MICRO, small and medium enterprises (MSMEs) also contribute a large part to our country’s economy. According to the Department of Trade and Industry in 2022, MSMEs comprise 99.5 percent of the 1.109 million business enterprises and 90.5 percent of these MSMEs are micro enterprises. MSMEs contribute 5.6 million jobs or 65 percent of the country’s employment with close to 33 percent from micro enterprises. They contribute significantly to the country’s gross domestic product and in providing additional income to families.
Among these MSMEs and micro enterprises, also most prevalent are the sari-sari (neighborhood variety) stores. They can be seen in every alley or street in both urban and rural areas all over the country. According to Asian Preparedness Partnership, the number of sari-sari stores reached 1.3 million in 2023 and as per Packworks, 70 percent of manufactured goods are transacted through this retail channel.
During the pandemic, sari-sari stores played a vital role for families and communities. With some family members losing their jobs from business down-sizing and closures, setting-up these stores was their only course of action to augment the family income. Also, with the lockdowns happening, the sari-sari store became the community’s main source of necessities.
Sari-sari stores were also a business option for a number of families since these are relatively easy to put up. Homes with windows along streets and alleys could just hang snacks, sell canned goods, various sachet products and drinks to start a sari-sari store operation.
Setting up a store would require funds to buy inventory. Often, initial capital is shouldered by the store owner. As the business thrives, the store owners would expand the sari-sari store, becoming wholesalers or traders, by adding more types of inventory, increasing their purchase volume, providing delivery services or enlarging the area to sell.
This would require additional funds and a common option is to resort to borrowings from creditors that charge steep rates or “5-6.” They often agree to this since they get the funds immediately with no documents nor collateral required. Yet, this type of informal credit can become a hindrance to growing their business as a substantial portion of their income goes to paying for the borrowed funds with high interest rates.
Hence, banks and their partner financing companies could play a vital role in helping the sari-sari stores and other similar micro enterprises gain access to financing.
Banks are not commonly the first option for them to get financing. Perhaps banks are not that accessible in their area, or they feel intimidated by transacting with them. Financing companies, such as Radiowealth Finance Co. (RFC), have expanded their network to markets and areas not commonly catered to by banks. “Our partnership with banks to cater to these markets enables both institutions to help microentrepreneurs in the provinces grow their business and be successful. Our personnel come from the local community, have a feel of the market and can easily relate with our clients and their needs. Through us, banks are also able to reach out and eventually help them,” said Radiowealth Finance President and Chief Executive Officer Donald Francis Chiong.
“Our partner banks help us with our funding so that we could then extend that help to our clients to gain access to the funds they need, be it for additional working capital or to finance assets to improve their production or services. We become their extension to these markets. This relationship works well especially when we share a common purpose to help them improve their lives. We are not only giving them access to financing, but we are giving them a chance to fulfil their dreams of success,” he added.
RFC has been in the business for six decades pioneering financing in the country. Founded by Domingo Guevara in 1964, he provided a buy now pay later scheme for his Radiowealth appliances and extended this to vehicles when his company assembled Volkswagen vehicles in the country. He wanted the common Filipino to enjoy his products and make these accessible to them through financing.
Eventually, the company focused on MSMEs. Recognizing this sector’s invaluable contribution to the country’s economy, the company expanded its network to the provinces, catering to small- and medium-sized agri-based businesses and retailers such as sari-sari stores and wholesalers.
Although banks are reportedly challenged and fall short in their MSME portfolio, it is through established financing companies such as RFC that they can accomplish their mandate in growing this sector. Also, forging partnerships or collaborating with a shared mission and complementing each other’s strengths would certainly contribute to progress and growth for the numerous sectors of the economy and communities.
George M. Abando Jr. is vice president and marketing head of Radiowealth Finance Co. Inc. for the past 10 years. He is a subject matter expert in the field of trade marketing strategies, advertising, alliances and business development. Prior to joining RFC, he worked with JS Unitrade, Julie’s Franchise Corp. and URC, managing product development, business partnership, trade promotions and merchandising.
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