Growing MEs

The Secrets of Success

From the Bacolod Workshop…

• Credit is not enough.

• BDS is not “one size fits all.”
• BDS is necessary, but expensive.
• There’s a need to be selective.
Comparing Micros in Terms of Growth Potential
Enterprise Type Livelihood Microenterprise
Characteristics
Reason for entry Pushed into it for Pulled by profit
lack of options potential & choice
Activities Multiple Main activity
Importance of income Supplements Main source of
from activity family income family income
Skills requirements Low, rudimentary Require more
experience & skills
Capital requirements Low Higher
Use of net earnings Sustenance, Savings for
survival expansion
Potential for growth Little, none High
Source: Ronald T. Chua (2004)
Activities / Importance of Income
Livelihood Microenterprise

• Multiple activities • Main activity

• Income supplement • Main income source

Implications:
• Focus
• Specialization
 Value Adding Activities

Buy and Sell Trader’s Margin

Activities in-between

Manufacturing Manufacturer’s Margin

Total Margin
Requirements
Livelihood Microenterprise

Relatively low in terms Relatively high in terms

of skills and capital of skills and capital

Implications:
• Volume (generally)
• Level of technology
Use of Earnings/Growth Prospects
Livelihood Microenterprise

• Survival • Savings for expansion

• Little or no growth • High growth prospects

Implications:
• Increasing efficiency
• Increasing need for BDS
A Typical Progression
of Microentrepreneurs
Asset
AssetAcquisition
Acquisition

Home
HomeImprovement
Improvement

Education,
Education,Health
Health

Food
FoodConsumption
Consumption
A Different Progression
Home
HomeImprovement
Improvement

Education,
Education,Health
Health

Asset
AssetAcquisition
Acquisition

Food
FoodConsumption
Consumption
Asset Acquisition: Questions
Does the asset benefit the business in any
way?
– Higher volumes
– Lower costs
– Improved product/s
– Product diversification
– Better customer service
Spotting the next 1%
The indicators --
• Increasing loan amounts availed of
• Increasing savings
• Asset acquisition
• Indications of expansion
• Evidence of deferred gratification
• Evidence of continuous learning
Spotting the next 1%
Behind the indicators --
• Discipline, diligence & self-confidence
• Intelligence, innovation & creativity
• Ability to take calculated risks
• Total commitment and having clearly defined
goals
• Honesty and integrity
• Open-mindedness
• Perseverance, perceptiveness & ability to learn
from mistakes
What questions to ask…

• How do the next 1% record their

– Sales and deliveries
– Purchases
– Payroll and other expenses
• How do they keep track of their inventory
– Raw materials
– Finished goods
Adequate controls and proper
record keeping.
What for?

• Compliance with reporting

requirements
• Analysis and decision making
• Business planning
Other Questions

What help do they usually need?

Help needed…
As perceived by the next 1%
As perceived by the MFI or NGO

The problem defined…

Is there a meeting of the minds?
Is it acceptable to the microentrepreneur?
Other Questions

What are the ways by which MFIs

assist them…
and the difficulties in doing so?
Other questions*
Are they street smart, but not financially
literate?
How old are they?
Is there succession? Division of labor?
How many buyers? Suppliers?
* That may or may not be asked.
BMBE Development Fund (DTI)

• Business advisory services

• Other related activities that will
benefit BMBEs
IGLF Grant for Research and
Promotion of SMEs
• Conduct of studies / new or
innovative researches including
policy, product and laboratory
research
• Product design and packaging and
labeling