CHAPTER II

Review of Related Literature and Studies.

Related Literature

"One of the biggest obstacles to growth is a lack of effectively skilled staff, so more

needs to be done to encourage SMEs to take on apprentices.

"Interestingly, availability of credit is seen as a barrier for nearly a quarter of those

polled. Clearly, banks need to review their lending policies," added Nigel.

(http://www.bristolpost.co.uk/SMEs-face-barriers-growth/story-26424284-detail/story.html)

A large number of barriers have been the main reasons why the growth of small and

medium enterprises (SMEs) has not been vigorous enough to propel the Philippine economy,

according to the state think-tank Philippine Institute for Development Studies (PIDS).

Two years from now, the Philippines and other Asean [Association of Southeast Asian Nations]

members will be moved toward a single market and production base under the Asean Economic

Community (AEC) by 2015. However, the readiness of our small and medium enterprises for

this regional economic integration draws a big question mark, it said.

A study by PIDS Vice President Rafaelita Aldaba reported that the weak performance of

SMEs has been attributed particularly to poor access to finance, technology, and skills, as well as

information gaps and difficulties in product quality and marketing. It also raised concerns over

the weak performance of SMEs despite regional measures implemented in the Asean Strategic

Action Plan for SME Development 2010-2015 (ASAPSD), and the Asean Policy Blueprint for

SME Development 2004-2009 (APBSD).

The study mentioned that a perception survey was conducted to evaluate the impacts of
these frameworks. Four SMEs and one government-member of the SME Working Group were

surveyed to evaluate the Philippine implementation. Both groups scored low in average

effectiveness, it stated.

The study found that majority of the respondents perceived that the APBSD had limited

impact on facilitating SMEs access to information, market, human resource development and

skills, finance, and technology.

Likewise, the ASAPSD has been perceived to have little concrete impacts in terms of

enhancing competitiveness and flexibility of SMEs in moving toward a single market and production

base, it further said. In 2006, the study said that micro, small and medium enterprises (MSMEs)

dominated the economy and accounted for almost 99.6 percent of the total number of establishments.

However, they only accounted for 61.2 percent of the countrys total employment and 35.7 percent of

total value added, and firm size distribution has also not changed significantly in the past two

decades.

Micro enterprises still formed the bulk of MSMEs, with a share of 91.6 percent, whereas

medium and small enterprises accounted for only 0.4 percent and 7.7 percent, respectively, it

added. Moreover, the study noted that in spite of present programs and policies created for

SMEs, access to finance has remained one of the most critical factors affecting the

competitiveness of the sector. It stated that many private banks are still reluctant to lend to SMEs

because of lack of credit information and low appreciation of lending to small businesses. More

specific issues on SME financing include lack of acceptable collateral, slow loan processing,

short repayment period, high interest rates, difficulties in loan restructuring, and lack of start-up

funds, it added.

(http://www.manilatimes.net/barriers-hinder-growth-of-smes-pids/420/)

Small and medium enterprises (SMEs) in Iloilo City should beef up in order to compete
well against the citys rapid growth development, said the Department of Trade and Industry

(DTI) Region VI.

Everybody wants their businesses to grow. There are three things SMEs should bear in

mind: good product quality, reasonable prices, and delivery on time, so that one can compete

within the global market, said DTI-6 Public Information Officer Ruby Melliza. She further

stated that DTI is open to help aspiring entrepreneurs attain their business goals. Among these

are: SME development, financing assistance options, design and development assistance,

marketing assistance, trainings, trade fairs and trademark registration.

In a previous article by Iloilo Metropolitan Times, Iloilo Business Club (IBS) Executive

Director Ma. Lea Victoria E. Lara stated that even SMEs are in a stage wherein they are all

trying to figure out how to ride with the developments of Iloilo.

Its crucial that they have to evolve, that they can identify clearly the opportunities they

can pursue or otherwise the rapid trends of the city can either hurt or complement their

businesses, Lara said

(Iloilo Metropolitan Times)

Related Studies
 According to Grayson (2004), small businesses face a myriad of problems in information

literacy. According to the National Forum of Information Literacy (2000), small business owners

who have life experiences with computers, technology, and information will likely be successful;

those without this background and technological capability will struggle and perhaps fail

(Poutziouris, 2003). Therefore, while large organizations often have strategies, smaller strategies

may lack some or all of the resources (Van Slyke, 2001), Poutziouris (2003) argues that it is not

surprising that small business owners either overlook growth objectives or even jeopardize their

growth potential simply because they fail to strategically address evolving barriers in the

financial, managerial, technological, and marketing areas. Another barrier to growth of small

businesses is obtaining the right resources.

In a study by Hay and Kamshad (1994), researchers were concerned with the limits on

growth rates experienced by small businesses. They identified the inadequate availability of

capital and financing as the primary external constraints encountered by operational small

businesses (Fielden et al., 2003).

Additionally, one study found regulatory compliance to be a barrier to growth. As defined

by Lipsinki (2005), a recent study shows that for firms with fewer than 20 employees, the annual

cost of regulatory compliance is nearly $7,000 per capita.

Small businesses encounter many barriers to success and growth throughout the start-up

process and their first year of operation. These barriers, erected by government agencies,

financial institutions, and large business organizations, are potentially life threatening to new

businesses, which are particularly vulnerable during the first twelve months following their

information. (Fielden et al., 2003, n.p.)

Summary
 The studies mentioned above have shown us some of the common barriers that small

enterprises face in the course of their business, in our city, it has been said that our government is

offering programs that help enterprises to grow and expand but still, it is not enough for those

enterprises within our city and it would need a lot of knowledge, like gathering of information

from every small enterprises, to get to know what the business owners has to say with their

business and how the government could help with it. Some of the mentioned problems that affect

the enterprises are mostly concerned with the financial aspect, while others seem to rest upon the

owners who manage the business, and let us not also forget all the other factors that has an affect

on the enterprise whether it gives a little impact or a major change over the business.