Small- and Micro-Business Development

In The Philippines

A Study of Economic Survival in the Midst of Globalization

Initiated and Presented by Dr. R. Chabot


 The Philippines Today

Considered a part of Southeast Asia, the Philippines is a developing island nation with close ties to the United States. A democratic republic and tied to a free market economy, Filipinos hope to share in all that is promised by economic globalization. Yet, with an unemployment rate of just over seven percent and almost 40% of the labor force involved in the agricultural sector, locals and foreign investors alike wonder about the future of the Philippine economy. Most reports on the Philippines sound desperate and discouraging, focusing on terrorists in the South or slowed industrial production in the last quarter. Yet, there is far more to the Philippine economy and its people than rice and textiles. My research into small business activity in the spring of 2002 (with some follow-up interviews in 2007) shows another side of the Philippines, one that gives a positive direction for government and the private banking sector to look towards for a stable and robust Philippine economy. The following photos and comments are just an introduction to opening a small shop in the Philippines. For more information on my research and other areas of work, go to my main web-page at /faculty/rchabot or you can contact me at

. Mabuhay!










Adam Smith and the Philippines

 Many generalizations about the Philippines fluctuate between terrorists and rice terraces. The latter view has some basis in fact given that almost half of the labor force is involved in what is termed the agricultural sector. But a large percentage of the population has more than an elementary school education and can speak English as a second or third language. College is a common goal for all school children and almost half of the labor force holds jobs in the private industrial sector or government services. Unfortunately, many college educated technicians in the private or public sector earn less than what they must pay in rent. It is not uncommon for a college professor to hawk kitchen wares to her students or for a computer programmer to sell sunglasses on the street after work. The formal job is for status and personal interest while the sideline job actually feeds one's family. Small, family based, often under-the-table activities make up a large though often undocumented activity Filipinos depend upon for obtaining services and making money. The more than one hundred personal interviews I had with small business owners in and around the Manila area provide information on the strengths and worries of this vital part of the modern Philippine Economy.





Small- and micro-businesses are as overwhelming a part of modern life in the Philippines as Jeepneys and mangoes. Though most Filipinos speak some conversational English, my questionnaire about business practices had been translated into Tagalog and I was accompanied by a translator, Arnel Santiago, who is himself a small businessman, raising and selling duck eggs. Since the ducks did most of the work, Arnel was happy to walk with me around parts of Bulacan and Quezon City to question whomever was willing to talk to us. Our inquiries focused on methods of capital acquisition to start the business, maintain product availability, and pay debts. Arnel was invaluable in convincing owners that I was a harmless American academic and not a venture capitalist or part of the Bureau of Internal Revenue. We tried to get as varied a group of businesses as we could, but our sampling was certainly not random. Many of the businesses were looked after by a clerk or relative, and many of the owners were too busy to sit down and talk at length. Overall, I am pleased at the number of business owners who did give of themselves and share their experiences. Many thanks to all of them.



Santa Maria Township

What used to be a small, quiet little town far from the madness of Manila has become a busy bedroom community for the Manila area. Jeepneys roam its compact streets while businesses compete with those down the road and in the capital. In this photo you can see jeepneys and tricycles, both important forms of public transportation and avenues of investment for small business entrepreneurs. Notice the pawnship, a front for a local lender of quick capital for small businesses. While these shops all have the front and upkeep costs of a stable business, many others down the street sell similar items (clothing, chips, toys, shoes, etc.) on the sidewalk or in small, temporary wooden structures. What keeps the more expensive storefronts alive is trust by the local populace and developing a relationship with customers. These "suki" may go to the same business for generations out of a sense of mutual obligation as well as trust in a good buy.




Santa Maria Shoe Seller

Inside a public market place reserved for small businesses, Consuelo Fernando Jose has used family capital to buy the rights for one small stall to sell a variety of shoes. Each stall is only four by six meters and her recent ability to buy the rights to another stall in this public market indicates her entrepreneurial abilities. Once a week she and her daughter drive to the far side of Manila in the early morning hours to buy new stock at wholesale prices. This form of "buy and re-sell" is common, where your access to transportation or special goods makes it possible for you to pass on goods to the general public for a profit. A new car and a newly built home for one of her daughters attests to the importance of her business to the family's success.








The front of a local bakery near Santa Maria, Bulacan, is a common home with driveway and a couple of sleepy dogs. While businesses in the city more commonly hide the living quarters of the owners or staff, suburban and rural areas hide what business goes on in the back yards. Here a bakery is set up in a space no larger than a two car garage, supplying baked goods to hundreds of families in the area. When a low paying factory job did not meet his needs, the owner (left in the photo) began this bakery with funds loaned to him by a local bank, an amount he paid back within a year. Though he had no previous experience in the business, a family friend showed him the basics of baking and he has learned as the business has grown. With the entire family supplementing his three full-time employees, the owner can support a comfortable middle class lifestyle






Garment Factory

This small sewing factory is located behind a residence on the rural edge of Santa Maria. The owners started with only two borrowed sewing machines and the family's own savings when their duck raising business started losing money. They had a lucrative contract to make denim coveralls for export but now limit themselves to making various clothing items for the local youth market. They contract out orders and have 15 full time seamstresses in their own back yard factory. A local savings cooperative provides the emergency capital when materials need to be obtained or employees need to be paid. The owners and their two children can be seen in the foreground.This same cooperative recently closed its doors and many members found their savings had disappeared.Such occasional abuses are difficult to prosecute and obtain redress for.It is for this reason that many distrust cooperatives or rotating credit associations, though sometimes need for some long term investment cash overrides their fears.





Roadside Restaurant

Opening a restaurant is a popular business for first-time entrepreneurs because all you need is a corner of space, a hot plate and a few odd ingredients. While the husband, a tricycle driver, built the structure and a friendly landowner allowed their use of a small square of land, Ellen gives up most of her day to providing simple snacks and meals to passing commuters and tricycle drivers along a busy road in Santa Maria.

Ellen had ten years of previous experience in selling "ready to wear" (RTW) clothing in a small local shop, initially funded through a rotating credit association. With so much competition in that area, she used her savings of 50,000 pesos to start her own eatery. All labor and capital needs are met by her immediate family. By 2009 Ellenís had grown to a much larger and more permanent eatery further up the street.




Saging Seller

Murphy's Market provides space for stores and shops that cater to the working class members of Quezon City. This woman specializes in selling different varieties of bananas. Though she lives in a neighboring province, she bought a space in this urban market for easier access to potential customers and to keep neighbors or friends from consuming her profits.

With ten years of experience transporting vegetables to the city from rural areas, she now owns the stall and only has to pay standard business taxes. Though she gets her goods on credit (three days to pay), at times she borrows from a local savings cooperative where a loan of 20,000 pesos for a hundred days will average about eight percent interest








Vegetable Stand

It is very easy to start up a vegetable stall, but location is the key to success. This vegetable vendor occupies a prime spot just outside of Murphy's Market, and other family members have similar stalls nearby. She started her business almost twenty years ago with the financial help of what is referred to as a "five-six" or someone who will loan fast money with repayment of six pesos for every five loaned out. Such lenders continue to be important to her and many other small businesses in the Philippines, though such harsh interest rates make it only a last resort in times of need.








Meat Without the Cellophane

Also located outside of Murphy's, this meat vendor is a mom and daughter operation that was started fifteen years ago when their family sewing business was unable to make any money. They borrowed from a 5/6 for start up capital and, even though they belong to two savings cooperatives, borrow from the 5/6 regularly as needs arise. Why not borrow from the cooperative? Too slow. When you need fresh meat to keep your regular customers, you do what you have to do, whatever the short term cost






Farmers Need Money Too

The many small farmers in the Philippines also have problems in finding cash to buy seed and start the planting season.Just as in the United States, a farmer only brings a paycheck home once or twice a year when the crop comes in.Obtaining money from a bank to keep you going during the growing season can be a real problem, especially in the more rural and remote parts of the Philippines.The photograph at left is of a small farm in Palawan Province in July 2007.With no access to a bank, or even electricity, farmers in this area go to local community leaders who have the money to lend and a sense of responsibility to their poorer neighbors.Thus, having a steady income and money in the bank can be a burden with attached social responsibilities and obligations, yet it also provides a higher status and sense of place in the community.Not to participate in this reciprocal relationship, or to be stingy and not lend to those in need, is not something taken lightly by longstanding community members.







Focus Group

Though this research project held more than one hundred in-depth interviews with many small- to micro-business owners in the Manila/Quezon City/Bulacan area, focus groups were also organized for group discussion on business needs and practices. The man on my left sold fresh chicken at a marketplace in Quezon city but also raises roosters to fight one another (a losing enterprise his wife wishes he would give up). Another member of this group gets up at four every morning, drives a commuter jeepney for a few hours, then picks up eggs at rural farms for his wife to deliver to urban households later in the day. All agree that hard work is necessary but that no amount of sweat will help you without easy access to capital when you need it. For example, the jeepney driver had a three thousand peso repair required on the jeepney. Without a quick loan to keep the jeepney going, both small enterprises that keep his family housed and fed would be put in jeopardy.


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