for graduates, as well as an “egg-hunting discount” scheduled for the Holy Week. Pasco is more proactive in promoting his business during the summer season.

“All is gone,” he said on Wednesday, April 1. By then, Luzon had been on lockdown for two weeks. He had to close down.

Business owners’ burden

Despite the situation, both Joseph and Pasco have not officially laid off any employees yet.

Joseph’s employees are on a no-work-no-pay basis, but he’s allowing them to “advance” their salaries for when the lockdown is lifted.

Joseph is also using his emergency funds, but he’s mostly spending them on utilities such as electricity and internet because he still has to pay his bills even though his business is not operational. 

In contrast, Pasco was able to give all his employees 10 kilos of rice each, canned goods, and packed noodles to aid his workers. This came from his emergency funds as well.

Pasco was also able to file for all his 33 employees for the P5,000 financial assistance from the Department of Labor and Employment. However, this would take at least two weeks before it would be released on their payroll accounts once approved. (READ: DOLE: P5,000 cash aid for Luzon workers affected by lockdown

Tapping into emergency funds is what MSME owners are doing to cope with the lockdown – no matter the size of the business.

Miki Arceo Velasquez, owner of Pinoy dessert brand Maxi Mango, also said that she’s currently relying on her emergency funds to pay her 70 employees from her 15 company-owned stores and office. Like Pasco, Arceo-Velasquez is also considered a small enterprise owner.

“Thank goodness we have it (emergency funds),” Arceo-Velasquez said. All Maxi Mango company-owned branches nationwide, which are mostly found in malls, are currently closed due to the coronavirus crisis.

Arceo-Velasquez hasn’t laid off any employee yet. Her emergency funds are still holding up well but the losses are starting to pile up, considering that not all malls have waived rent.

“Losses in the sense na walang sales papasok pero (that there are no incoming sales but) my emergency fund is still doing a good job so far. Pero (But) of course, I’m sure as every MSME, the fund won’t last forever,” Arceo-Velasquez said.

Jorge Wieneke, co-founder of the Association of Filipino Franchisers Inc (AFFI), said MSMEs are one of the hardest-hit sectors by the coronavirus crisis. AFFI has around 300 member brands – all considered MSMEs. Wieneke said the majority of them are already having difficulty managing this situation 3 weeks into the lockdown.

“Majority of our members, talagang nag-close lahat. Cash flow is gone. In short, walang pumapasok na pera sa aming lahat. Ang magsu-survive lang are those entrepreneurs na talagang itinatabi nila yung profit nila.” Wieneke said.

(Majority of our members closed down. There is no income coming in for us. The only ones who will survive are those who really have enough retained income.)

Wieneke is an entrepreneur himself. He owns the franchise brand Tokyo Tempura and is one of the co-founders of Potato Corner.

Pag nawala ‘yung cash flow, wala nang pambayad ng rent, wala nang pambayad ng labor, wala nang pambayad ng supplies. (If the cash flow is gone, there will be no more left to pay for rent, for labor, for supplies.) Kasi (Because) some of the startups rely only on the cash flow,” Wieneke explained.

Aid for businesses

Economists had earlier suggested that the government should spend P300 billion or more to prevent a recession due to the coronavirus pandemic. This should cover social protection and economic recovery programs.

The National Economic Development Authority’s (NEDA) had also outlined a strategy to contain the spread of COVID-19 and mitigate its socioeconomic impact. The 3-step plan is focused on medical and public health response first, then followed by a rebuilding of consumer and business confidence after.

So far, the Duterte administration has set aside P1 billion for the Pondo sa Pagbabago at Pag-Asenso (P3) microfinancing special loan package of the Small Business Corporation by the DTI, as part of the P27.1-billion package vs coronavirus rolled out on March 16. It’s the smallest amount among all other allotments on the list.

President Rodrigo Duterte also has at least P275 billion under the Bayanihan law signed on March 25, but this didn’t specify a breakdown of the public funds. (READ: [ANALYSIS] May pera nga ba? Does Duterte have money to fight COVID-19?)

On March 31, Finance Secretary Carlos Dominguez III said government support for businesses will have to “take [a] back seat,” because the government will prioritize cash handouts to the poorest Filipinos. He added that the government will have programs for businesses “eventually” so that the economy would be able to bounce back.

But this also means that MSME owners are left waiting while earning nothing.

Since the lockdown started, Joseph said he hasn’t heard of any assistance for business owners like him.

Wala. Sana kung meron pero parang wala naman sa Makati,” he said. (There is no such thing. I would apply for assistance if there is any but I don’t think there is such in Makati.)

Even AFFI members are also still waiting for whatever the government is planning to do to help them.

“They said there is going to be a package to help us, but we’re still waiting for the details on how to do it, how to apply, etcetera. We’re trying to be patient because nobody really prepared for this,” Wieneke said.

For their part, the AFFI supports their members and other MSME owners through educational online forums and podcasts publicly available on their Facebook account. So far, they’ve done online forums on people management contingency, tax and accounting compliance in times of crisis, technology solutions, and public and private collaboration to fight COVID-19.

Lockdown extension

Pasco and Joseph both hoped the lockdown would be lifted on April 14, as initially announced, so that their businesses could resume. But on April 7, President Duterte approved an extension until April 30.

Ako nangangamba, dami ko kasing loan loan – yung truck at L200 na ginagamit ko sa negosyo, loan ko sa lupa kung saan nakatayo ang commissary,” Pasco said. (I’m anxious because I have a lot of loans – my truck and L200 that I use for business and my loan for the land that I use for the commissary.)

Meanwhile, Joseph had been contemplating letting go of one of his only two employees once his shop reopens even before a lockdown extension was announced.

‘Di namin alam kung kikita pa ba. May lag pa rin ‘yan (customers) ng more or less one to two months. Papasok sila (employees) pero dahil dalawa sila baka isa na lang kasi wala rin papasok na mga customers,” Joseph said.

(I don’t know if it’s still going to be profitable once the shop opens again. There would still be a lag of more or less one to two months in terms of customers. My employees might be reduced to one, because there might be not enough customers by then.)

Arceo-Velasquez, who seems to still be managing well given her emergency funds, is more open to an extension as long as it would all end by “May at the latest.”

“The biggest worry and concern there would be the staff of Maxi Mango. Because I have to continuously compensate them. I can’t let them starve,” Arceo-Velasquez said.

Wieneke echoed this, and cautioned that if MSME owners are left to fend for themselves without any assistance, it might just kill their businesses.

“Of course, we don’t want to rush the government (for financial assistance) because the government is still busy fixing the problem. In the meantime, we’re on hold. But this is just my opinion, I could predict that my fellow entrepreneurs, they can only support their people up to two to 3 months only,” he said.


MSMEs around the country employ roughly 5.7 million workers, based on PSA data. About 3.8 million are employed in MSMEs in Luzon alone. More than half (633,886) of all the MSMEs in the country are located in the 8 regions in Luzon. 

For this vast sector, Wieneke said that it wouldn’t be “automatic back-to-normal” once the lockdown is lifted because consumer confidence would not be the same. And if this sector fails, the consequences for the many that rely on it for employment could be significant. The graph below shows a breakdown of MSMEs per region. 

“Everybody will be in the starting line (once the lockdown is lifted). Mare-reboot kaming lahat (We will all be rebooted). And some of us will not be in the starting line at all,” Wieneke said.

As for Pasco, whose funds are already starting to run out, there’s nothing left to be done but wait.

Mahirap maging small-scale business. Sariling diskarte. Hindi ko naman masisisi ang gobyerno, dahil alam ko na mas mayroong nangangailangan ng tulong ngayon. Prayers na lang talaga at matulog at tanggapin na kung ano man ito ay lilipas din. Bahala na,” Pasco said.

(It’s hard to be a small-scale business. It’s all up to me. I can’t blame the government because I know there are people who need more help right now. I’ll just pray, sleep, and accept that whatever this is will also pass. Come what may.)

Joseph, whose computer shop appears to be the most badly hit, said it would be difficult to manage given the lockdown extension but he understands it needs to be done.

Mahirap para sa isang business owner dahil almost 45 days na ‘yung lockdown at malaki ‘yung sales na mawawala, pero kailangan natin ‘yun eh kasi kung hindi tayo susunod o ‘di pa maagapan nang maaga eh mas lalong lalaki ‘yung malulugi mo,” Joseph said.

(The lockdown extension is hard for a business owner because it’s going to be almost 45 days of lockdown and the losses will be huge. But we need to do this, because if we don’t follow or if the crisis is not managed, then our losses will be larger.)

Right now, all these business owners can only hope that the government will eventually provide assistance for them, as promised. – Rappler.com

*He requested that only his first name be used

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Pauline Macaraeg

Pauline Macaraeg is digital forensics researcher for Rappler. She started as a fact checker and researcher in 2019, before becoming part of Rappler's Digital Forensics Team. She writes about the developing digital landscape, as well as the spread and impact of disinformation and harmful online content. When she's not working, you can find her listening to podcasts or K-pop bops.