PinoyM E in coop er a ti o n with

Minist e rio de Asun to s Ext erior e s y de Coop er a c i o n

AECID
and
Fund a c i o n COD E S P A

Building the Cap a c i ti e s of

Gro wt h- Orient e d Micro e ntr e pr e n e u r s

Executive Summary

PHINMA Training Center, Tagaytay City,

21-22 May 2009

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 CONFERENCE BACKGROUND

Under PinoyME’s (“Filipino Enterprise”) lead, microfinance institutions (MFIs), non-

government and other social development organizations academe as well as the
various institutions providing marketing, consolidation and distribution gathered once
again to see how to help microentrepreneurs go to the next level and become part of
the mainstream economy.

This conference with the theme “Building the Capacities of Microentrepreneurs” was
the second business development services (BDS) Workshop organized by PinoyME’s
business development services (BDS) working group in cooperation with the Agencia
Española de Cooperación Internacional (AECID) under Spain’s Ministry of Foreign
Affairs, and Fundación CODESPA, a Spanish non-government organization.

“Strengthening the business fabric through [supporting] microentrepreneurs is of vital

importance,” said Mr. Jesus Molina, Coordinator General of AECID. In fact, Mr.
Molina pointed out, sustainable and inclusive economic growth constitutes one of the
objectives to which the Spanish Cooperation has committed itself. Economic growth,
which is aimed at reducing poverty, entails allowing the poor to participate in income
generation, gain access to employment and to the markets of goods and services, he
added.

For Fundación CODESPA, the theme of this year’s BDS Conference fell in line with
its own advocacy of strengthening the economic and entrepreneurial fabric of the
Philippines in cooperation with other organizations, explained Ms. Esther Santos,
Philippine Delegate of Fundación CODESPA. Thus, the collaborative effort of
PinoyME, AECID and CODESPA to stage this BDS conference was a convergence
of minds.

CONFERENCE OBJECTIVES

Boosting the numbers of micro entrepreneurs who can grow their enterprises to
become small or medium sized businesses is the huge challenge facing the whole
industry, explained Mr. Danilo Songco, President/CEO PinoyME Foundation. How
various institutions engaged in BDS and social entrepreneurship for the poor can
work together with successful entrepreneurs to achieve that is the main goal of the
conference. Specifically, the conference aims to:

 Review the lay of the land in BDS programs, highlight models that work and
how these may be expanded/replicated
 Highlight the lessons in BDS delivery and how this can be made more
effective in the long term
 Design specific projects that would promote collaboration in expanding and
scaling up effective strategies in delivering BDS to microenterprises

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 CONFERENCE OVERVIEW

Despite the fact that there is a growing interest in this area, a continuous exchange on
lessons learned and strategic steps toward making BDS more effective was still
lacking. Hence, this conference builds on previous efforts and discussions on BDS.
The conference had three parts. The first part aimed to provide the participants with a
panorama of the available BDS programs in the country, who or what organizations
were providing BDS and a range of the BDS models that work and how these may be
expanded or replicated.

The second part centered on the effective delivery of BDS, focusing in particular on
deepening the participants’ understanding of the value chain and presenting various
programs that show scaling up strategies such as how to sell to the high end market.
Meanwhile, the third part highlighted the successful models in BDS and offered
participants various opportunities to probe the presenters’ experiences through
business clinics. A new feature in this year’s conference was the trade fair of products
made by organizations that were being assisted by certain BDS providers.

KEYNOTE MESSAGES

BDS: A powerful tool in poverty eradication

During the keynote address, Dr. Aristotle Alip, Founder and Managing Director of the
Center for Agriculture and Rural Development Mutually Reinforcing Institutions
(CARD-MRI) and Convenor of PinoyME’s BDS Working Group, drew attention to
two key lessons that the industry can learn from three decades of microfinance. First,
business development services or BDS is another powerful tool in poverty eradication
alongside microfinance. Through the financial services that MFIs provide,
microentrepreneurs---also called the “missing middle”--- are helped to go to the
small, medium enterprise (SME) level. Second, microentrepreneurs can be significant
value chain players and should be supported so they can be integrated into the
mainstream economy like in our neighboring Asian countries, Dr. Alip said.

Through BDS, MFIs, social organizations can assist the microentrepreneurs in

grooming their businesses, stabilizing their income and in generating employment,
Dr. Alip affirmed. Based on CARD’s experience and research, about 3-5% of their
members that numbered one million as of June 2009 have the capacity to grow big.
The microentrepreneurs who managed to become SMEs generate an average of 8-15
jobs in their small companies. Hence, BDS should be seen as next to microfinance
when it comes to eliminating poverty.

Sustaining BDS
Many institutions, however, are afraid to offer BDS over concerns of sustainability. In
CARD’s experience, if MFIs are innovative, they would find ways to respond to
clients’ needs that would contribute in the long term to covering the organization’s
costs in providing BDS. Growing microentrepreneurs need access to financial
instruments and management systems. MFIs can take advantage of these opportunities
to offer checking accounts, import-export lines, working capital, and short-term loans
to meet their clients’ growing business requirements. They can also partner with other

3
organizations to deepen its clients’ access to markets, technology, and modern
management techniques.

Dr. Alip stressed that MFIs should be ready to adapt to these changing new
environments and to the financial requirements of growing entrepreneurs. MFIs
should welcome these developments since growing entrepreneurs require larger loans.
Big loans translate to bigger interest earnings, which in turn translate to the MFIs’
sustainability.

In response to these developments in BDS, CARD is establishing the CARD-SME

bank. The bank is envisioned to have a different culture, a different psychology of
doing things for what is called the “missing middle”, that is, those who are neither
MEs nor SMEs.

MEs as significant value chain player

Dr. Alip pointed out that the Philippines’ neighboring Asian countries like Taiwan,
South Korea, and Malaysia were economically successful because they developed
their SMEs.

“Integrating microentrepreneurs into the mainstream economy by making them

significant value chain players is what we should try to achieve,” explained Dr. Alip.
“We want to see microentrepreneurs become major suppliers of the big department
stores or construction companies (e.g. hardware, handicraft). In the food industry,
CARD is working to connect the different farmers so that they can bring their produce
to the supermarkets.”

A great number of opportunities would unfold even if only 1% to 5% of the estimated

10 to 20% of microentrepreneurs with potentials to move to the next level gradually
evolve to become SMEs. One of one million clients is equal to about 10,000 clients
while 5% is equivalent to about 50,000 clients. In terms of loan amounts, this number
of clients would need an estimated Php250,000 to Php1million pesos, Dr. Alip added.

RP’s entire microfinance industry’s current outreach stands at 1.7 million. One
percent of this figure corresponds to an estimated 30,000 microentrepreneurs who---if
they grow to become SMEs---can generate thousands of jobs. Dr. Alip explained that
this is how MFIs can make a big difference to the country: Creating a new middle
class through a strong SME sector.

Active collaboration among BDS players

Nonetheless, making BDS effective requires more than a token cooperation among
the various players in the industry namely, the MFIs, the NGOs, the academe, the
business sector, and donors.

The MFIs are crucial in bringing the microentrepreneurs to become SMEs through the
provision of BDS. Donors also play an important part in encouraging and supporting
BDS initiatives since very few funding agencies take “innovative risks”. NGOs, with
their know-how in governance and management can help MFIs work more efficiently

4
and move towards sustainability in their BDS operations sooner. The academe could
contribute by undertaking more research that is adjusted and made more relevant to
the needs of the microfinance industry. Very few MFIs are allocating funds for
research even though the cutting edge in innovation and development is found in
research, Dr. Alip pointed out. The business sectors, on the other hand, have the direct
links to the multinational corporations (MNCs) and therefore, can show the way for
the actual integration of the microentrepreneurs into the mainstream economy.

Active collaboration among these various players is essential in order to review

strategies, share lessons, and collaborate their varying ideas to bring the
microentrepreneurs to the next level.

Building Growth-Oriented Enterprises through an Advocacy

Following Dr. Alip’s address, Mr. Rommel T. Juan, president of Binalot Fiesta Foods,
Inc. then recounted how his company started, grew and developed to become a native
fast food chain. In his account, Mr. Juan also related how Binalot’s history became a
journey of its advocacy to provide sustainable, value-added livelihood to the
community that supplies banana leaves1 to the company. Binalot’s advocacy resulted
in the setting up of Dangal at Hanapbuhay sa Nayon (DAHON2) Foundation.

Setting up an advocacy
The pioneering example of Binalot showed a novel way of helping
microentrepreneurs grow. Should SMEs decide to venture on this path, Mr. Juan gave
several pointers to help them succeed in setting up their own advocacy. Four essential
elements, he said, are needed: (a) the originator who should have his heart for the
whole endeavor, (b) the organizer, (c) the operator and (d) the passion for self-
sustenance.

In choosing an advocacy, SMEs should select a cause they personally believe in. If
possible, it would be more worthwhile if that cause were firmly aligned with their
company’s vision since advocacy is a full time job. The meaning and value of the
advocacy must be communicated internally to the whole company, that is, from top to
bottom and to the target recipients. Moreover, the advocacy must offer true
sustainable benefits to the company and to the target recipients. In reality, embarking
on an advocacy is a leap of faith. It requires patience since takes time to bear fruit.
Monetary results do not come instantly. There is no economic value until some
economies of scale has been reached.

For Mr. Juan, the DAHON advocacy was close to the company’s vision and it was
close to their heart. The idea germinated in 2006 at the Asian Forum for Corporate
Social Responsibility (CSR) and became a reality in 2007. It provided a win-win
solution for both Binalot and the Nagcarlan community. Binalot was assured of a
steady and good supply of banana leaves while the families in Nagcarlan Community,
DAHON’s beneficiaries had a ready market for their products, Mr. Juan said. Binalot
was above all a business with an advocacy for Filipino culture and values. The
Binalot DAHON Advocacy really was for Mr. Juan, “a leaf of faith.”
1
Binalot uses banana leaves to package the food products sold in its stores
2
Leaf in english

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 OPEN FORUM

“When one goes into a business, it is always important that one has a passion for
doing business. One needs to enjoy what one is doing. That is the key success factor,”
Mr. Juan explained in response to a question from the audience. During Binalot’s
beginnings, he did not receive a salary. He was fortunate enough to be working for his
father, who gave him a regular source of income.

Binalot paid the workers in the DAHON program a premium for their value-added
services. There were varying arrangements in the workers’ relations with the
landowners of the land where they sourced the banana leaves. Some families either
paid a small entrance fee or simply had an informal arrangement with the landlord.
There was no danger of over harvesting since the farmers could only get 1-2 leaves
per tree. Every two weeks there was a new sprout to replace the leaves that were cut.
The company planned to replicate the program in communities in the north to avoid
over harvesting in the southern areas.

The best type or variety of banana leaves used by Binalot is what is called Butuan.
This variety of banana has lots of seeds in its fruits that people do not want to eat it.
For this reason, farmers usually harvest the Butuan, which has the thickest leaves that
smells good. The company also uses the “saba” variety.

Apprenticeship is said to be one of the best ways to enhance entrepreneurship. Mr.

Juan, who represented the Association of Filipino Franchisers Inc. (AFFI), assured
everyone that the network or group made up of about 72 SMEs has a strong advocacy
for entrepreneurship in place and welcomed the offer from the Cavite State University
(CSU) to accept its business and management students for on-the-job-training. A
representative from CSU volunteered to help propagate the Butuan variety of banana.

KEYNOTE REFLECTIONS
Donors, corporate foundations, wholesale microfinance institutions and non-
government organizations, made up of consultants and providers of enterprise
development services, could learn from the experience of CARD-MRI and Binalot
Foods from three perspectives:
 The Entrepreneur/Social Entrepreneur (What can be learned from their
experience?)
 The Enterprise/Social Enterprise (What can be learned from the enterprise
that they have put up?)
 The Enterprise/Business Model (What can be learned from their business
model?)

One could become the entrepreneur or one could develop the entrepreneur or learn to
adapt the business models to one’s enterprise or institution. One could also network
with the entrepreneur/institution in order to build the distribution of goods to the
markets as key building blocks as in the example of Binalot outlets or in the case of
CARD and Smart-Hapinoy stores.

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 PLENARY PRESENTATIONS

BDS: The Lay of the Land3

Peace & Equity Foundation’s Executive Director Ms. Veronica Villavicencio
provided the background of this year’s BDS conference by expounding on the topics
covered in the previous conference. In 2008, the Bacolod BDS conference tried to
answer four key questions:
o What organizations are offering BDS for Filipino micro enterprises? What
type of BDS de these organizations provide?
o What BDS models work and what needs more work?
o What lessons were learned from these models?
o What are the key opportunities for collaboration?

The Bacolod BDS Conference was an opportunity for various groups or organizations
to present different methods in providing BDS. Some of these provided various
services along the value chain but operated only in specific geographic areas. Others
offered a greater variety of services using volunteer consultants to assist several
microentrepreneurs who only charged out-of-pocket expenses.

Among the BDS providers that specialized in delivery mechanisms like training,
coaching, and mentoring as well as research and consulting were the Philippine
Business for Social Progress (PBSP), Notre Dame Business Resource Center
(NBRC), and the University of the Philippines Institute of Small Scale Industries (UP-
ISSI). The Strategic Development Corporation-Asia (SDC-Asia), along with Taytay
sa Kauswagan Inc. (TSKI), the Phil. Amalgamated Supermarkets Association
(PAGASA), Uplift Marketing Foundation Inc. (UMFI), and the Catholic Relief
Services (CRS) assisted SMEs in product development, marketing and consolidation
and distribution. Pinoydelikasi and Hapinoy Stores presented innovative business
models.

BDS continues to evolve. Among the various points of intervention in the value chain
that still needed improvements include how to segment the clients, how to shorten the
lag time between intervention and application given the swift change in the markets
and how to make BDS services sustainable.

Growing MEs: The Secrets of Success4

The Bacolod BDS conference also served to highlight some industry realizations:
• Providing credit to the microentrepreneurs was not enough
• BDS was not a “one size fits all” solution
• BDS was necessary but expensive

Given the costs of providing BDS, Prof. Sibayan underlined the need to offer BDS to
those who will really use it to grow their business or businesses. This requires
selecting the microentrepreneurs who are growth-oriented from among those that are
engaged in livelihood enterprises. These growth-oriented microentrepreneurs make up
3
Presented by Ms. Veronica Villavicencio, Executive Director, Peace & Equity Foundation
4
Presented by Prof. Dado Sibayan, University Extension Specialist, UP-ISSI

7
about one to five percent of the clients of MFIs.

What characterize these growth-oriented entrepreneurs? They are concentrated on a

particular business, are engaged in the production of value-added goods and use their
business earnings to expand their enterprise. Increasing loan amounts availed of,
growth in savings, asset acquisition, and indications of deferred gratification and
desires for continuous learning are just some of the indicators that set apart the
growth-oriented microentrepreneurs from those engaged in livelihood enterprises,
Prof. Sibayan added.

Models for the Design, Delivery and Monitoring of BDS5

Establishing priorities and making choices in terms of the specific BDS methodology
to use, sustaining the BDS program and monitoring the impact of BDS are just a few
of the challenges facing BDS providers, Mr. Jiji Rodrigquez pointed out.

Aside from those challenges, BDS providers also face other issues: organizational
capacity, presence competition from other providers offering similar services, and
sustainability. A microfinance institution may be very good in microfinance but
providing BDS requires a different set of competencies and the MFI must examine
whether it has those competencies. It should also consider how it fares in comparison
with other BDS service providers and lastly, especially for NGOs and non-profit
organizations, how to sustain BDS provision.

In the past, organizations have used various type of program which include:
a) Sub-sector led – choose sub sectors that show promise of high micro and
small enterprise growth or that generate significant levels of employment
b) Demand led – demand for specific services determine the programs
c) Target population led – program is focused on a target population
d) Services led – replication of services already provided successfully
e) Supplier led – direct providers determine what services will be provided
f) Broad economic development – driven by cross-sector situations

Many organizations are also beginning to favor the systems approaches and the value
of partnering and networking are also increasing, Mr. Rodriguez stated. There is a
need for market research to find out who needs what, who will buy/pay, and who
already provides BDS. It is also a critical need for BDS providers to know their
clients/beneficiaries (what their needs are, where they are headed, how they can be
helped) and how to improve performance monitoring and evaluation.

OPEN FORUM
During the open forum that followed the first plenary presentations that explained the
past initiatives in BDS, participants requested for further clarification on the meaning
of value chain, systems approaches and business incubation. Simply put, value chain
is the whole link between enterprise and players from the end market and all the way
to the inputs suppliers seen not only from the perspective of one particular enterprise
but even from an industry angle, Prof. Ronald Chua explained.
5
Presented by Mr. Jiji Rodriguez, Former Head, TSPI Business Development Program

8
Value chain
The value chain approach is an example of a systems approach viewed holistically or
in an integrated fashion, according to Mr. Rodriguez. One can look at the possible
impacts of the business or a specific business then one can also see what specific set
of interventions were really needed as opposed to other possible interventions that
may or may not work because of the existence of other gaps. A good example of an
organization implementing a value chain approach is the Philippine Business for
Social Progress (PBSP) that has been working on the organic farming of rice,
muscovado sugar and seaweeds. PBSP taught organic farming to a group of farmers
only to realize that giving them farming technology was not enough. Two other
interventions were needed: access to the markets and farm to market roads. Beyond
these two, PBSP also realized that it was essential to look at the farmers’ need for
information and communication technology, and to examine the whole business
environment, the policy environment as well as the role of the industry and farmers’
associations.

Business incubation
Ms. Villavicencio explained that the concept of business incubation was not discussed
in detail in the previous BDS workshops. However, the Department of Trade and
Industry (DTI) and the Department of Science and Technology (DOST) had a
program where they provided entrepreneurs with assistance in terms of the technical
aspects of production. A franchise association also provided business incubation
support to entrepreneurs who were introducing a new product into the market. The
group offered market research, packaging support in order to help entrepreneurs
introduce new business ideas such as selling “balut” or duck embryos in 21 different
flavors. The business incubation concept is simply about helping businessmen
introduce new business models or ideas, which means, there are no existing templates
for success.

Business training for women entrepreneurs

Ms. Ellen Soriano from the University of Asia & the Pacific (UA&P) announced that
the Goldman Sachs Group, Inc. in partnership with UA&P has launched a project
called the 10,000 Women initiative, which seeks to provide 10,000 women
entrepreneurs all over the world with business and management know-how. In the
Philippines, some 450 women with businesses of high growth potentials are targeted
to benefit during the five-year program, Ms. Soriano explained.

Partnerships
Ms. Maybelle Santos, senior manager in charge of Microfinance and Rural Bank at
Smart Communications, Inc. explained that Smart works with several partners and it
has carried out several business incubations, which they refer to as product
development. Transparency and trust, she underlined were critical in their
partnerships with organizations. She explained that Smart tries to understand the core
business of the client. By leveraging on the core business of its partners Smart is able
to facilitate transparency in its relationships.

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 PLENARY PRESENTATIONS: UNDERSTANDING THE VALUE CHAIN

o Promoting Pro-Poor Growth Through Value Chain Development6

o SMFI’s Integrated Agro-Industrial Zone7
o Understanding the Value Chain: The Mango Industry Perspective8

Open Forum
Mr. Eduardo Aller of San Miguel Food Inc.’s (SMFI) Agribusiness and
Development Operations Group was asked if cassava could be cultivated in wet and
dry climates. SMFI had taught cassava production to farmers with very small lots in
areas that were often affected by the typhoons. Cassava is a root crop that needs good
weather in order to grow, Mr. Aller explained.

A representative from an NGO engaged in running family farm schools that teaches
alternative methods of farming technology to its students asked if his school could
solicit SDC-Asia’s services to improve its bottled fish products, the school’s source of
income for its operations. SDC-Asia’s interventions, however, are directed at the
industry level, Ms. Nobleza replied. Thus, it could not help the NGO in product
development but she was willing to help the NGO on a personal level to help improve
its production.

Ms. Rowena Zulueta from Iloilo inquired if her organization could be a consolidator
of Guimaras mangoes, acclaimed to be the sweetest in the world and the only type of
mango that is allowed in Australia and the US. She also asked in which type of soil
cassava thrives and what were the possibilities of setting up a partnership with SMC
in order to develop a cassava plantation. Mr. Aller explained that cassava should be
planted in friable soil. He also repeated SMC’s need for more consolidators in order
to boost the industry. Assemblers were very welcome to enroll in SMC. Sweet potato
and cassava are really the same. SMC still requires 500,000 tons of cassava, which
can be augmented using sweet potato. Sweet potato is a good crop and it can be
harvested 30 times. The problem lies in the availability of seedlings. It is better, Mr.
Aller said, to plant the tissue culture to avoid deterioration or infecting the crop with a
virus.

Ms. Zulueta related that a number of her organization’s members are faced with
production difficulties with the implementation of the Comprehensive Agrarian
Reform Program (CARP). The supply of mangoes or the volume produced locally
could not meet the local and international demands. Mr. Cruz explained that the real
problem faced by the industry is volume. Thus, it would be best if the farmers can go
through a consolidation process. If they are banded together, they can achieve volume
and the exporters or the processors would be amenable to negotiate with them. Engr.
Ambao shared TSKI’s experience in micro agriculture in Iloilo and affirmed the
importance of consolidating the farmers.

6
Presented by Ms. Chin Nobleza, Project Officer SDC-Asia
7
Mr. Eduardo Aller, Manager, Hectarage Development, San Miguel Food Inc. Agribusiness and
Development Operations Group
8
Mr. Roger Cruz, President, Philippine Mango Seedling Corp.

10
In answer to the question on the cost of production and distribution of sweet potato,
Mr. Aller explained that the cost of sweet potato production depends on the area and
the cost of the tissue culture. Sweet potato has the advantage of being a short-term
crop. It can be harvested after four months compared to cassava that could only be
harvested after 10 months. SMC has the same buying price for cassava and sweet
potato.

He then discussed value price, which is dictated by the end consumers. SMC usually
looks at the price from the processors, from the exporters and the wet markets before
it starts buying from the different farms. SMC buys by lot including the small ones.
SMC, Mr. Aller further explained, deals with all the players, from the growers, the
processors, the traders and the exporters in order to monitor the price. It also studies
the market, the technology; the price movement of the different products related to
production and more importantly, it evaluates the costs of production of the farmers.
Mr. Aller shared that a technique has been developed to delay the ripening of
mangoes.

Someone asked where the cassava planting materials come from. Mr. Aller said that
the golden varieties are the ones commonly used for planting. SMC has a joint
activity with the Department of Agriculture (DA) to develop industrial varieties. In
Luzon, the joint program between SMC and DA has generated 3,000 hectares of land
planted with the industrial variety. SMC hopes to increase the areas to 5,000 hectares.

With regard to organic cassava production, Mr. Aller stated that organic farming of
cassava is effective. In the Philippines, the cost of inputs is very low on a per hectare
basis. In terms of technology, SMC is still in the process of looking for the best
option. It is ready to test that alternative. The cost is still under evaluation.

A participant shared her organization’s experience in shipping bananas from Misamis

Oriental such as paying for costs of going through various checkpoints along the way.
It may be a sad reality but these challenges form part of the costs of doing business,
Mr. Cruz pointed out.

DAY 1 RECAP
The plenary presentations presented different models of helping microentrepreneurs
or small shareholders earn more and be better integrated into the mainstream market.
There were several tools or approaches or models that were reviewed. Ms.
Villavicencio gave a recap of what were presented in the first BDS workshop. Prof.
Sibayan presented questions that could be asked in order to identify the
microentrepreneurs who have potentials for growth. He also enumerated the
individual traits that characterized these growth-oriented entrepreneurs. Mr.
Rodriguez then provided a synopsis of the various BDS models in use.

In the afternoon, an overview of the Value Chain approach was discussed. There were
various sharing of experiences on using the value chain perspective as a player in the
system, on business incubation and use of technologies, and as consolidators or
processors.

11
From the presentations and exchanges during the open forum, the situation of
suppliers also became apparent. Microentrepreneurs specially small holders in
agriculture as well as the small sari-sari stores were fragmented, lacked information
on the markets and technology, were low-skilled and constrained financially.

These microenterprises can be helped in different ways: on an individual basis or at

the firm, sector or industry level. The presentations also showed how BDS providers
could play various roles: as an industry player, industry facilitator, marketing agent
and suport services provider. In terms of markets or product type, the presentations so
far had covered the local and export markets, food, animal feeds and financial
services.

The industries in the meantime were linked to the global markets from the value chain
perspective. Due to globalization, no industry or sector was immune to competition
from the international markets thus, benchmarking enterprises in the same sector in
the global industry was also important.
Key insights
In summary, microentrepreneurs need two things: access to markets and scale. BDS
service providers, on the other hand, need strategies for dealing with small
holders/microenterprises as well as incentives for the diferent organizations to pursue
BDS provision.

BDS PROGRAMS AND SERVICES: SELLING TO THE HIGH-END MARKET

o Specialty Markets: A Creative Way to Reach High-end Customers with

Various Products9
o Bridging the Market Divide: The Advocate of Philippine Fair Trade Inc.
Experience10

In this session, two models on how firms could grow were presented. One approach is
for organizations to aim at helping their clients grow. The other approach is by
partnering with other organizations or working through a network. PinoyME was
cited as an example of an organization that uses the network approach. The panorama
of trading with 36 million clients and establishing a relationship with 1,000 producers
doing the same product with the same quality in the same industry would be
overwhelming.

Ms. Chit Juan, Marketing Head of Echo Store and Mr. Vic Roaring, Executive
Director of APFTI talked about their organization’s experience in catering to the high
end markets.

Echo Store
One of the models presented was catering to the specialty or niche markets. Products
sold to these markets were usually bought on perceived value, that is to say, on the
background of the product and not necessarily based on its function. Selling to these
9
Presented by Ms. Chit Juan, Marketing Head, Echo Store
10
Mr. Vic Roaring, Executive Director, APFTI

12
types of markets require showcasing the products in various ways. Moreover, the
specialty market encompasses not only the Philippines but also the niche markets in
other parts of the world such as Europe where the demand for organic, environment-
friendly product had been there for a long time, Ms. Juan explained.

To help micro and small entrepreneurs cater to the specialty markets, Echo Store’s
intervenes through what it calls “echoteach”. Its staff goes around the provinces in
the country to share its experience in marketing, operations, as well as in graphic,
visual, and industrial design. Echo Store also offers product design, product
development and packaging services. It studies the fit of the product with the
market. Does the product satisfy a need? Is the product aligned with trends? Does the
product have the quality that it promised to the customers?

APFTI
The second model presented was the networking approached used by the Advocate of
Philippine Fair Trade Inc. (APFTI), which started as an association of fair trade
practitioners in the country. It has assisted small and medium enterprises (SMEs) at
various stages of their growth and development.

APFTI assists enterprises using an integrated approach starting from raw materials to
sourcing, product development and design. APFTI helps SMEs build their capabilities
through empowerment trainings and bridging markets through trade linkages and
facilitation. It provides technical assistance that includes Product Development and
Design, Booth Design and Visual Merchandising, Producer-Buyer Matching and
Market Information, Technical Research and Publications and Web-Design and
Desktop Publishing. It also offers empowerment trainings and capability building
such as Product Development Courses – Food and Crafts, Marketing Courses,
Productivity and Quality Management Courses, Enterprise Development Courses, and
Technical Skills Trainings. Market and trade fair facilitation such as Market
Awareness Tours, Trade Fair Participation, and Market Information is also part of
APFTI’s services as well as advocacy and networking through Colloquia and
Conferences, E-Bulletin and Fair Trade Audits in addition to business consultancy.

UPSCALING BDS: DEVELOPING GROWTH-ORIENTED MICROENTREPRENEURS

o The TSKI Experience11

o CARD BDS Foundation Inc. (CARD-BDSFI)12

This session looked at the organizations that work with the suppliers. The discussion
focused on how one can set up a BDS program, the challenges, difficulties and areas
of improvement in the current BDS programs.

Engr. Rey Ambao, Director of TSKI’s Microfinance Success Institute-Business

Development Services (MSI-BDS) Division and Mr. Julius Alip, Operations Manager
of CARD BDS Foundation Inc. represent two of the biggest MFIs in the country.
11
Engr. Reynaldo T. Ambao, Director, TSKI MSI_BDS Division
12
Mr. Julius Alip, Operations Manager, CARD-BDSFI

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Among the key messages of the two speakers with regard to establishing BDS
services were as follows:
a) Top management’s decision to establish BDS in the organization should be
strong;
b) There should be deliberate advocacy to get the “buy-in” among staff and
clients;
c) Staff employed in the BDS unit should be competent;
d) BDS service provision should be focused on helping micro entrepreneurs
grow;
e) The organization should foster strong linkages with other institutions
f) The organization should be prepared to overcome the difficulties in integrating
BDS with microfinance operations

Nevertheless, the myriad challenges to BDS provision still remain. These include (a)
sustainability, (b) how to replicate BDS provision to other areas of the organization’s
operations, (c) how to included BDS in microfinance performance indicators and (d)
developing new loan products for growing microentrepreneurs.

OPEN FORUM

The first question from the audience was, how should one consider BDS: as an
investment or an expense center? How many years will it take before it could become
an income-generating unit? Engr. Ambao gave this advice: Organizations should not
think of BDS as an expense. It is an investment. How long it will take to become an
income-generating unit depends on the direction of the organization and the array of
services it is prepared to offer. More resources should be put in to make the BDS unit
earn in a shorter time.

Mr. Alip added that once the organization has decided on the direction it will take, it
may take at least three (3) years for the unit to develop its capacity to earn and
presuming there is capital to hire a consultant. A donor cannot fund all the
organizations, Mr. Songco declared. It may be possible for the organization to finance
its BDS establishment if it would study its finances. He affirmed that there is a real
return if the organization invests in establishing a small BDS unit. It could even add
value to the MFI’s products.

Mr. Jojo Malolos of Smart Communications shared that one of the company’s
strategy is to strengthen its linkages with the development sectors. If development
partners understand the organization’s vision and mission, he explained, they would
support the institution’s goals and programs.

One of the questions centered on how CARD BDSFI treats the income from its BDS
provision given that it is a foundation. Mr. Alip explained that income from the
foundation is ploughed back into the organization’s operations. There is no dividend
sharing.

A community organizer asked which set up---a microfinance or a cooperative---will

work better for marginal producers with only Php5,000 capitalization at most in order

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to gain access to capital? Mr. Alip pointed out that microfinance could be one of the
services offered by the cooperative. Another alternative was for the cooperative to tie
up with a microfinance institution. The Center for Community Transformation (CCT),
for instance, provide microfinance to its members whom they call “partners”. A
cooperative, moreover, enjoys certain tax breaks as provided by the law.

Someone asked where would CARD take its BDS services next given its current BDS
programs? Mr. Alip shared that CARD BDSFI is focused on growing its Hapinoy
program with MicroVentures Inc. and Smart Communications Inc. It would also like
to take its BDS to the industry level by helping its clients in terms of product
development such as packaging, labeling, and other laboratory services.

Ms. Nobleza from SDC Asia related that her institution is running a component of the
BDS as a business. Since SDC Asia is a developmental organization, it starts with
selecting a sub sector of the industry and studies the constraints of that sector’s
growth. Afterwards, it looks for the most potential market and where there is a
demand for providers. SDC Asia examines both the demand and supply side of the
business. It prepares a business plan to ensure that the service they will provide is
really marketable.

Mr. Songco also pointed out that some of the service providers in the conference are
willing to provide services initially for free. The organizations’ offer can be a
substitute for donor funding but those availing of such free services should look at the
relationship as a legal business.

PLENARY SESSION: THE NEW MIDDLEMEN. CONSOLIDATING MICROENTREPRENEURS’

PRODUCTS TO ACHIEVE SCALE

o The Story of the Association of Negros Producers (ANP)13

o The Hapinoy Ecosystem14

OPEN FORUM
In response to a question on how close was the network of Hapinoy stores and
whether it was confined to certain municipalities, Mr. Bam Aquino clarified that only
the number of community stores per area was regulated. He explained that the
maximum is two per town. In Calamba, for instance, there are two (2) community
stores. The community stores are connected to the small sari-sari stores and act as
wholesalers for the smaller stores whether these were Hapinoy stores or not. In terms
of asset size, the biggest Hapinoy community store were worth between Php300,000
to Php400,000, Mr. Aquino declared.

Another query for Mr. Aquino was on whether Hapinoy stores could be owned by a
cooperative or an association. He explained that the Hapinoy sari-sari stores ran by
CARD clients were individually owned but other stores were owned by a cooperative
or by an association. Hapinoy’s regular consumers using a wholesale approach were
the sari-sari storeowners.
13
Ms. Maryann Colmenares, President, ANP
14
Mr. Bam Aquino, President, MicroVentures Inc.

15
To the question on competing in the international market, Ms. Colmenares of ANP
replied that the global market is big. What Filipino entrepreneurs need to do is to find
their niche and produce the right product for the right market. She pointed out that the
Philippines supplies only two percent of the handicrafts demand in the world. She
urged the conference participants not to think of local competition but about the
competition posed by China and by other Asian countries. Moreover, Filipino
handicrafts manufacturers should focus on collaborating with other local producers in
the country to improve their market share in the global market. Local businesses
should be competitive. Product sales should be market driven, she added.

DAY 2 RECAP
What are the key messages of the past presentations? Prof. Chua summed it up into
three elements. Knowing the market is the first basic step. Each market has different
requirements. The perspective required for a market for consumer products would be
very distinct from the viewpoint if one were looking at a market that is addressing
institutional or industrial consumers. Understanding the sector is also essential. Echo
store, for instance is all about positioning the products. The Hapinoy program, on the
other hand, caters to the mass-market sari-sari store. Finally, to help the
microentrepreneurs increase their income and improve their quality of life; it is also
essential to know them.

There are various ways the institutions can help microentrepreneurs. It can help them
gain access to the markets. The other option is to help the microentrepreneurs
distribute their products and services not only to the local community but also to the
sari-sari stores, stakeholders and the challenge is, helping them get better terms,
similar to what Hapinoy is trying to do.

The main challenge for BDS providers is how to achieve scale in order to make a
bigger impact. One way that BDS providers could try to achieve this is to reach one to
two million clients. On the other hand, BDS providers that are helping firms or
individual entities would be to be more creative in coming out with new ways of
transactions to make the relationships efficient and productive by structuring the
incentives for microentrepreneurs. Are they appropriately motivated? It is essential
for entrepreneurs to know their markets through the markets, their target groups and
their industry sector.

After the various presentations, participants were invited to join the “business
clinics” or close consultations with the different BDS providers on the following
topics:
o Product Development15
o Value Chain Development16
o Marketing and Merchandising ME Products17
o Becoming Part of a Sari Sari Store Chain18

15
Mss. Reena Francisco and Jeannnie Javelosa
16
Mr. Jonah Nobleza, Enterprise Development Specialist, SDC Asia
17
Mr. Steve Cua, President, Phil. Amalgamated Supermarkets Association
18
Mr. Mark Ruiz, Hapinoy

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 o Value Chain Financing19

CLOSING SESSION: SUMMING UP

To help the participants reflect on the variety of presentations during the two-day
conference, the facilitator provided some reflection-action questions to guide them.

o What new learning/insights did I get from this morning’s sessions?

o How can I apply the learning/insights to my work?
o How and who can I collaborate/network with to improve my microenterprise
development?
o What do I want to learn more/know more about /need clarification on/
suggestions/comments?

Among the insights that participants to the conference could take away were the
following key ideas: access to markets; scale and the various ways of scaling up;
incentives; knowing the organization’s buyer markets and target microenterprises.
Another important lesson for participants was the need to know one’s industry sector,
the strategies for dealing with small holders/or microentrepreneurs, the organization
and most importantly, the need to have business sense. How can BDS providers earn?

The key message of the presentations all pointed to the need for understanding the
market as a basic step followed by the need to understand the players in the sectors
then finally, the microenterprises. It is essential to help the microentrepreneurs obtain
better access to the markets starting from the village then helping them reach the
provinces and so on while helping them face the challenges that go with each step.

SUMMARY OF SHARING DURING THE PLENARY SESSION OF BDS CONFERENCE

I. What Learnings/Insights did participants get from the conference?

• Validated the relevance of BDS

o Range (markets) of BDS work
o Existence of various forms/new business BDS models (Hapinoy,
MBS/EDS) that other organizations can replicate/shorten the learning
curve or that can be potential partners
• How to improve plan in providing BDS
o Need to choose BDS based on core competence
o Need to partner with other institutions/compliment
o Basics of knowing your target clients/ markets
o Customizing business services
• Benchmarking with other organizations
• Product development & the need for product consolidation at the local level
• Value chain
o Basic concepts, relationship, development, use;
Mr. Larry Nanagas, Finance Committee Head, PinoyME Foundation & Mr. Danilo Songco,
19

President/CEO, PinoyME Foundation

17
 o Value pricing for markets
• Market familiarity: need to distinguish or differentiate business from personal
relationships
• Broadened experience-agri; mfi-agri loan inputs from SMC
• Realized the gaps in present engagement of training microentrepreneurs
• Many players can integrate/network toward poverty alleviation
• The BIGGER you are, the SHORTER the chain (SMC).

II. With whom can institutions collaborate?

• Providers of services
o Set up public-private interface e.g.
DOST - Echo Store
TESDA - ANP
DTI - Hapinoy
TLRC - Smart
CLSU - Private universities
• Communication/Collaboration with various networks
• Business opportunities partnerships
• Formulate & replicate strategies (TSKI and CARD)
• With PCFC/ wholesalers
- More defined indicators
- Access to ground test installation support through variable financing

III. What do participants want or need to know more or be clarified about?

• Help in looking for solutions – integrated way putting together

• More on marketing – on how to move products
• Management of business, how to avail of services for producers
• What “scaling up” means; the implications, criteria for scaling up
• Conference emphasized mainstream markets like supermarkets. Why not
public markets/bazaars (tiangges) for small producers in more small group
discussions in subsequent workshops?
• More on interventions (alternative/options) that will aid ME/subsistence
“livelihood” in expanding, diversifying, venturing into enterprises that will be
more sustainable – taking that leap ideas that will bring them out of the box
• Need more service providers for BDS
• Need tried and tested BDS tools
o MFIs – SDC Asia, SEDPI, UPLIFT, JVOFI
o Wholesalers – PCFC
o Regional networks – Bicol Microfinance Council, Mindanao
Microfinance Council
• Need to strengthen the core competencies of the staff who will handle BDS
• Know how certain MFI’s grew/lessons learned over time
• Packaging product/ physical services in the current trend

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IV. Next Steps

At the national level, participants suggested the following:

• Repeat the conference in the regions (e.g. Regional
conferences/seminar or BDS conference in Mindanao)
• Look for the marginal producers – expand the network
• Facilitate continued interaction by Workshop participants
o By providing a directory
o By setting up a Facebook account to facilitate continuous
networking/ web-based interaction, distance communication learning
and to strengthen the partnerships

At the individual/organizational level, the workshop participants thought that their

next steps should be:
• To work on their organization’s staff development
• To continue networking
• To revive “ka-entrepreneur”
• To disseminate information
• To put up own BDS or refine organization’s BDS
• To analyze & watch the trends & use the trend/evolve with the
market (enterprise, entrepreneur) and enable own environment

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