Philippine Social Science Journal

The Economic Impact, Contribution,

and Challenges of Micro Business
Enterprises to the Local Development
Joyfe G. Quingco
Carlos Hilado Memorial State College-Fortune Towne Campus, Philippines
[email protected]
https://orcid.org/0000-0002-6472-6463

Carmenda S. Leonoras
University of Negros Occidental-Recoletos, Bacolod City, Philippines
[email protected]

ABSTRACT

Micro Business Enterprises (MBEs) is the lifeblood for economic

development. Using a descriptive quantitative research design, the study
aimed to investigate the impact of MBEs to economic development. As
to impact, in general, it was of a moderate extent. Among the indicators,
technology has the highest mean interpreted to a high extent, while
infrastructure development scored the lowest mean score, which reflected
a moderate degree. The study further delved into the economic contribution
and challenges encountered by MBEs. The findings basically implied that
MBEs were rooted in the entrepreneur’s commitment to do business that
promotes progress and development to the local economy.

Keywords: Micro business, Economic Impact, Contribution, and Challenges,

Descriptive Research Design, Local Development, Bacolod City, Philippines

____________________________
Date Submitted: October 29, 2019
Date Revised: December 13, 2019
Date Accepted: December 29, 2019

1.0. Introduction
The pursuit of economic development is the objective of many growing
countries worldwide (Opafunso & Adepoju, 2014). Developing countries confront
several problems, such as the high rate of poverty and unemployment, which continue
to impede the attainment of economic development (Opafunso et al., 2014). MBE
is a small business that is usually operated by not more than ten people and usually
starts with a small amount of capital. MBEs abound in the economy, and they are seen
everywhere (Simbre, 2017). They are considered the engine of economic growth that

Volume 2 Number 2 July-December 2019 107

 Philippine Social Science Journal

promotes equitable development (Nishanth, 2014). Also, MBE’s refer to entities that
employ few workers and which are usually run by the owners who report low to average
revenue and assets; these owners do not hold stakes in subsidiaries, associate entities,
or joint ventures (Mackowiak, 2017).
According to Nishanth (2014), MBEs play a vital role in developing the
economic condition of a country to lessen poverty and attain sustainable growth. One
of the advantages of MBEs is seen in its nature of business as it leads to an equitable
distribution of income. Moreover, MBEs help the inefficient allocation of resources in
a country by implementing labor-intensive production processes, given the abundant
supply of labor force in countries wherein capital is scarce Nishanth (2014).
In this study, the contribution of MBEs to local economic development identified
are income generation, local competitiveness, and poverty alleviation (Yahaya, Geidam,
& Usman, 2016).
Despite its relevance, these micro enterprises encounter some problems like
the absence of sufficient and available supply of financing, difficulties in buying raw
materials, marketing and distribution challenges, and the non-availability of suitable
technology. The existing problem on access to funding may be different in each region,
sector, or individual enterprise in an industry (Nishanth, 2014).
Navarathne (2017) identified operational and managerial challenges, such
as maintaining a superior quality of products and services, innovating the technology,
business rules and regulations-related issues, competition, and infrastructure issues. In
ASEAN countries, MBEs are found to be the critical factors in the economy, accounting
for the rising shares in employment. Studies on MBEs in the ASEAN countries exhibit
that MBEs enhance the development of production networks for higher intensity and
higher-end processes and products, based on vertical specialization and arm’s length
transactions, stimulating local entrepreneurship, competitiveness, and businesses
(Bobowski, 2017).
In the Philippines, micro-enterprise considered the lifeblood of the economy.
MBEs create avenues for ethical trade and promote productivity by providing income-
generating activities for a significant portion of the population, which are considered
vital in developing the countryside and stimulating local tourism (Abellanosa, 2014).
Micro Business Enterprises (MBEs) are significant to the economy of the
country. In 2014, the Philippine Statistics Authority (PSA) estimated micro enterprises
to have reached around 90.3% among the business establishments in the Philippines
(Almerino, 2016).
Republic Act 9178 or the Barangay (Community) Micro Business Enterprise
(BMBE) Act is one of the programs of the Philippine government which strengthens
the BMBEs through the incentives and other benefits such as exemption from income
tax, exemption from minimum wage, reduction of local government taxes, fees and
charges, particular credit window for financing, technology transfer and other business
development assistance. Qualified MBEs can register with asset size of up to three
million pesos (P3,000,000.00) in production, processing, or manufacturing of products,
including agro-processing (Simbre, 2017).
Despite the Republic Act 9178, many MBEs are not registered entities. MBEs
may benefit from not issuing receipts and paying taxes, but not registering deprives

108 Volume 2 Number 2 July-December 2019

 Philippine Social Science Journal

them of the opportunity to grow, which the licensed MBEs enjoy. So far, no formal local
studies have been made to determine the economic impact, the contributions, and the
everyday challenges of this Micro Business Enterprise to the local economy. However,
previous studies delved into factors affecting the operational efficiency of MBEs, the
role of micro-businesses in the socio-economic and effectiveness of the implementation
of MBE law (Abellanosa, 2014).
Hence, this paper aimed to determine the economic impact of Micro Business
Enterprises (MBEs) to the local economy in Bacolod City in terms of infrastructure
development, job creation, tax collection, and technology. Also, it investigated the
economic contribution of MBEs in terms of income generation, local competitiveness,
and poverty alleviation. Likewise, it explored the current challenges faced by MBEs.

2.0. Framework of the Study

The framework of the study focused on the economic contributions, the
economic impact of Micro Business Enterprises to the local economy, society, and
individuals as well as the common operational challenges. The economic contributions
like income generation, local competitiveness, and poverty alleviation bear significance
to the local economic development (Chowdhury, 2016). The more MBEs contribute, the
higher the importance.
Moreover, as the contribution becomes active, it yields a high impact on
the local economy like infrastructure development, job creation, technology, and tax
collection (Magar, 2017).
Prevailing challenges experienced in the operation of the business-like access
to financial services, cost of technology, employee turnover, existence of competitors,
lack of barangay micro business enterprise campaign, lack of managerial skills, limited
access to market, low demand of product and services, small profits are determinants
in the success of the Micro Business Enterprise (Maloka, 2013).
The output of the study would help the micro-business owners to plan and
organize a business venture by established criteria and procedures supported by an
action plan and implementing a business policy.

3.0. Methods
The present study used a descriptive research design applying the survey
questionnaire method. Respondents of the survey were the selected progressive
barangays with registered Barangay Micro Business Enterprises (BMBEs) of Bacolod
City. Sixty MBEs owners acted as respondents that belonged to 24 barangays operating
as trade and merchandising businesses using purposive sampling and who were
currently doing for the last five years. A list of BMBEs was acquired from the City
Treasurer’s Office Licensing Division.
Using the survey method, a researcher-made questionnaire was validated
using Good and Scates standard with a score of 3.5. It was pilot tested with 30 micro
business owners who are registered in the BMBE of Talisay City to obtain reliability
using the Cronbach Alpha Method. The test score was 0.976.
Data obtained from the instruments were subjected to descriptive analysis
and appropriate statistical tools to interpret the data. Using the mean and standard

Volume 2 Number 2 July-December 2019 109

 Philippine Social Science Journal

deviation, problems that sought to determine the extent of the economic impact and
contributions of Micro Business Enterprises to the local economy. On the other hand,
for the problem which sought to determine the current challenges faced by the Micro
Business Enterprises, frequency and percentage distribution were used.

4.0. Results and Discussion

Extent of Economic Impact of Micro Business Enterprises

Infrastructure Development. Table 1 shows that the extent of the economic
impact of MBE to infrastructure development as a whole is moderate (M=3.11; SD=0.77).
“Upgrades the operation process” got the highest score of 3.23, which was interpreted
as high extent while “increases in capital invested” got the lowest score of 2.92, which
was also interpreted as a moderate extent.
As the business upgrades operational processes, infrastructural development
flourishes as proven by acquiring additional facilities to enhance operational efficiency
and productivity. Operating profit surplus was reinvested; thus, the micro-business
owners are not required to make cash outlay as an additional investment. Respondents
rated increases capital invested low because they consider that earnings are rolled back
to the operations and not on the capital expenditures. Simply stated, the priority of
these entrepreneurs is business survival rather than investing in equipment.
The improvement in facilities and the production of goods and services
contribute to the betterment of the operations of the business. According to Magar
(2017), the lack of proper infrastructural facilities causes severe damage to the
enterprise’s value chain process, which includes production, consumption, and
distribution of the products. This impediment is apart from the absence of finances,
inadequate marketing facilities, and technological obsolescence that are already being
faced by MSMEs.
Moreover, infrastructure development supports business development as
confirmed by World Economic Forum (2014), well-developed infrastructure not only
reduces the Ondistance
the other between regions but also
hand, infrastructural integrates national
development increasesmarkets and invested.
the capital connects
them at low costs
Requirements to other for
are necessary economies (Ismail, 2015).
current infrastructure projects for Micro, Small, and Medium
On (MSMEs).
Enterprises the other hand,
With infrastructural
this, all MSMEs development increases
come together and the capital
share the invested.
costs of
infrastructure, which are a costly affair for individual MSMEs (Magar, 2017).
Requirements are necessary for current infrastructure projects for Micro, Small, and

Table 1. Extent of Economic Impact of MBE in terms of Infrastructure Development

Infrastructure Development Mean SD Int
1. Generates improvement in facilities. 3.15 0.67 ME
2. Upgrades the operation process. 3.23 0.71 HE
3. Increases in the production of goods and services. 3.15 0.78 ME
4. Increases in capital invested. 2.92 0.84 ME
5. Promotes new business opportunities. 3.08 0.84 ME
Average 3.11 0.77 ME
Note: ME=Moderate Extent, HE=High Extent

Job Creation. Table 2 shows that the economic impact of MBEs in job
110 Volume 2 Number
creation as a whole is a high extent (M=3.62; SD=0.82). 2 July-December
It implies 2019
that MBEs help
create jobs and decrease the unemployment problem in the community.
Micro Business Enterprises "promote self-sufficiency of employees" was
 2. Upgrades the operation process. 3.23 0.71 HE
3. Increases in the production of goods and services. 3.15 0.78 ME
4. Increases in capital invested. 2.92 0.84 ME
Philippine Social Science Journal
5. Promotes new business opportunities. 3.08 0.84 ME
MediumAverage 3.11
Enterprises (MSMEs). With this, all MSMEs come together 0.77 share
and MEthe costs
Note: ME=Moderate Extent, HE=High Extent
of infrastructure, which are a costly affair for individual MSMEs (Magar, 2017).
JobCreation.
Job Creation. Table
Table 2 shows
2 shows thateconomic
that the the economic
impactimpact
of MBEsoftoMBEs in job
job creation
as a whole is a high extent (M=3.62; SD=0.82). It implies that MBEs help create jobshelp
creation as a whole is a high extent (M=3.62; SD=0.82). It implies that MBEs and
create jobs
decrease theand decrease theproblem
unemployment unemployment problem in the community.
in the community.
MicroBusiness
Micro Business Enterprises
Enterprises “promote
"promote self-sufficiency
self-sufficiency of of employees”
employees" was was
rated a high extent (M=3.85), which means MBE operations
rated a high extent (M=3.85), which means MBE operations provide employment provide employment and
and increases
increases individual
individual or income.
or family family income. On the
On the other other
hand, hand, "increase
“increase employedemployed
residents
inresidents
the area”inwastherated
area" was ratedextent
a moderate a moderate extent
(M=3.31). MBEs (M=3.31). MBEshire
owners often owners
employeesoften
hireare
who employees
not from who are not from
the community theoperate.
they community they operate.
Therefore, Therefore,
it is not absolute thatit MBE’s
is not
absolute
employ onlythat MBE's employ
residence comingonly
fromresidence
the city. coming from the city.

Table 2. Extent of Economic Impact of MBE in terms of Job Creation

Job Creation Mean SD Int
1. Provides employment in the local society. 3.46 0.64 ME
2. Improves individual/family income. 3.69 0.73 HE
3. Increase employed residents in the area. 3.31 1.08 ME
4. Promotes the self-sufficiency of employees. 3.85 0.54 HE
5. Provides training skills to the employees. 3.77 0.90 HE
Average 3.62 0.82 HE
Note: ME=Moderate Extent, HE=High Extent
According to Ajuwon, Ikhide, and Akotey (2015), job creation has come to
recognizeAccording
the significant roleIkhide,
to Ajuwon, that MBEs play in
and Akotey any economy's
(2015), job creationdevelopment.
has come to
Business owners believe that as it offers employment of the residents of the
recognize the significant role that MBEs play in any economy’s development. local
Business
community, it promotes self-sufficiency, provides skills training, and improves
owners believe that as it offers employment of the residents of the local community, an
individual's family income. As the number of business enterprises operates,
it promotes self-sufficiency, provides skills training, and improves an individual’s it gives
employment
family income.opportunities
As the numberandofincreases
businessthe per capitaoperates,
enterprises income ofit the
givesresidents.
employment
opportunities and increases the per capita income of the residents. 5
MBEs often hired non-local residents due to the scarcity of local employees,
for they chose to seek and gain employment bigger companies that offer better
salary packages.
Micro-businesses play a significant role in economic development by providing
both employment, goods, and services. As a result, MBEs improve individual/family
income, according to Baptiste-Cornelis (2015).

Tax Collection. Table 3 shows that the economic impact of MBEs to tax
collection as a whole is a high extent (M=3.54; SD=0.83). It considered that top tax
collection gives the local community the best opportunity to receive essential services.
As a result, improvement or development on the local community is visible as business
enterprises bloom or prosper.
The results of the survey show that “tax collections from new businesses” got
the highest mean score of 3.77 and a standard deviation of 0.81, which was interpreted

Volume 2 Number 2 July-December 2019 111

 services. As a result, improvement or development on the local community is visible
as business enterprises bloom or prosper.
The results of the survey show
Philippine that
Social "tax collections
Science Journal from new businesses"
got the highest mean score of 3.77 and a standard deviation of 0.81, which was
interpreted as a high extent. An increase in sales tax, business permits, and licenses
as a high extent. An increase in sales tax, business permits, and licenses are brought
are brought about by new micro-businesses and also other types of business. On the
about by new micro-businesses and also other types of business. On the other hand,
other hand, "assures infrastructure development from taxes" got the lowest mean
“assures infrastructure development from taxes” got the lowest mean score of 3.31 and
score of 3.31 and a standard deviation of 0.61, which was interpreted as a moderate
a standard deviation of 0.61, which was interpreted as a moderate extent. Thus, not
extent. Thus, not all infrastructure developments in the community came from the
all infrastructure developments in the community came from the local budget but also
local budget but also income-generating national budget and appropriation.
income-generating national budget and appropriation.
Increasedsales
Increased salestax
taxcollection
collection came
came from
from increased
increased sales.
sales. Sales
Sales tax
tax revenue
revenue
is given to the local economy because these are used to meet community needs
is given to the local economy because these are used to meet community needs (De
(De
Renzy,2014).
Renzy, 2014).ThisThisconfirms
confirmsthatthatthe
the collection
collection ofof business
business taxes,
taxes, like
like fees
fees on
on permits
permits
andlicenses,
and licenses,isiscontributory
contributory to to the
the economic
economic impact
impact ofof MBEs
MBEs to to the
the local
local economy.
economy.
The increase in sales revenue and tax collection is part and parcel of total collections
The increase in sales revenue and tax collection is part and parcel of total collections
generatedbyby
generated thethe government.
government. Economists
Economists discussed
discussed that thethat the resources
resources of companies of
companies directed as to tax compliance are resources that
directed as to tax compliance are resources that could be used for reinvestment, and could be used for
reinvestment,
facilitating futureandgrowth.
facilitating future
Hence, growth.
there Hence,that
is a belief there
theis tax
a belief
and that the tax and
complicated tax
complicated tax system has pressured the business and
system has pressured the business and does not warrant infrastructural development does not warrant
ininfrastructural
the area Adebisi development
(2013). in the area Adebisi (2013).
Table 3. Extent of Economic Impact of MBE in terms of Tax Collection
Tax Collection Mean SD Int
1. Collects business taxes from the new branch. 3.77 0.81 HE
2. Promotes higher individual income taxes. 3.62 0.85 HE
3. Provides funds to local government for the delivery
of basic services. 3.46 0.64 ME
4. Assures infrastructure development from taxes. 3.31 0.61 ME
5. Supports the Barangay Micro Business Enterprise
law implementation. 3.54 1.10 HE
Average 3.54 0.83 HE
Note: ME=Moderate Extent, HE=High Extent

Technology. Table 4 shows that the extent of micro-enterprises’ economic 6

impact of MBEs to technology is high (S=3.63; SD=0.78). Advancement in technology like
internet e-commerce and other gadgets helps to do business fast and easy.
Technology improves the connection to suppliers or their marketability
as manifested by a mean score of 4.08 and a standard deviation of 0.74, which was
interpreted as a high extent. The presence of high technology provides convenience
to MBEs. The low mean score was on the “improves business process efficiently and
improves employee’s’ productivity” (M=3.38), which was interpreted as a moderate
extent. It implies that the use of high technology decreases human productivity
as employees rely on the use of technology. The decrease in human productivity is
brought about by the oppressive or extensive use of modern technology in the business
— the use of human labor decreases due to the replacement of technology that the
human process can do. However, dealing perhaps with slow or obsolete technology
and poor internet bandwidth can slow down even the most productive employees, and
may warrant the need to upgrade existing hardware and software regularly proactively.

112 Volume 2 Number 2 July-December 2019

 that the human process can do. However, dealing perhaps with slow or obsolete
technology and poor internet bandwidth can slow down even the most productive
employees, and may warrant the need
Philippine toScience
Social upgrade existing hardware and software
Journal
regularly proactively.
According to Aruna (2015), nowadays, adopting the latest technology can
According to Aruna (2015), nowadays, adopting the latest technology can
improve the productivity of MBEs and overcome problems as well. Advancement in
improve the productivity of MBEs and overcome problems as well. Advancement in
technology enhances business processes and promotes efficient customer service
technology enhances business processes and promotes efficient customer service and
and employees'
employees’ productivity.
productivity. TrueTrue to other
to other advanced
advanced countries,
countries, whereinautomation
wherein automationis
is generally applied in all business processes for all types of businesses.
generally applied in all business processes for all types of businesses.
Moreover, technology
Moreover, has revolutionized,
technology and enterprises
has revolutionized, use a chain use
and enterprises of technology,
a chain of
from servers to mobile devices, to develop competitive strengths
technology, from servers to mobile devices, to develop competitive strengths in the economic
in the
marketplace.
economic Business Business
marketplace. owners owners
ought to think
ought aboutabout
to think implementing technology
implementing in
technology
their planning process for smooth integration and to provide room for future
in their planning process for smooth integration and to provide room for future growth growth
(Vitez, 2018).
(Vitez, 2018).

Table 4. Extent of Economic Impact of MBE in terms of Technology

Technology Mean SD Int
1. Improves business processes efficiently. 3.38 0.75 ME
2. Improves employee's productivity. 3.38 0.75 ME
3. Improves market activities. 3.54 0.64 HE
4. Provide efficient service to the customers. 3.77 0.81 HE
5. Improves connection to suppliers/marketability. 4.08 0.74 HE
Average 3.63 0.78 HE
Note: ME=Moderate Extent, HE=High Extent

Extent of Economic Impact of MBEs. Table 5 shows that when taken as a

whole, the economic impact of Micro Business Enterprises (MBEs) to the local economy
is a moderate extent (M=3.47; SD=0.83). 7
It implies that the presence of MBEs in the community gives support to the
local development of the economy, particularly on technology, which got a high mean
score of 3.63 and interpreted as high extent while infrastructure development got a
low mean micro-enterprise of 3.11 interpreted as moderate extent. There is visible
infrastructure development in the local community but not as much as job creation,
tax collection, and technology. Priorities of micro business owners (MBO) focused on
improving the delivery of services and business innovation, which significantly affects
income-generating activities.
Technology has changed the means that firms do business by enabling
businesses to level the playing field with organizations. Businesses use a series of
technology - everything from servers to mobile devices - to develop competitive
advantages in the economic marketplace. Managers ought to think about implementing
technology in their planning process for smooth integration and to provide room for
future growth (Vitez, 2018).
Furthermore, the study, which anchored on the modern theory by Berry
and Mazumdar (1991), was proven to be correct, which stated that development
brings a natural birthplace for development and growth and enterprise of all sizes
of establishments.

Volume 2 Number 2 July-December 2019 113

 Furthermore, the study, which anchored on the modern theory by Berry
and Mazumdar (1991), was proven to be correct, which stated that development
brings a natural birthplace for development and growth and enterprise of all sizes of
establishments. Philippine Social Science Journal
Empirical studies related to economic management included analysis of
financialEmpirical
problemsstudies
and liquidity constraints.
related to economic Thesemanagement
studies contributed to the
included subject
analysis of
of micro-enterprises, filling some of the gaps in economic and
financial problems and liquidity constraints. These studies contributed to the subject financial
ofmanagement. Microfilling
micro-enterprises, enterprises
some ofdetermine
the gaps in their impactand
economic on financial
business management.
performance
under prac ces that focus on achieving the op mal level of
Micro enterprises determine their impact on business performance underliquidity and profitability
practices
that posi vely affect the performance of microenterprises (Ramirez-Urquidy
that focus on achieving the optimal level of liquidity and profitability that positively et al.,
2018).
affect the performance of micro enterprises (Ramirez-Urquidy et al., 2018).
Table 5. Extent of Economic Impact of Micro Business Enterprises
To Mean SD Int
Infrastructure Development 3.11 0.77 ME
Job Crea on 3.62 0.82 HE
Tax Collec on 3.54 0.83 HE
Technology 3.63 0.78 HE
As a Whole 3.47 0.83 ME
Note: ME=Moderate Extent, HE=High Extent

Extent
ExtentofofEconomic
EconomicContribution
Contribu onofofMBEs
MBEs
Income
IncomeGeneration.
Genera on. Table 6 shows
Table that thethat
6 shows extent
theof extent
the economic
of thecontribution
economic
ofcontribu
MBEs to on
income
of MBEs in terms of income genera on as a whole implies
generation as a whole is high (M=3.52; SD=0.81). It is highthat Micro
(M=3.52;
Business Enterprises provides opportunities to both local government and community
to earn revenues through business permits and licenses and employment. Additional 8
taxes are regularly collected, and residents are employed.
Result of the survey shows that indicator like high tax collection through
business taxes got a mean score of 3.69 and was interpreted as a high extent. Micro
businesses contribute to a more significant tax collection through sales tax payments
and fees paid for business permits and licenses. Respondents moderately rated
improvement of the standard of living as a contribution of micro-businesses, which
got a low mean score of 3.38. Respondents believe that business engagements do not
necessarily improve the standard of living because there are also other expenses or
needs like food, education, clothing, and shelter that their income supports.
According to Hassan (2016), micro-enterprises play an essential role in income
generation. These small-scale enterprises are more efficient in the nation’s economy as
they provide income generation opportunities for low-income groups.
In the study of Debela (2014), the informal sector’s activities and small-scale
manufacturing industries are eight times bigger than those engaged in the medium and
large-scale industrial business comprising the ever-increasing significance of the MBE
sector in the country’s economy.
The result proved the findings in the study about Micro Business Enterprise
development, which encompasses income-generating strategies and services
ranging from education, skill training, and financial capital to low-income and small
entrepreneurs (Jha, 2017).

114 Volume 2 Number 2 July-December 2019

 The result proved the findings in the study about Micro Business Enterprise
development, which encompasses income-generating strategies and services
ranging from education, skill training, and financial capital to low-income and small
entrepreneurs (Jha, 2017). Philippine Social Science Journal

Table 6. Extent of the Economic Contribution of MBE in terms of Income Generation

Income Generation Mean SD Int
1. Provides income opportunity to local
residents. 3.54 0.85 HE
2. Improves the standard of living. 3.38 0.85 ME
3. Results higher tax collection through
business tax (permits & licenses) 3.69 0.73 HE
4. Creates new products/services to the
market.
to the advantage 3.46 that0.76
of consumers. Competition dictates ME retail price
the suggested
5. Improves the quality of life of local
becomes lower when there are many players. "Promotes a reasonable retail price"
residents.
got a high 3.54
mean score of 3.92 and was interpreted as 0.85 HE Meanwhile,
high extent.
Average
"promotes sustainable business and attracts 3.52 new 0.81
investment
HE from other
Note: ME=Moderate
entrepreneurs" got low Extent,
meanHE=High
scoresExtent
of 3.54 but interpreted as high extent. As the
scenario for business engagements become better, many individuals become more
Local
Local Competitiveness.
Competitiveness. Table
Table7 7shows
showsthatthatthethe
extent
extentof the economic
of the con-
economic
interested in venturing into business.
tribution
contribution of MBEs to
of study
MBEs ofthe local
in terms competitiveness
of local as a
competitivenesswhole is high
as a whole (M=3.68; SD=0.85).
In the Popescu, Corbos, and Bunea (2018), local is high (M=3.68;
competitiveness
ItSD=0.85).
implies thatIt local competitiveness
implies that local is the primary contributor
competitiveness is the to economic
primary develop-
contributor to
can improve the business environment of a city which includes the physical, social,
ment.
economic The entrepreneurs
development. are operating
Thethat
entrepreneurs under close competition to the advantage of
and cultural infrastructure can attract are andoperating under close
retain profitable, competition
innovative, and
consumers. Competition dictates that the suggested retail price becomes lower when
creative
there are workforce
many players. to achieve
“Promotes high productivity,
a reasonable employment,
retail price” got a highhigh mean
wage,score
gross9of
domestic product per capita, but reduce income disparities
3.92 and was interpreted as high extent. Meanwhile, “promotes sustainable business and diminish social
exclusion.
and attracts new investment from other entrepreneurs” got low mean scores of 3.54
Currently,
but interpreted the extent.
as high idea ofAscompetitiveness
the scenario forhas gained
business a significantbecome
engagements presence,
bet-
both internationally and locally (Cisneros, M., Torres,
ter, many individuals become more interested in venturing into business. A., Flores, M., 2017).
Furthermore,In theMBEs'
study ofprinciples
Popescu,ofCorbos,
promoting and the
Buneaeconomic
(2018), competitiveness
local competitivenessof local
can
industries
improve theregarding
business progress
environment and ofexports have attracted
a city which includes thecontroversy and debates.
physical, social, and cul-
In regards
tural to the discussion,
infrastructure they argued
that can attract and retainthatprofitable,
the introduction of flexible
innovative, production
and creative work-
embraces
force substantial
to achieve promise foremployment,
high productivity, a regeneration of wage,
high the small-scale
gross domesticindustrial sector
product per
(Maloka,
capita, but2013).
reduce income disparities and diminish social exclusion.

Table 7. Extent of the Economic Contribution of MBE in terms of Local

Competitiveness
Local Competitiveness Mean SD Int
1. Creates more opportunity for an
entrepreneur to grow. 3.62 0.85 HE
2. Promotes a sustainable business. 3.54 0.85 HE
3. Attracts new investments from other
entrepreneurs. 3.54 1.02 HE
4. Improves business environment
through healthy competition. 3.77 0.71 HE
5. Promotes a reasonable retail price. 3.92 0.74 HE
Average 3.68 0.85 HE
Note: ME=Moderate Extent, HE=High Extent

Poverty Alleviation. Table 8 shows that the extent of the economic

contribution of MBEs in terms of poverty alleviation as a whole is high (M=3.75;
SD=0.88). It implies that the standard of living improves as income pours into the
Volume 2 Number 2 July-December 2019 115
family. Poverty is eradicated, and new life is slowly beginning. Businesses established
help low-income family in improving their way of living. Poverty is one social
problem that micro-enterprise society has that is addressed when ventures in the
 Philippine Social Science Journal

Currently, the idea of competitiveness has gained a significant presence, both

internationally and locally (Cisneros, Torres, & Flores, 2017). Furthermore, MBEs’ prin-
ciples of promoting the economic competitiveness of local industries regarding prog-
ress and exports have attracted controversy and debates. In regards to the discussion,
they argued that the introduction of flexible production embraces substantial promise
for a regeneration of the small-scale industrial sector (Maloka, 2013).

Poverty Alleviation. Table 8 shows that the extent of the economic

contribution of MBEs to poverty alleviation as a whole is high (M=3.75; SD=0.88). It
implies that the standard of living improves as income pours into the family. Poverty is
eradicated, and new life is slowly beginning. Businesses established help low-income
family in improving their way of living. Poverty is one social problem that micro-
enterprise society has that is addressed when ventures in the local community prosper.
It gives residents a source of income or an opportunity to increase their financial
capabilities. Accesses to reasonably priced goods and services, children are sent to
school, and the ability to acquire necessities are some of the benefits when Micro
Business Enterprises grow in the local community. Poverty can be eradicated when both
the local government and people in business join hands in providing opportunities for
employment to residents.
Based on the results of the survey, it is shown that “necessities like food,
shelter, and water are met” and got a high score of 4.08 and were interpreted as high
extent. The adversity in life, like a lack of money to spend on basic needs, is eliminated
with business engagement. The business income supports the family’s needs daily.
“Provision of the minimum wage to the employees” got a low mean score of 3.23 and
was interpreted to a moderate extent. The MBEs hire employees and provide them
with minimum wage. To some employees, this may be not enough to sustain their daily
needs, especially those with prominent families.
According to Edoho (2016), the author emphasized that entrepreneurship micro,
small, and medium enterprise (MSME) strategy can reduce the high unemployment rate
and alleviate crippling poverty. Strengthening entrepreneurship has been recognized as
a mechanism of producing employment and is a powerful weapon of fighting poverty
in the country.
The economic status of the family improves when opportunities for employment
and lower prices of goods and services are present in the community. For any nation
to realize growth, industrialization, and having gainful and meaningful employment are
relevant indices used to measure economic progress, typically represented by income
per capita, equitable distribution of income, welfare, and quality of life enjoyed by the
citizen (Opafunso et al., 2014).
Financing micro-entrepreneurs for job creation and income-generating
activities shows success in many developing countries. Poverty alleviation is necessary
to deal with any effective program related to sustainable development. It was given top
priorities for international development because one-fifth of the world population is
living in extreme poverty (Khanam, Mohiuddin, & Hoque (2018).

116 Volume 2 Number 2 July-December 2019

 necessary to deal with any effective program related to sustainable development. It
was given top priorities for international development because one-fifth of the
world population is living in extreme poverty (Khanam, Mohiuddin, and Hoque
(2018). Philippine Social Science Journal

Table 8. Extent of Economic Contribution of MBE in terms of Poverty Alleviation

Poverty Alleviation Mean SD Int

1. Provides minimum wage to the employees. 3.23 0.9 ME
2. Employees can send their children to school. 3.85 0.87 HE
3. There is sufficient basic necessity like food,
shelter, water, and clothing. 4.08 0.84 HE
4. Provides sustainable livelihood for everyone. 3.77 0.81 HE
5. Gives access to cheaper goods and services. 3.85 0.78 HE
Extent of Economic Contribu on. As shown
Average 3.75in Table 0.889, the extent
HE of the
Note: contribu
economic ME=ModerateonExtent, HE=High
of Micro Extent Enterprises to local development as a
Business
whole is high (M=3.65; SD=0.85).
Extent of Economic Contribution. As shown in Table 9, the extent of the
economic This indicatesofthat
contribution Micro
Micro Business
Business Enterprises
Enterprises in thedevelopment
to local community as "alleviates
11
a whole
poverty," which got
is high (M=3.65; SD=0.85). a high mean score of 3.75 and was interpreted as high extent
while "income
This indicates on" got
genera that Microa low mean score
Business of 3.52inand
Enterprises thealso interpreted
community as high
“alleviates
extent.
poverty,” which got a high mean score of 3.75 and was interpreted as high extent while
According
“income to Debelagot
generation” (2014),
a lowthe contribu
mean score of on3.52
of MBEs
and alsotoward employment,
interpreted as highpoverty
extent.
reduc on, entrepreneurship, and innova on is growing
According to Debela (2014), the contribution of MBEs toward employment, in importance.
Microenterprises
poverty are noted for sizeable
reduction, entrepreneurship, propor isons
and innovation of urban
growing jobs and Micro
in importance. also
considered as the "vital component of urban economies."
enterprises are noted for sizeable proportions of urban jobs and also considered as the The economic
contribu
“vital ons of micro
component business
of urban to the growth
economies.” and development
The economic contributions of the economy
of micro is of
business
toprime importance
the growth and in upli ing theoffinancial
development status of
the economy is the residents
of prime and the in
importance delivery of
uplifting
essen
the al services
financial statusofofthe
thelocal government.
residents and the delivery of essential services of the local
government. This validates the theory of the study that economic development and
growth This
occurs when there
validates is support
the theory of thefrom
studythe local
that government
economic and open
development access
and growthto
financial
occurs when services
there isover and from
support abovethethelocal
resources
governmentinvested by the
and open microto business
access financial
owners.over and above the resources invested by the micro business owners.
services

Table 9. Extent of Economic Contribu on of Micro Business Enterprise

To Mean SD Interpreta on
Income Genera on 3.52 0.81 HE
Local Compe eness 3.68 0.85 HE
Poverty Allevia on 3.75 0.88 HE
As a Whole 3.65 0.85 HE
Note: HE=High Extent

Prevailing ChallengesFaced
Prevailing Challenges Facedbyby MBEs.
MBEs. Table
Table 10 presents
10 presents a summary
a summary of
of the
the prevailing challenges MBEs faced. Entrepreneurs struggle to operate
prevailing challenges MBEs faced. Entrepreneurs struggle to operate and make their and make
their businesses
businesses profitable
profitable successfully.
successfully. BasedBased
onon
thethesurvey,
survey,the
thetop
topmost
most prevailing
prevailing
challenges faced by MBEs was the existence
challenges faced by MBEs was the existence of of new competitors,
compe tors, which got the
highest percentage of 84.60 (n=33). It is a natural phenomenon that competition
highest percentage of 84.60 (n=33). It is a natural phenomenon that compe on is is aa
prevailing economic challenge, especially when someone ventures in business.
prevailing economic challenge, especially when someone ventures in business. New New
compe tors are threats to the profitability of the exis ng business. The emergence
Volume
of new2 Number
compe 2tors
July-December
lowers the2019
income of exis ng or old businesses. It affects the 117
income-genera ng ac vi es; thus, it is a challenge for entrepreneurs to design
strategies to counter the effects. The specific nature of compe on in the market
 Philippine Social Science Journal

competitors are threats to the profitability of the existing business. The emergence of
new competitors lowers the income of existing or old businesses. It affects the income-
generating activities; thus, it is a challenge for entrepreneurs to design strategies to
counter the effects. The specific nature of competition in the market for products or
services made is of particular importance for the participants to obtain a competitive
is crucial for the survival and development of institutions and enterprises (Zelga,
advantage over rivals. Therefore, competitiveness in an open market is a central issue,
2017).
and the corresponding formulation of competitive strategy is crucial for the survival and
developmentCompetition
of institutions leads
andtoenterprises
lower prices. As a2017).
(Zelga, result, business profit is low; this is
also considered as a challenge for MBE
Competition leads to lower prices. As a result, owners to grow profitably.
business profit isBased
low; thison is
the
also considered as a challenge for MBE owners to grow profitably. Based on the study It
study conducted by (Carter, 2019), competition causes low profit to the business.
is statedbyin(Carter,
conducted his study
2019),thatcompetition
net profit margins
causes lowhave declined
profit to thefor both food
business. It isand non-
stated
food retailers over recent years.
in his study that net profit margins have declined for both food and non-food retailers
Challenges like the cost of technology for the installation of new business
over recent years.
processes or systems,
Challenges like the andcost
the ofhigh rate of employees
technology turn over are
for the installation also considered
of new business
processes or systems, and the high rate of employees turn over are also technological
detrimental to the operations of the business. Innovation and considered
infrastructure
detrimental to the are operations
quite expensive, of thewhich micro-business
business. owners
Innovation andfound to be costly
technological
and affect the cash flow of the business.
infrastructure are quite expensive, which micro-business owners found to be costly and
affect the cashEmployee
flow of the turnover is the rate at which employees depart a company and
business.
have Employee
to be replaced by new
turnover is the or rate
existing staff. employees
at which The issue ofdepart
employee turnover
a company has
and
raised quite a several concerns in the construction industries
have to be replaced by new or existing staff. The issue of employee turnover has as a result of its effect
on quite
raised productivity.
a severalIt concerns
is a known in fact that employees
the construction are important
industries stakeholders
as a result of its effectinonthe
firm, but unfortunately,
productivity. It is a known fact after limited
that resources
employees are have been stakeholders
important used in recruiting,
in thetraining
firm,
but and developing after
unfortunately, the employees, they leave
limited resources haveforbeen
otherused
organizations (Adetraining
in recruiting, Abdulquadri,
and
2015). the employees, they leave for other organizations (Ade Abdulquadri, 2015).
developing

Table 10. Prevailing Challenges Faced by MBE

Challenges f %
Existence of new competitors 33 84.6
Low profits 24 61.5
Cost of technology 21 53.8
Employee turnover (Fast Employee
Resignation) 21 53.8
Access to financial services 18 46.2
Limited access to markets 12 30.8
Lack of Barangay Micro Business
Enterprise campaign 9 23.1
Lack of management skills 9 23.1
Low demand for product and services 9 23.1
Others (Specify): High Demand, Low
Supply 1 2.6

TheThe
results of the
results study
of the studyshow that
show MBE’s
that significantly
MBE's contribute
significantly to to
contribute thethe
local
local
development of the economy as it provides income to the residence of
development of the economy as it provides income to the residence of thethe community,
community, alleviating poverty. These results have reflected the impact of business
Volume 2 Number
118 operation where it provides infrastructural development, job2 July-December 2019tax
creation, higher

13
 Philippine Social Science Journal

alleviating poverty. These results have reflected the impact of business operation
where it provides infrastructural development, job creation, higher tax collection, and
improve business process. Moreover, business enterprises encounter challenges like
competition, high rate of employment, low profit, and high cost of technology, but it
can be solved through effective and efficient management.

5.0. Conclusion
At the outset, micro-business owners play a vital role in the success
of the selected business venture. In all aspects of the business, business owners
and managers have direct control over the operation and decision-making process of
the business. The economic impact, contributions, and challenges of Micro Business
Enterprises on the local economy give both macro and micro perspectives of their
operational efficacy. The economic impact which considers infrastructural development,
job creation, tax collection, and technology indicates the after-effects of the business
operation of micro-enterprises. The findings imply that Micro Business Enterprises
are deeply rooted in the entrepreneur’s commitment to do business that promotes
progress to the local economy. Results signify that the presence of micro-businesses in
the local community can help improve the economy and the peoples’ standard of living
as this will provide revenue to the local government and employment to residents. It is
brought about by many participants that are interested in being local entrepreneurs or
in doing business on a micro-scale level.
Further, Micro Business Enterprises contribute to local economic development
other than by providing employment opportunities to the residents and supporting local
government unit’s delivery of essential services. MBEs boost local entrepreneurship.
Prevailing challenges faced by Micro Business Enterprises affect their
operational efficiencies. These challenges reduce profits and heighten competition.
There are specific issues that the local government unit can address, like providing
access to financial services and assistance in upgrading to new emerging technologies.
Micro Business Enterprise owners, for effective management, may consider
using the data in designing and formulating or drafting policies and procedures on
purchasing, distribution, hiring, and financing. MBE owners should organize their
businesses based on their capabilities and resources invested.
Challenges faced by MBEs and these emerging issues are to be answered for
sustainable business operations. To prospective investors, findings of the study give
potential investors insights as to the challenges faced by MBEs as well as the weak areas
of the business operation that need focus when they eventually venture into business.
These challenges identified need to be addressed to achieve business objectives and
desired profits.
The local government agency may explore the possibility of assisting micro-
businesses in gathering information for periodic evaluation and monitoring of the
financial status of micro-businesses for reporting purposes. It is hoped that future
researchers utilize this study as a basis for further research, especially studies that will
focus on the impact assessment of Micro Business Enterprises, financial literacy, and
readiness for skill transfer and technology prospects.

Volume 2 Number 2 July-December 2019 119

 Philippine Social Science Journal

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