Challenges Faced by The MSMEs: Input to Policy Recommendations

  • Authors

    • Anna Liza H. Manalo Batangas State University, The National Engineering University, Philippines, College of Accountancy, Business Econom-ics and ‎International Hospitality Management Batangas State University, Pablo Borbon
    • Michael Q. Balanay Batangas State University, The National Engineering University, Philippines, College of Accountancy, Business Econom-ics and ‎International Hospitality Management Batangas State University, Pablo Borbon
    • Joan Camille A. Verdadero Batangas State University, The National Engineering University, Philippines, College of Accountancy, Business Econom-ics and ‎International Hospitality Management Batangas State University, Pablo Borbon
    https://doi.org/10.14419/qk093q19

    Received date: July 24, 2025

    Accepted date: August 23, 2025

    Published date: September 4, 2025

  • Access to Finance; Access to Market; Access to Technology; Business Environment; Productivity and Efficiency

  • Abstract

    MSMEs play a vital role in economic growth by stimulating employment, promoting revenue distribution, and reducing poverty. MSMEs operate but struggle ‎to compete with larger industries in terms of productivity. This study examined the challenges hindering the growth and performance of MSMEs, ‎aligning with the Sustainable Development Goals (SDGs) to support them, and addressed a critical research gap in localized MSME policy ‎interventions. This research uniquely focused on the specific socio-economic and regulatory conditions that contribute more to a targeted ‎approach for MSMEs. The study employed a descriptive survey with a researcher-made questionnaire, and 303 respondents were selected ‎through simple random sampling. Data analysis utilized percentages, means, Chi-square tests, and ANOVA. Findings indicated that most MSMEs ‎are sole proprietorships engaged in trading, with limited access to finance, technology, and market opportunities. The most pressing concern ‎remains the business environment, particularly regulatory inefficiencies and limited government support. The study revealed significant relationships between business type and business environment, business form, number of employees, years in operation, gross annual revenue, access to finance, access to technology, productivity, and efficiency. The study provided policy recommendations to enhance MSME resilience and align with the Sustainable Development Goals (SDGs), particularly SDG 8 (Decent Work and Economic Growth) and SDG 9 (Industry, Innovation, and Infrastructure).

  • References

    1. ACERD and FINEX (undated). “Making SMEs Work, Making SMEs Create Work: Job Creation Through Small and Medium Enterprise Devel-opment.” A joint paper by the Ateneo Center for Research and Development (ACERD) and the Financial Executives Institute of the Philippines (FINEX).
    2. ADB (Asian Development Bank). 2015. Integrating SMEs Into Global Value Chains: Challenges and Policy Actions in Asia. Mandaluyong City: Asian Development Bank.
    3. Agung Nur Probohudono, Djoko Suhardjanto, Frank Aligarh, Nur Chayati, Adhitya Agri Putra, Navigating MSMEs' performance through innova-tion and digital IT capabilities in business strategy, Social Sciences & Humanities Open, Volume 12,2025, 101810, ISSN 2590-2911, https://doi.org/10.1016/j.ssaho.2025.101810
    4. Aldaba, Rafaelita M., 2012. "Small and Medium Enterprises` (SMEs) Access to Finance: Philippines," Discussion Papers DP 2012-05, Philippine Institute for Development Studies.
    5. Bangko Sentral ng Pilipinas. (2020, November 26). Circular No. 1105: Guidelines on the establishment of digital banks. Bangko Sentral ng Pilipi-nas.https://www.bsp.gov.ph/Regulations/Issuances/2020/c1105.pdf
    6. Bangko Sentral ng Pilipinas. (2024, December 12). Status of digital payments in the Philippines. Bangko Sentral ng Pilipi-nas.https://www.bsp.gov.ph/PaymentAndSettlement/2024_Report_on_E-payments_Measurement.pdf
    7. Barroga, K. D., Wabina, V. E. R., & Sales, A. C. (2021). Level of Awareness of Smart Manufacturing Technologies and its Nexus to Adoption among Micro, Small,and Medium Enterprises in the Philippines. Philippine Journal of Science, 150(6), 1593–1606. https://doi.org/10.56899/150.6a.20
    8. Capistrano, E. P., Gomez, M. M. E., & Isleta, A. P. (2023). Examining trust, self-efficacy, and technology acceptance in the Philippines’ e-commerce sectors. Information Development, 40(4). DOI:10.1177/02666669231153837
    9. Caraballo, M. U. (2018). Funding challenges hampering MSMEs. The Manila Times. Retrieved from https://www.manilatimes.net/2018/09/18/business/funding-challenges-hampering-msmes/442662/
    10. Chan, S., Jalaluddin, J., & Asni, K. (2023). Digital technology as a resilience-enhancing tool for SMEs in earthquake-prone developing countries. In E3S Web of Conferences (Vol. 447, p. 03002). EDP Sciences.
    11. Department of Trade and Industry (2018). 2018 MSME Statistics. Retrieved from https://www.dti.gov.ph/resources/msme-statistics/
    12. Department of Trade and Industry (2019). 2019 MSME Statistics. Retrieved from https://www.dti.gov.ph/resources/msme-statistics/
    13. FINEX. (2024). Responding to the access to finance concerns of SMEs. Financial Executives Institute of the Philippines, February 8, 2024.
    14. Foxmont Capital Partners & Boston Consulting Group. (2025). Despite driving jobs and GDP, MSMEs get a fraction of bank lending. Business-World Online, April 7, 2025.
    15. Francisco, J. F., & Canare, T. (2019). The challenges to SME market access in the Philippines and the role of business associations.
    16. Guillen Jr., N. B., & Lim, C. T. (2023). Unlocking growth opportunities for Philippine micro, small, and medium enterprises through Facebook ad-vertising and growth hacking strategies in the post-pandemic era. International Journal of Multidisciplinary: Applied Business and Education Re-search, 4(8), 2884–2893. https://doi.org/10.11594/ijmaber.04.08.26
    17. Hong, J., Guo, P., Deng, H., & Quan, Y. (2021). The adoption of supply chain service platforms for organizational performance: Evidences from Chinese catering organizations. International Journal of Production Economics, 237, 108147.
    18. Khan, J. (2021). Technology: The key to the success of SMEs. The Manila Times. Retrieved from https://www.manilatimes.net/2021/03/20/business/columnists-business/
    19. Khor, N., Sebastian, I., & Aldaba, R. (2013). Enterprises in the Philippines: Dynamism and Constraints to Employment Growth. Asian Develop-ment Bank. http://hdl.handle.net/11540/2330
    20. Li, L., Su, F., Zhang, W., & Mao, J. Y. (2022). Digital transformation by SME entrepreneurs: A capability perspective. Information Systems Jour-nal, 28(6), 1129–1157. https://doi.org/10.1111/isj.12353
    21. Martins, A. (2023). Dynamic capabilities and SME performance in the COVID-19 era: the moderating effect of digitalization. Asia-Pacific Journal of Business Administration, 15(2), 188-202.
    22. Matias, J. B., & Hernandez, A. A. (2021). Cloud Computing Adoption Intention by MSMEs in the Philippines. Global Business Review, 22(3), 612–633.https://doi.org/10.1177/0972150918818262
    23. Mia, I. B., Jiménez, S., Habaradas, R., Ranieses, J. J., Javier, C., & Enríquez, J. (2024). Digital technology adoption among Philippine micro-, small-, and medium-sized enterprises: Barriers, enablers & challenges during COVID-19. Journal of Business, Ethics and Society, 4(1). Retrieved from https://www.researchgate.net/publication/378821489_Digital_Technology_Adoption_Among_Philippine_Micro-_Small-and_Medium-Sized_Enterprises_Barriers_Enablers_Challenges_During_COVID-19
    24. MFIF. (2022). Digital lending critical to reimagining MSME financing in the Philippines. Official Monetary and Financial Institutions Forum, Oc-tober 12, 2022.
    25. Ningsih, S., & Tjahjono, B. (2024). Digital Marketing Innovation for MSMEs through Integration and Management Information Systems: A Tech-nological Transformation Approach for Competitive Advantage. Jurnal Minfo Polgan, 13(1), 1033-1044. https://doi.org/10.33395/jmp.v13i1.13924
    26. OECD (2021), The Digital Transformation of SMEs, OECD Studies on SMEs and Entrepreneurship, OECD Publishing, Paris, https://doi.org/10.1787/bdb9256a-en.
    27. Ofafa, M. (2013). Enhancing market access in Kenyan SMEs using IC. Global and Business, and Economics Research Journal.
    28. Philippine Institute for Development Studies (PIDS). (2025). Reducing regulatory burden for a more competitive and innovative Philippines. PIDS Policy Notes No. 2025-03. Quezon City: Philippine Institute for Development Studies.
    29. Philippine Institute for Development Studies. (2024). Economic Policy Monitor 2023–2024: Wealth creation for expanding the middle class in the Philippines (Annual report).
    30. Philippine MSME Development Plan 2017–2022. Department of Trade and Industry. Manila.
    31. Raquiza, M. V. R. (2021). Micro, small, and medium enterprise (MSME) sector financing: Issues and challenges.
    32. Republic Act No. 9501. Magna Carta for MSMEs, amending RA 8289 and RA 6977. Retrieved from https://www.dti.gov.ph/negosyo/msme-resources/msme-laws/
    33. Rocha, E. A. G. (2012). The impact of the business environment on the size of the micro, small, and medium enterprise sector: Preliminary findings from a cross-country comparison. Procedia Economics and Finance, 4, 335–349.
    34. Rogerson, C. M. (2013). Improving market access opportunities for urban small, medium and micro-enterprises in South Africa. Urbani Izziv, 24(2), 133–143.
    35. Schulte, P., & Hallstedt, S. I. (2018). Company risk management in light of the sustainability transition. Sustainability, 10(11), 4137. https://doi.org/10.3390/su10114137
    36. Senate Economic Planning Office (SEPO). (2012). Micro, Small, and Medium Enterprises (MSMEs). Retrieved from http://legacy.senate.gov.ph/publications/AG%202012-03%20-%20MSME.pdf
    37. Sun, W., Chen, K., & Mei, J. (2024). Integrating the resource-based view and dynamic capabilities: a comprehensive framework for sustaining competitive advantage in dynamic markets. EPRA International Journal of Economic and Business Review, 12(9), 1-8.
    38. Umami, I., Che Pee, A. N. B., Bin Sulaiman, H. A., Hariyanto, & Mar’ati, F. S. (2024). A literature review of MSME success: Acceptance and use of technology, financial access, and strategic cooperation. Multidisciplinary Reviews, 6, 2023ss086. https://doi.org/10.31893/multirev.2023ss086
    39. UP Institute for Small-Scale Industries. (2020). Uplifting Micro, Small, and Medium Enterprises (MSMEs) in the Philippines through DTI’s 7Ms: Suggested Policies for Implementation. https://beta.entrepreneurship.org.ph/2020/02/21/
    40. UNCTAD (United Nations Conference on Trade and Development). (2021). Technology and Innovation Report 2021: Catching Technological Waves – Innovation with Equity. United Nations. Retrieved from https://unctad.org/publication/technology-and-innovation-report-2021
    41. United Nations ESCAP. (2022). Fostering Green and Inclusive MSMEs in Asia and the Pacific. United Nations Economic and Social Commission for Asia and the Pacific. Retrieved from https://www.unescap.org
    42. World Bank. (2013, 2015). Doing Business 2014: Understanding Regulations for Small and Medium-Size Enterprises. Washington: The World Bank.

  • Downloads

  • How to Cite

    Manalo , A. L. H. ., Balanay, M. Q. ., & Verdadero, J. C. A. . (2025). Challenges Faced by The MSMEs: Input to Policy Recommendations. International Journal of Basic and Applied Sciences, 14(5), 98-113. https://doi.org/10.14419/qk093q19