NURTURING the
Enterprising BOP Cases from the PBSP Business Advisory Program
Edited by Eugenio M. Caccam, Jr. Writers Cynthia Abella Mary Fe Arquiza Arlette Melgar Felix Tonog
Copyright Š 2009 by Philippine Business for Social Progress
All rights reserved. No part of this book may be reproduced in any form or by any means without the written permission of the publisher.
Published by the Philippine Business for Social Progress with funding support from the iBoP Asia, a partnership between the Ateneo School of Government and Canada’s International Development Research Centre. The findings, interpretation and conclusions expressed herein are those of the authors and do not necessarily reflect the views of Philippine Business for Social Progress and iBoP Asia. Citing of trade names or commercial processes does not constitute endorsement.
ISBN 978-971-8572-62-7 Philippine Business for Social Progress PSDC Building, Magallanes corner Real Streets, Intramuros, Manila 1002 Philippines Phone: +63 (2) 527 7741 to 48 Fax: +63 (2) 527 3751 Email: pbsp@pbsp.org.ph Website: www.pbsp.org.ph
About the cover The man is a hearing-impaired member and worker of the Atlas Mining Community Handicapped Association Multipurpose Cooperative (AMCHAMPC) in Toledo City, Cebu, one of the social enterprises being assisted by PBSP Business Advisory Program. Photo by Miguel Yabut Layout and Design by Marilou Odulio
About PBSP
The Philippine Business for Social Progress (PBSP) is the largest corporate-led, nonprofit, social development foundation in the Philippines. PBSP is at the forefront in the fight against poverty through trailblazing corporate social responsibility (CSR)/ corporate citizenship programs developed and implemented with the strategic commitment of more than 240 PBSP member-companies. PBSP works with strategic partners such as donor agencies, civil society organizations, communities, government and the academe in implementing programs in Education, Livelihood and Enterprise Development, Health, and Environment. Four million Filipinos have been assisted by PBSP in the past 38 years. So much more needs to be done. PBSP enjoins businesses, large or small, to commit resources wisely to programs that assist communities towards their selfreliance and improved quality of life − our life transforming gift to the Filipino poor. Vision To be the leader in promoting business sector commitment to social development. Mission PBSP is committed to the empowerment of the poor by promoting business sector leadership in, and commitment to, poverty reduction programs that lead to self-reliance. www.pbsp.org.ph
About iBoP Asia
The Science and Technology Innovations for the Base of the Pyramid in Southeast Asia (iBoP Asia) is a project of the Ateneo School of Government (ASoG) supported by Canada’s International Development Research Centre (IDRC). It aims to seek and foster S&T solutions that can effectively address the pressing needs of the economically marginalized sector at the base of the pyramid (BoP), particularly in Southeast Asia. Working closely with relevant organizations and sectors in Southeast Asian countries, the overarching goal of this Project is to facilitate better understanding of strategies, processes and policies that foster S&T innovations that target and will benefit the BoP. Its underlying premise takes off from the idea popularized by C.K. Prahalad in his 2005 book The Fortune at the Bottom of the Pyramid, that the BoP constitutes an under-tapped sector that can be served with innovative products tailored to their needs and budgets. iBoP Asia, through its website, grants program, and capacity-building and convening activities, would like to: • Help raise awareness on the needs of the poor and the role that S&T can play in addressing them; • Contribute to the development of policy and governance tools that encourage S&T innovations for the BoP; • Build the capacity of researchers and research councils to conduct studies on pro-poor S&T innovations, in coordination with other key sectors like government, business and civil society; • Develop an open-platform for information-sharing and learning among researchers, innovators, and key sectors in the region; • Facilitate dialogue among government, private sector, civil society and BoP representatives to encourage multistakeholder partnerships that will promote S&T innovations for the BoP. www.ibop-asia.net
FOREWORD The Ateneo School of Government warmly congratulates and thanks PBSP for making this project a success and the publication of this book possible. In 2007, as the Graduate School of Leadership and Public Service of the Ateneo de Manila University, the School adopted the ambitious goal of working with leaders of 1,000 local governments to build a prosperous and just Philippines. Providing solutions to poverty and inequity is at the core of our mission. This poverty, aptly called the “poverty of capability” by Nobel-prize winning economist Amartya Sen, comes not just from a lack of opportunity and resources, but also in great part from a lack of capability – the lack of capacity of many to access quality education, health care, housing and credit, to name a few. We are no stranger to those who barely get by on a daily basis, living in shantytowns and rural villages, some even in garbage dumpsites. These are the economically marginalized poor in our society, those at the “base of the pyramid”. The base of the pyramid or BoP is the economic designation of the roughly four billion people worldwide living with less than US$ 4 a day; in Asia, they are roughly 2.9 billion or 80 percent of the region’s population. The School of Government, through its cluster of poverty programs and projects, is involved in various efforts toward finding innovative solutions to poverty, not only at the national level but also on a regional scale. The iBoP Asia Project of the School of Government, supported by Canada’s International Development Research Centre, is a major regional initiative. Through its small grants program, web-based portal and convening activities, iBoP Asia’s efforts are geared towards finding and promoting Science and Technology (S&T)-based solutions that address the basic needs of those at the BoP. We define S&T in its broadest sense, referring to the full range of social, natural, medical and life sciences, as well the physical and engineering disciplines. Why are we here – we are here because we are concerned about the alarming stats and we would like to help improve the lives of those at the base by promoting the BoP approach to development – that those at the base have the potential to become innovators themselves and co-creators of value; they can be
vi
served with products and services tailored to their needs and budgets, and at the same time be suppliers or active partners in the productive value chain. The BoP approach puts forth the idea that commercial and developmental objectives can be mutually reinforcing, and enables higher levels of understanding and collaboration across sectors, and higher levels of business-social convergence. The Business Advisory Program of PBSP is a model for this business-social convergence. By providing affordable consultancy services to micro, small and medium enterprises (MSMEs), this program not only strengthens the capacities of their MSME clients (whose workers, partners and market are often those at the BoP), but also adds more value to the products and services made available to the BoP. With this book of successful case stories, learnings from the Program’s implementation and recommendations for its sustainability, we hope to be able to demonstrate that the BoP approach to addressing poverty works and contributes to the empowerment of the poor as social actors. Trying to “invert the pyramid” is indeed a huge challenge but all we need is to take the necessary steps, however small, to do it. We, at the School of Government and our partners, are motivated by one vision for our country – to build a prosperous and just Philippines, and to do this not only for our own selfsatisfaction but for the greater glory of God. Let me end with the words of our University president, Fr. Ben Nebres, S.J., taken from his 2005 report: “… Amidst much affliction, powerlessness and devastation, our mission now, as always, is to heal, to empower and to rebuild. But most of all, our mission is to build hope: to be the Lord’s light to our nation and our people who dwell in great darkness and uncertainty.” Knowing that this is our collective mission, let us go out and work with our people to build a prosperous and just society.
Antonio G.M. La Viña, J.S.D. Dean, Ateneo School of Government Director, iBoP Asia Project
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PREFACE PBSP has always believed in entrepreneurship as a way out of poverty. Since its founding in 1970, it has encouraged groups and communities to engage in income generating projects and micro and small enterprises to generate additional income for themselves and their neighbors. In this endeavor, PBSP has been fortunate to have received financial and technical support from various groups, such as the United States Agency for International Development (USAID), through the Department of Finance, for its Small and Medium Enterprise Credit (SMEC) Program. The program was later expanded with a sizable but affordable loan from the KfW of Germany, which enabled it to serve more entrepreneurs through participating rural and thrift banks. In 2003, its services went beyond financial assistance and included Business Advisory Program (BAP) as a result of its partnership with the Canadian Executive Service Organization (CESO). Supported by the Canadian International Development Agency (CIDA), the BAP, as designed, was eventually integrated into the core poverty-reduction strategy of PBSP, first as CVED (or Corporate Volunteers for Enterprise Development), and later as PBSP-BAP. With the success of the BAP, PBSP has found a potent tool for helping entrepreneurial members of the so-called Base of the Pyramid make their enterprises more profitable, and thereby generate more opportunities and wealth for themselves and their communities. Most significantly, BAP has found a way to help those in the BoP not only to be able to afford goods but to find the means to acquire goods by being part of the value chain. This case book documents the lessons PBSP has learned from implementing the BAP. It is offered to groups interested in helping enterprises become better at reaching out to more BoPs. It is also offered to entrepreneurs themselves for them to learn from others how they were able to improve their businesses with the help of Volunteer Advisers. PBSP wishes to thank iBoP Asia for its generous support in making this casebook possible. Mabuhay ang Filipino entrepreneur.
Gil T. Salazar Executive Director Philippine Business for Social Progress viii
Contents Foreword
iv
Preface
vi
Chapter I Introduction The BoP in our Midst BoP as Producers vs. BoP as Consumers Purpose and Objectives of the Casebook Framework of the Casebook Developing the Casebook Chapter II The PBSP-BAP and the Enterprising BoP The MSME Sector in the Philippines PBSP’s Enterprise Development Framework History of PBSP-BAP PBSP-BAP: Program Design Business Advisory Service Delivery Models Summary of PBSP-BAP Accomplishments PBSP-BAP Prospects for the Enterprising BoP
1 2 3 6 7 8 11 12 16 18 21 24 28 31
Chapter III PBSP-BAP: handholding the enterprises A Note on the Cases Seek Help and You Shall Find, Lailen’s Pastries Sweet Treats on Bohol’s Dauis Hills, Tienda Boholana Women Find Work in Durian Waste, KATAKUS, Inc. Just Being Differently Abled, Atlas Mining Community Handicapped Association Multipurpose Cooperative Transforming Limitation to Leverage, National Federation of Cooperatives of Persons with Disability Strategic Partnership for Growth, Bulacan GTH Cluster Selling Seashells to the World, Capiz Shell Phils., Inc. The Coco Coir Social Enterprise: Cashing in on Coco Husks, Davao Oriental Coconut Husk Social Enterprise, Inc. Organic Rice Trading: An Enterprise with a Heart, Mindanao Agri Network Corp.
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Chapter IV Conclusion: bap for the bop Potent Tools for Creating Wealth: The Cases as Social Enterprises The Inputs They Need The Throughputs The Outputs The Facilitating Factors Hindering Factors The PBSP-BAP for the BoP
119 120 120 122 123 124 125 126
REfeRENCES
128
33 34 35 45 53 61 70 78 89 99
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list of tables
x
1.
The World Economic Pyramid
2.
Comparison of BoP 1.0 and BoP 2.0 Strategies
3.
Classification of Philippine MSMEs
4.
MSME Characteristics, Objectives and Needs by Sector
5.
Summary of Business Advisory Assignments by Area
6.
Assignments by Special Target Groups
7.
Distribution of Volunteer Advisers by Area, by Gender
8.
Growth of Lailen’s Pastries in terms of product offerings
9.
Distribution outlets of Lailen’s Pastries
10.
NFCPWD Member-Cooperatives
11.
MANCOR Sales Report, 2002-2004
12.
PBSP-BAP Process Framework
list of figures 1.
Theoretical/Conceptual Framework
2.
PBSP’s Enterprise Development Framework
3.
Basic Logic Model for Business Advisory Program
4.
Business Advisory Service Delivery Process Flow
5.
Lead Enterprise Clustering Model
6.
Lead Product Clustering Model
7.
Lead Operating Result Clustering Model
8.
Cluster Formation Process Flow
9.
Distribution of Volunteer Advisers by Expertise
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list of acronyms ACMDC AMCHA-MPC ARMM BAP BDS BMSMED BoP Calabarzon CBCP CBM CDA CESO CESO-BAP CIDA CITEM CFLI CSR CVED DA DENR DepEd DFID DOCHSEI DOCST DoF DoLE DOST DPWH DTI GAA GDP GMP GTH HACCP iBoP Asia IDRC IPCLS KATAKUS
xii
Atlas Consolidated Mining and Development Corporation Atlas Mining Community Handicapped Association Multipurpose Cooperative Autonomous Region in Muslim Mindanao Business Advisory Program Business Development Service Bureau of Micro, Small, and Medium Enterprise Development Base of the Pyramid Cavite, Laguna, Batangas, Rizal and Quezon (provinces that comprise Region IV-A) Catholic Bishops Conference of the Philippines Christian Blind Mission Cooperative Development Authority Canadian Executive Service Organization Canadian Executive Service Organization – Business Advisory Program Canadian International Development Agency Center for International Trade Expositions and Missions Canada Fund for Local Initiatives Corporate Social Responsibility Corporate Volunteers for Enterprise Development Department of Agriculture Department of Environment and Natural Resources Department of Education Department for International Development Davao Oriental Coconut Husk Social Enterprise, Inc. Davao Oriental College of Science and Technology Department of Finance Department of Labor and Employment Department of Science and Technology Department of Public Works and Highways Department of Trade and Industry General Appropriations Act Gross Domestic Product Good Manufacturing Practices Gifts, Toys and Houseware Hazard Analysis and Critical Control Points Science and Technology Innovations for the Base of the Pyramid in Southeast Asia International Development Research Centre Integrated People’s Livelihood Cooperative System Kababayen-an alang sa Teknolohiya nga Haum sa Kinaiyahan ug Kauswagan (Empowering Women through Appropriate Technology)
KDCI KfW KKK LGU MANCOR MDG MNC MSME NCR NFA NFCPWD NFTS NGO NSCB NSO PBSP PCEDO PDAP PFRD PO PWD SMEC SnDAP SNV TACDRUP TESDA TLRC UP UP-ISSI USAID USEP VA WBCSD
Kalumonan Development Center, Inc. Kreditanstalt fur Wiederaufbau (German Development Bank) Kababayen-an sa Katipunan alang sa Kalambuan (Katipunan Women for Development) Local Government Unit Mindanao Agri Network Corporation Millennium Development Goals Multinational Corporation Micro, Small and Medium Enterprises National Capital Region National Food Authority National Federation of Cooperatives of Persons with Disability Nature Farming Technology System Nongovernment Organization National Statistical Coordinating Board National Statistics Office Philippine Business for Social Progress Provincial Cooperative and Economic Development Office Philippine Development Assistance Program Philippine Foundation for Rehabilitation of Disabled Persons Peoples’ Organization Persons with Disability Small and Medium Enterprise Credit Sweets and Delicacies Association of Pampanga Netherlands Development Organization Technical Assistance Center for the Development of Rural and Urban Poor Technical Education and Skills Development Authority Technology and Livelihood Resource Center University of the Philippines University of the Philippines, Institute of Small Scale Industries United States Agency for International Development University of Southeastern Philippines Volunteer Adviser World Business Council for Sustainable Development
xiii
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Chapter I
Introduction “The higher purpose of private enterprise is to build social and economic conditions which shall promote the development of the person and the well-being of the community.� PBSP Statement of Commitment
xv
The BoP in Our Midst Around the world, poverty persists. Per World Bank (2007) estimate, one billion people worldwide live on less than $1 a day, a magnitude which it hopes to cut to 550 million in 2030. Here are a few more statistics on global poverty (Shah 2009): •
The GDP (Gross Domestic Product) of the 41 Heavily Indebted Poor Countries (567 million people) is less than the wealth of the world’s seven richest people combined.
•
Nearly a billion people entered the 21st century unable to read a book or sign their names.
•
Less than one per cent of what the world spent every year on weapons was needed to put every child into school by the year 2000 and yet it didn’t happen.
•
One billion children live in poverty (1 in 2 children in the world). 640 million live without adequate shelter, 400 million have no access to safe water, 270 million have no access to health services. 10.6 million died in 2003 before they reached the age of five (or roughly 29,000 children per day).
Shah concludes: “In the face of such enormous external influence, the governments of poor nations and their people are often powerless. As a result, in the global context, a few get wealthy while the majority struggle.” In spite of the scale of this daily/ongoing catastrophe, abject poverty rarely captures prime-time or headline coverage. In a paper on Corporate Social Responsibility she prepared for the Philippine Business for Social Progress in 2008, noted National Scientist Gelia Castillo (2009), who has studied the subject of poverty over the years, says: “Fighting poverty has been the battle cry of the international development community for many decades….” And this has seemed to be almost a losing battle so that in 2000, “the rhetoric of pro-poor strategies and programs has become much more vigorous with the adoption of the Millennium Development Goals (MDG) during the UN Millennium Summit.” These eight MDG are to: eradicate extreme poverty and
2
Chapter I Introduction
hunger; achieve universal primary education; promote gender equality; reduce child mortality; improve maternal health; combat HIV/AIDS, malaria etc; ensure environmental sustainability and develop a global partnership for development. In the Philippines, based on NSCB (2006) data, poverty afflicts about 33 percent of the population—4.7 million families or 27.6 million Filipinos are poor. About two million Filipino families cannot even meet their daily food requirement for them to survive. These include the urban poor, the itinerant hawkers and street-dwellers, the sustenance fisherfolk, marginal farmers, indigenous communities, people displaced by conflict, and, lately, the growing number of the unemployed. These are typically the homeless, the income-less, and the powerless. In the words of the Catholic Bishops Conference of the Philippines (CBCP) and many nongovernment organizations, these represent “the least, the lowest and the lost.” And yet they comprise the bulk of the population. If society were viewed as a pyramid, the poor, with their number, form what is now called the “Base of the Pyramid” or BoP.
BoP as Producers Vs. BoP as Consumers The term and concept of the “Base of the Pyramid” originated from the work of business professors C.K. Prahalad and Stuart Hart (2002) in their pioneering article, The Fortune at the Bottom of the Pyramid. They argue that the “real source of market promise is not the wealthy few in the developing world, or even the emerging middle class-income consumers: it is the billions of aspiring poor who are joining the market economy for the first time.” Their estimates suggest that there are around four billion poor people worldwide with incomes of less than $4 a day (see Table 1). This poorest two-thirds of the world’s population constitutes the BoP1. They have significant unmet needs, they are dependent on informal or subsistence livelihoods, and they lack access to basic goods and services (Hammond, et al. 2007). Viewed from the business perspective, the BoP represents a huge untapped market—about $5 trillion—for products and services. From a developmental perspective, the BoP are the bulk of the world’s population who are yet to benefit from the fruits of economic development.
Chapter I Introduction
3
Prahalad and Hart (2002) believe that “investment at the ‘base of the pyramid’ means lifting billions of people out of poverty and desperation, averting the social decay, political chaos, terrorism, and environmental meltdown that is certain to continue if the gap between the rich and the poor countries continue to widen.”
Table 1: The World Economic Pyramid Annual Per Capita Income*
Tiers
Population in Millions
1
75-100
$1,500-$20,000
2&3
1,500-1,750
Less Than $1,500
4
4,000
More Than $20,000
*Based on purchasing power parity in U.S. $. Source: U.N. World Development Reports Source: Prahalad and Hart, 2002.
Because of the failure, as Prahalad and Hart (2002) claim, of top-down development strategies, in the past five decades despite over $2 trillion spent on foreign aid, the private sector has increasingly been called upon to help the BoP. The BoP concept has encouraged corporations to transform their business models to “achieve the price points and cost positions required to reach the poor.” This is the so-called first generation model, developed in 2001, which encouraged business to help the poor as customers by making their products accessible and affordable by way of packing and dispensing (such as sachet packs, micro retailing, etc.) While commendable, this strategy, in Simanis and Hart’s (2008) view, does not ensure reaching the BoP “because the business remains alien to the communities it intends to serve.” The BoP must be viewed not only as a consumer but, more importantly, as a creator, too, of goods and services. They, too, must be seen as potential entrepreneurs. To realize this, the two authors believe that “if the enterprise-based approach to poverty alleviation is to flourish in the future, it is imperative that we now move rapidly to a ‘second generation’ of corporate BoP strategies.“ The table below compares the two generations of strategies of helping the BoP from the corporate sector’s viewpoint.
4
Chapter I Introduction
Table 2: Comparison of BoP 1.0 and BoP 2.0 Strategies BoP 1.0 l l l l l
BoP as consumer Deep listening Reduce price points Redesign packaging, extend distribution Arm’s length relationships mediated by NGOs
BoP 2.0 l l l l l
BoP as business partner Deep dialogue Expand imagination Marry capabilities, build shared commitment Direct, personal relationships facilitated by NGOs
“Selling to the Poor”
“Business Co-Venturing”
Source: Simanis and Hart, 2008.
In the second-generation strategy, the BoP participate in the value chain itself, not just as end-user but as an active, creative actor in the production process. As co-producers, they should not just be the object of pricing and costing decisions, but participants who can, in fact, contribute to a nation’s economy and the profitability of business. Again from Prahalad and Hart (2002): “This is a time for multinational corporations (MNCs) to look at globalization strategies through a new lens of inclusive capitalism. For companies with the resources and persistence to compete at the bottom of the world economic pyramid, the prospective rewards include growth, profits, and incalculable contributions to humankind. Countries that still don’t have the modern infrastructure or products to meet basic human needs are an ideal testing ground for developing environmentally sustainable technologies and products for the entire world.” In the Philippines, engaging the corporate sector would mean involving the micro, small and medium enterprises that comprise more than 99 percent of the country’s businesses. The question, then, is: How can the enterprising BoP actively and productively participate in the global value chain and in turn benefit from it?
Chapter I Introduction
5
Purpose and Objectives of the Case Book Since it began, PBSP has always desired and sought ways to improve the condition of the poor—farmers, fisherfolk, urban poor communities, workers, women and children. This is, in fact, its reason for existence, as articulated in its vision and mission statements. It moreover believes that they must be given the financial means to rise above their poverty and become self-reliant; one of these means is entrepreneurship. Thus, over the years, its poverty reduction strategy has consistently integrated entrepreneurship in community organizing and other sustainable development programs. In 2003, following the success of the earlierbegun Small and Medium Enterprise Credit that was supported by funds from the USAID and the KfW, and seeing the need for technical assistance to grow the enterprises, PBSP partnered with the Canadian Executive Service Organization (CESO), which was funded by the Canadian International Development Agency (CIDA), to test and refine the CESO Business Advisory Program Phase II (or CESO-BAP II) as a strategy for helping MSMEs improve their business operations through the assistance of Volunteer Advisers. Affirming the viability of the scheme, the end-of-project evaluation conducted in 2008 by CESO said: [A]lmost all the respondents, addressing both CESO and PBSP, expressed favorable impressions of the Project and strongly recommended its continuance.... It was highly appreciated because it helped in narrowing the gap on business consulting through the consultancy services they offered at nominal cost to SMEs. The benefits from the business advisory services that CESO-BAP rendered in such areas as marketing, product technology, production practices, organizational management strengthening, and marketing systems will continue to be felt by the SMEs for many more years to come. CESO-BAP’s approach was assessed as innovative and empowering in nature considering the philosophy and value of volunteerism is not well known in developing countries, but has nonetheless demonstrated its ability to address and meet the priorities and needs of the Philippines. CESO’s effort to involve strategic partners in the delivery of the assistance in the field allowed the stakeholders to feel ownership [of] and partnership with the Project.
6
Chapter I Introduction
This positive evaluation inspired PBSP to conclude that the program should be disseminated as its contribution to the literature of how the business sector, especially the MSMEs whose clients, partners, and workers most often are the BoP, can improve their operations to maximize at every stage of the business process the potential of the BoP themselves and thereby contribute to the twin objectives of involving the latter and increasing the MSMEs’ profitability as well. In the interest of strengthening and expanding the Business Advisory Program, PBSP believes that good stories need to be told and retold and retold if only to magnify their influence and how they affect many people. In this light, then, this casebook seeks to share lessons on the following: 1.
How has PBSP-BAP helped in improving the competitiveness of its assisted enterprises, particularly the enterprising BoP?
2.
What strategies were employed by PBSP-BAP effectively to reach more clients and make the enterprising BoP avail of, and pay for its services?
3.
What are the opportunities for further innovation to make the service more accessible to the enterprising BoP, and allow it to be financially viable?
Framework of the Casebook This casebook used an inductive process of theory-building on successful operations of micro and small business based on the experiences of the cases. It consists of: first, description of the inputs (business services provided), the throughput (the methodology or model used to deliver the in inputs) and outputs (the results of the mix of input and throughput); second, an analysis of what worked and did not work; and third, a synthesis of the insights gained and lessons learned which it offers by way of recommendation as models to address the needs of enterprising BoPs as part of the value chain. This conceptual framework may be represented thus:
Chapter I Introduction
7
THEORY BUILDING
DESCRIPTION
ANALYSIS
> Operations
> What worked
> Inputs
> What didn’t work
> Lessons learned
> Throughputs
> Facilitating factors
> Insights
> Outputs
> Hindering factors
MODELING
> Recommendations
Fig. 1: Theoretical/Conceptual Framework
Developing the Casebook The development of this casebook consisted of a review of BoP literature and PBSP-BAP documents, including inception and progress reports, evaluation, and Volunteer Advisers’ reports; and the development of cases.. The cases developed were pre-selected by PBSP based on the following criteria: they must be representative of the clients served from Luzon, Visayas and Mindanao; and they must show variation on the nature of business advisory assignment, industry sector, type of enterprise, and the extent of outcome of the business. These criteria were set to demonstrate representativeness, as well as viability across regions and opportunities for engaging the BoP. Cases that demonstrate positive results in addressing gender and environmental issues of micro and small enterprises were given preference in keeping with the accomplishment of the country’s Millennium Development Goals. The field processes included triangulation interviews with the owners, employees, and Volunteer Advisers to allow for a broad range of perspectives. Individual interviews were complemented by Focus Group Discussions (FGD)
8
Chapter I Introduction
to validate, sharpen and deepen individual perspectives. Analysis of the PBSPBAP operations, financial conditions, current strategies and future directions was employed to assess the viability and sustainability of the program as well as its capacity to continuously deliver the services for the enterprising BoP. The lessons learned and recommendations comprise the Conclusion.v
______________________ 1 Both Prahalad and Hart have written separate books on the BoP, titled respectively, The Fortune at the Botton of the Pyramid: Eradicating Poverty Through Profit, and Capitalism at the Crossroads: the Unlimited Business Opportunities in Solving the World’s Most Difficult Problems. Both books are from Wharton Publishing. From http://en.wikipedia.org/wiki/Base_of_the_pyramid, accessed April 4, 2009.
Chapter I Introduction
9
10
Chapter I Introduction
Chapter II
The PBSP-BAP and the Enterprising BoP by Felix Tonog “PBSP aims to combat poverty through enterprise development via job generating programs and by creating and assisting micro, small and medium enterprises through credit and non-credit programs. This recognizes the role which enterprise plays in development, democracy and in the protection of human rights.� PBSP Chairman, Manuel V. Pangilinan
Chapter I Introduction
11
The MSME Sector in the Philippines It has been widely acknowledged that the micro, small and medium enterprises (MSMEs) constitute the backbone of the Philippine economy particularly in the countryside where large businesses hardly exist. Republic Act (R.A.) 6977, as amended by R.A. 8289, further amended by R.A. 9501, also known as the Magna Carta for MSMEs, defines MSMEs as “any business activity or enterprise engaged in industry, agribusiness and/or service, whether single proprietorship, cooperative, partnership or corporation whose total assets, inclusive of those arising from loans but exclusive of the land on which the particular business entity’s office, plant and equipment are situated, must have value under the following categories:
Table 3: Classification of Philippine MSMEs Category
Asset Size
Micro
Not more than P3M
Small
Above P3M to P15M
Medium
Above P15M to P100M
Statistics (BSMED 2005) show that there are more than 810,000 registered business establishments operating in the Philippines. MSMEs account for 99.6 percent (or about 808,000) of the total establishments, of which about 92 percent are micro enterprises, 7.5 percent are small enterprises, and 0.35 percent are medium enterprises. Large enterprises make up the remaining 0.4 percent. The same report reveals that the majority of MSMEs can be found in the five political regions that account for about 65 percent of the country’s population, namely: NCR, Calabarzon, Central Luzon, Central Visayas, and Ilocos Region. In terms of contributions to the economy, MSMEs employ about 68 percent of the labor force—about 38 percent are employed by micro enterprises, 23 percent by small enterprises and seven percent by medium enterprises. Large enterprises account for the remaining 32 percent. On the other hand, MSMEs contribute around 30
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Chapter II The PBSP-BAP and the Enterprising BoP
percent of the total sales and census value-added in the manufacturing industry, and account for about 25 percent of the country’s total export revenue. It is also estimated that 60 percent of all exporters in the country belong to the SME category. SMEs are able to contribute in exports through subcontracting arrangement with large firms, or as suppliers to exporting companies. Looking at the statistics, of particular interest are micro enterprises, which are about 92 percent (or 740,533) of the MSME population because they are in fact the enterprising members of the ‘Base of the Pyramid’ that belong to the formal economy and whose business needs remain unmet. The aggregate contribution of Philippine MSMEs to GDP is only about 30 percent, which is comparatively lower than its Asian counterparts. Much lower is the value-adding capacity of microenterprises because of inefficiencies, low productivity and lack of capital. In his studies about the MSMEs in the Philippines, Tan (1996) asserts that a “key input for a more appropriate definition of Philippine establishments is an understanding of the basic characteristics, objectives and needs of each of the sector.” He classifies enterprising activities based on their characteristics, objectives, and needs to survive or perform better (see Table 4). The “characteristics are described to form the basis for the two main economic activities: non-business and business”. Non-business is generally subsistence or livelihood activities whose main objective is to earn income entirely for providing immediate personal and family needs—either for survival or sustaining a standard of living. These types of activities are predominantly informal and do not usually graduate into formal businesses. On the other hand, “business” are those livelihood/growthoriented micro-enterprises, small, medium enterprises whose main objective and essence of economic activity is profitability and which show potential for growth.
Chapter II The PBSP-BAP and the Enterprising BoP
13
Table 4: MSME Characteristics, Objectives and Needs by Sector Non-business Subsistence/ Livelihood
Business Micro
Small
Medium
• Labor-intensive, specialized operations, produce customized products • Have wage and salaried employees; has one or more functional supervisors in production, finance, sales, personnel • Entrepreneur is engaged in production, finance and marketing • Entrepreneur has basic technical skills • Low level of technology and productivity; have few but basic tools and equipment • Enters into formal and/or informal agreements • Registered as a business • Has potential for growth
• Materials-based • Has product lines or services and wider market base • Have access to resources and facilities • More intensive use of technology than small • Functional areas are handled by skilled people • Have specialized skills: engineers, chemists, food technologists • Have some specialized equipment • Concentrates on formal agreements • Registered as a business: sole proprietorship, partnership, corporation • Has potential for growth
Characteristics • Self-employed; likely employs family members, relatives or neighbors. • Labor-intensive, home-or community-based production or operation • Generally within the informal sector; may not be registered as a business • Have no or very little resources; individual has very little capability or skills • Irregular and intermittent activities; may be just one of the many part-time or seasonal activities to support family income • Entrepreneur is engaged in one business function: production/ operation (e.g., sewing, selling) • Unstable, and generally do not graduate to micro enterprise
14
• Self-employed (owned and managed by the entrepreneur); • Have some wage employees, most likely employs family members, relatives, or neighbors • Main source of family income • Labor-intensive, home- or community-based production or operation • One product operation, normally production-based • Entrepreneurs is engaged in production, finance and marketing • Have some savings or resources; hand tools and small equipment • May or may not be registered as a business, generally sole proprietorship • Unstable, but has potential for growth
Chapter II The PBSP-BAP and the Enterprising BoP
Table 4: MSME Characteristics, Objectives and Needs by Sector (continued) Non-business Subsistence/ Livelihood
Business Micro
Small
Medium
Objective • Earnings are for hand-to-mouth existence. At worst, the individual has no aim or particular target. At most, aim is to gain regularity or stability of income source
• Business objective of profitability. Aim is to improve capital and workers’ productivity
• Business objective of profitability. Aim is to improve capital, workers’ productivity and efficiency
• Business objective of profitability, productivity and growth. Aim is to improve capital, workers’ productivity and efficiency
Distinct Needs • Tools, materials and • Materials and inputs, inputs; • Improve • Access to capital and credit for productivity, materials and product or service quality; production inputs, • Access to credit for • Skills improvement working capital • Sustaining business
• Access to capital and credit, • Productivity improvement, enhanced operating systems and procedures
• Access to capital and credit for expansion, • Improvement in technology and productivity, • Common service facility
Adapted from Tan 1997.
Micro-enterprises, to which most of the enterprising BoP belong, have peculiar business needs in terms of access to capital and business development services. They need access to productive resources so that they can harness their full potential for growth. Access to information and technical know-how is equally important as capital in building the capacity of micro-enterprises to survive and grow.
Chapter II The PBSP-BAP and the Enterprising BoP
15
PBSP’s Enterprise Development Framework A USAID (2006) study shows that the poor benefit from economic growth in four distinct ways: 1.
As farmers and entrepreneurs. Economic growth raises end-market demand for the goods and services produced micro and small enterprises owned and operated by the poor, increasing the income that they earn;
2.
As workers.
Economic growth raises the demand for labor,
increasing wage payments received by those who have nothing to sell but their labor. 3.
As consumers. Rising production from MSMEs increases the supply of lower-priced goods and services consumed by the poor, raising their purchasing power; and
4.
As potential recipients of tax-funded service or transfers. Economic growth boosts government revenues, which can finance expansion of services like education and basic health care.
For this reason, there is a growing consensus among donor agencies that “the private sector is the engine that drives economic growth” (see Downing, et al. 2006; DFID 2008). Departing from the traditional aid, donor agencies have now turned to market-based solutions as the key strategy in the fight against poverty. MSMEs constitute the majority of the private sector particularly in developing economies. The Netherlands Development Organization and World Business Council for Sustainable Development (2007) report emphasizes the critical role of MSMEs in alleviating poverty. “The key to poverty alleviation is economic growth that is inclusive and reaches the majority of people. Improving the performance and sustainability of local entrepreneurs and small and medium enterprises (SMEs), which represent the backbone of global economic activity, can help achieve this type of growth.” The same report continues: “Yet, despite their acknowledged contribution to the economy, assistance to MSMEs remains largely sparse. And they still operate in the peripheries, not yet quite shedding off their image as part of the so-called informal economy.”
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Chapter II The PBSP-BAP and the Enterprising BoP
As can be gleaned from Figure 2, PBSP’s Enterprise Development Program is geared toward creating and sustaining viable enterprises by making financing and business development services available and accessible. It recognizes the distinct needs and priorities of enterprises as they go through stages of growth and development. Critical to this strategy is building and enhancing the capacity of institutions to either manage or support economic activities that ensure that the poor participate in and benefit from these activities. Enterprises are supported because of their capability to generate jobs, increase the incomes of the poor, propel other economic activities, and help people move out of poverty. “Most micro, small and medium enterprises lack good access to capital, markets, information, infrastructure, and business development services that make them less competitive and vulnerable to various forms of exploitation” (Hammond, et al. 2007). ”Business development services are designed to help micro, small, and medium enterprises overcome barriers to increased profitability by improving their productivity and access to high value markets. In this way they can realize their potential, work their way out of poverty, create jobs, and grow local economies” (Mielbradt and McVay 2004).
FINANCING • • • • Enterprise Development Program
Credit Financial Advance Grant Equity
Financial & Non-Financial Intermediaries
COMPETITIVE MSMEs CREATING JOB OPPORTUNITIES FOR MEN AND WOMEN
BDS • Business Advisory • Technical Assistance • Institution Building • Advocacy
MSMEs
Enterprise growth pattern >> Subsistence
Livelihood
Non-business
Micro
Small
Medium
Growth-oriented business
Fig. 2: PBSP’s Enterprise Development Framework
Chapter II The PBSP-BAP and the Enterprising BoP
17
History of PBSP-BAP In response to the need of the MSMEs, the Business Advisory Program (BAP) was introduced in the Philippines by the Canadian Executive Service Organization (CESO) in 1999 as a result of the bilateral agreement between the Canadian Government and the Government of the Philippines. It was a two-phase project covering the period 1999 to 2008. The CESO-BAP Phase I was implemented by CESO from 1999 to 2003 in the Visayas and Mindanao. Its purpose was to increase the operating effectiveness and efficiency of small and medium enterprises (SMEs) in selected sectors in these regions through business advisory using Canadian Volunteer Advisers. In 2001, a CESO volunteer, David Evershed, conducted a study mission to explore the relevance of establishing a volunteer-based business advisory program in the Philippines. At that time, PBSP had its Small and Medium Enterprise Credit (SMEC) program that provided wholesale credit to intermediary financial (thrift and rural banks) and microfinance institutions that in turn re-lent the money to MSMEs. At that time, too, PBSP wanted to expand its services to include providing suitably qualified volunteer advisers who would assist micro and small enterprises that needed business advising. The PBSP-CESO partnership began when CESO, recognizing PBSP’s corporate network, strong programming and track record, identified it as its ideal partner for this project. The new partners then commissioned the University of the Philippines Institute for Small Scale Industries (UP-ISSI) to conduct a demand-and-supply study for business advisory services. On 14 February 2003, then PBSP President Maria Luisa Perez-Rubio and CESO Vice President & COO for International Services Clare T. M. Bonnell signed a Memorandum of Understanding establishing the Corporate Volunteers for Enterprise Development (CVED) as a major outcome of CESO-BAP Phase II. This would pave the way for developing local volunteers to continue the work of the Canadian expatriates of CESO-BAP when it concluded in March 2008. On the same date, CVED was formally re-launched and renamed PBSPBusiness Advisory Program (PBSP-BAP) in recognition of the achievements and contributions of CESO-BAP in MSME development in the country. The renaming
18
Chapter II The PBSP-BAP and the Enterprising BoP
fulfilled PBSP’s commitment to mainstream BAP as the business development service (BDS) component of its Enterprise Development Program to complement its SMEC program. In the first three years of CESO BAP Phase II, PBSP-BAP was implemented in three pilot areas: Pampanga, Cebu/Bohol, and Davao. By the fourth year, the project’s operations had expanded to neighboring provinces in Central Luzon, Central Visayas, and the Autonomous Region in Muslim Mindanao (ARMM). Because of this, BAP was able to reach more enterprises and establish partnerships with local government units, national government agencies, private corporations, and non-government organizations. The first year of operation of PBSP-BAP proved challenging as the staff had to learn the craft. Recruitment of Volunteer Advisers proved difficult, so different approaches were tried and tested. One-on-one meetings and personal referrals proved to be the most effective ways of recruiting them. The first Volunteer Adviser recruited was Dr. Leodegardo Pruna, then a professor of Tarlac State University. Dr. Pruna enthusiastically responded to an Entrepreneur Magazine feature story calling for Filipino professionals to volunteer as business advisers. Since then, Dr. Pruna has been very active in the program. He was the Chair of the BAP Advisory Committee from 2004 to March 2008. Convincing micro and small enterprises to seek the help of a business adviser was a big task back then. Promotional activities for prospective clients were done mostly in partnership with the provincial Department of Trade and Industry (DTI). From a feeling of distrust and anxiety, more and more micro and small enterprises are now realizing the value of business advice in helping their businesses not only to survive but to grow. Hard work, rigorous training and mentoring between CESO and PBSP-BAP staff eventually paid off. Within five years of operations, PBSP-BAP can show results on how it has contributed to the growth of MSMEs.
Chapter II The PBSP-BAP and the Enterprising BoP
19
Former PBSP President Maria Luisa Perez-Rubio (left) and former CESO Vice President & COO for International Services Clare T. M. Bonnell sign the Memorandum of Understanding establishing the Corporate Volunteers for Enterprise Development (CVED) on 14 February 2003.
Hand-over ceremonies of CESO-BAP to PBSP during PBSP’s 37th Annual Membership Meeting and Foundation Day Celebration on January 22, 2008. (L-R) Former PBSP Trustee Roberto E. Aboitiz, former CESO President Paul Van der Wel, PBSP Chair Manuel V. Pangilinan, and Canadian Ambassador to the Philippines H.E. Robert Desjardins.
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Chapter II The PBSP-BAP and the Enterprising BoP
PBSP-BAP: Program Design According to Hammond et al. (2007), “The most effective new models of enterprise development combine the provision of capital with mentoring, business education, and skills training.� By this criterion, SMEC-plus-BAP is a good fit because it combines credit and business development services for MSMEs. Figure 3 presents the basic logic model of PBSP-BAP as a strategic intervention directed at MSMEs to contribute to the improvement of the economic and social conditions of the community.
MSMEs Business Advisory Program
Increase in use of BAP services
Improved enterprise performance
Improved economic and social conditions
PBSP
Fig. 3: Basic Logic Model for Business Advisory Program The overall goal of PBSP-BAP is to contribute to reducing poverty through the development of micro, small and medium enterprises (MSMEs) that create meaningful jobs for both men and women, thus, improving the economic and social conditions of the community. Its purpose is to improve the competitiveness and business performance of assisted enterprises. The target clientele are growth-oriented and viable enterprises that belong to the agribusiness and food processing, small manufacturing, tourism and allied services sectors that otherwise could not afford consultancy services. Said sectors were specifically chosen because they are labor-intensive in nature and have huge opportunities for growth. Special attention is given to community-based and social enterprises organized and managed by the marginalized sectors such as farmers, persons with disability, and women’s groups.
Chapter II The PBSP-BAP and the Enterprising BoP
21
The PBSP-BAP delivers business advice and technical services to MSMEs by engaging Filipino professional experts as volunteers. The advisory services cover almost all dimensions of business, such as accounting, financial management, production process and productivity improvement, operations management, organizational development, and marketing. In addition, technical services in the areas of product development, product design, and compliance with processed food standards such as Good Manufacturing Practices and Hazard Analysis and Critical Control Points (GMP-HACCP) are made available to them. The Program has four major components, namely: 1.
Volunteer recruitment and management The Volunteer Advisers are professionals and experts in their respective fields. They share their time and expertise for free because they believe in the goals and objectives of BAP. The program continuously enriches its roster of VAs by recruiting new ones particularly in those skills categories where there are not many available volunteers. This is to ensure the continuous supply of ready and willing VAs. This component involves activities such as orientation, seminars, retooling workshops, volunteer gatherings and recognition, and database maintenance to sustain the interest and involvement of the volunteers in the program.
2.
Client generation and delivery of business advisory services Figure 4 illustrates the process flow of business advisory service delivery from receiving clients’ application for assistance to assessing the impact of the assistance rendered. The set of activities under this component includes client ocular visit to validate the application, strategic planning, direction-setting, conduct of business diagnostics, cluster formation (when applicable), matching the client with the qualified volunteer adviser, and deployment of volunteer adviser to the client. A business advisory assignment takes about four to six months on the average, and the monitoring of results for
22
Chapter II The PBSP-BAP and the Enterprising BoP
completed assignments happens after. For every assignment, the client pays an administrative fee to cover part of BAP’s direct operating expenses. In addition, the client defrays the volunteer adviser’s actual expenses such as transportation, food and accommodation, if necessary. This investment by the client is an indication of commitment to improving their business. The VAs are also covered by travel insurance when they visit the client during the assignment period.
Receive client application
Diagnose client’s business need
Match client with volunteer adviser
Deliver business advisory
Monitor progress of assignment
Evaluate results of assignment
Monitor results of assignment
Assess impact of assignment
Fig. 4: Business Advisory Service Delivery Process Flow
3.
Monitoring and evaluation Ongoing assignments are regularly monitored against an agreed work plan between the client and the VA through actual visit, phone calls or e-mails to ensure the smooth flow of assistance and accomplishment of deliverables. At the end of each assignment, evaluations are done by the client, the volunteer adviser, and BAP staff to determine the results (outputs) and the extent of improvement in the enterprise. At least six (6) months after completion of the assignment, post-assignment monitoring is conducted by BAP staff to assess the sustainability of results or outcomes and possible impact.
Chapter II The PBSP-BAP and the Enterprising BoP
23
4.
Facilitating access to market Access to market is critical to MSMEs, as this is a major factor in their sustainability. BAP addresses this concern by organizing market encounters in which the assisted enterprises have face-to-face meetings with potential buyers.
In this
encounter, MSMEs present their products to potential buyers; in turn, they receive feedback on their marketability and the need for improvement, if any. The end objective is for MSMEs and buyers to finally close a deal. This component also involves organizing forums, trade fair sponsorships and business clinics to facilitate market information exchange.
Business ADVISORY SERVICE Delivery Models For cost efficiency, the Clustering methodology of business advising was tested and developed. The adaptation and application of the clustering methodology by CESO, through the leadership of Mr. Timothy Moiket, then CESOBAP Country Manager, made PBSP-BAP more efficient since more clients were reached in one assignment than if it used one-on-one, enterprise level advising. Clustering is a process of grouping enterprises that demonstrate the potential of working together to achieve commonly articulated and agreed results and directions. Business advising is then directed to the group or cluster to enable them to achieve these development goals, both as an individual enterprise and as a sector. It evolved from an analysis by the CESO-BAP staff of the flow of values in the value-chain, which resulted in the design of three variations of clustering, namely: lead enterprise cluster, lead product cluster, and lead operating results cluster. Lead Enterprise Model.
The lead enterprise model builds critical
backward linkages around a lead enterprise on the assumption that its business gains directly benefit backward links. However, the flow of value in this model is reversed to stress the significance of the lead enterprise’s role in supporting the survival of the sub-contactors. The normal flow of values from sub-contactor to the
24
Chapter II The PBSP-BAP and the Enterprising BoP
lead enterprise in the trickle down concept creates an impression of exploitation, which is counter-productive to the formation of partnerships. Hence, the flow of values is reversed to create a more fitting visual and conceptual framework that encourages mutuality of relations. Once a partnership is formed, the cycle of value exchange sets off where the lead enterprise generates more orders to pass on to the sub-contractors, while the latter leaves the commitment of delivering quality goods on time and at the right price to the lead enterprise who can sustain the market and demand of products. This cycle addresses the mutual interest of the sub-contractor and the lead enterprise to progress in the business.
Subcontractor 1
Subcontractor 2
Subcontractor 3
Subcontractor 4
IMPROVED PERFORMANCE
LEAD ENTERPRISE
Fig. 5: Lead Enterprise Clustering Model
Lead Product Model. This model focuses on a particular, local product with the best competitive advantage and market potential. It is anchored on the assumption that clustering enterprises can harmonize the collective effort in spurring development around the lead product. Again, the cycle of value exchange serves the mutual interests of the inter-connected business sectors.
Chapter II The PBSP-BAP and the Enterprising BoP
25
Increased business for raw material producers
Increased business for service providers
Increased business for processors
Increased business for consolidators & marketers
IMPROVED BUSINESS
LEAD PRODUCT
Fig. 6: Lead Product Clustering Model
DESIRED OPERATING RESULT
IMPROVED PERFORMANCE
Improved productivity
Improved product quality
Improved marketing
Improved technology
Enterprises
Fig. 7: Lead Operating Result Clustering Model
26
Chapter II The PBSP-BAP and the Enterprising BoP
Lead Operating Result Model. The lead operating result cluster model focuses on key performance areas leading to the achievement of a common central value. It assumes that clustering toward mutually-sought key performance areas triggers unity among sector members with the same interest. The figure below shows that the shared desired results among the sector participants will stimulate collaboration in improving production, product design, market access, and in upgrading technology in their respective businesses. With clustering, PBSP-BAP has improved its effectiveness in influencing changes that ultimately contribute to the creation of conditions that promote sustained and equitable development of MSMEs. Moreover, clustering equalizes the chances of MSMEs to grow as they are jointly extended the same support as others in the group. This corrects market distortions that might result from the individual-assignment approach, where some more affluent and favored enterprises could grow at the expense of others.
Partnership Building
Direction Setting Workshop BAP Assistance
Strategic Planning Workshop
Strategic Plan & Yr. 1 Plan
Program Assistance by other Partners
Cluster Application Generation
Deployment of BAP VA
Fig. 8: Cluster Formation Process Flow
Chapter II The PBSP-BAP and the Enterprising BoP
27
Summary of PBSP-BAP Accomplishments From 2003 to March 2008, PBSP-BAP recorded 124 assignments benefiting 441 enterprises accessing the service through the assistance of 132 volunteer advisers. There are at present 17 cluster assignments involving 354 enterprises, and 109 individual assignments. Of the clients served, around 70 percent are microenterprises, mostly home-based, engaged in food processing, manufacturing of fashion accessories, home furnishing and holiday decors, and subcontracting works for furniture exporters. Table 5: Summary of Business Advisory Assignments by Area Area
Accomplishments
Luzon
54 assignments benefiting 79 enterprises (5 clusters with 30 enterprises, and 49 individual enterprises)
Visayas
52 assignments benefiting 280 enterprises (5 clusters with 253 enterprises, and 27 individual enterprises)
Mindanao
40 assignments benefiting 38 enterprises (7 clusters with 71 enterprises, and 33 individual enterprises)
A total of 293 of the targeted enterprises were assisted in organizational management, product development, productivity improvement, and accounting or financial management (see Table 6 below). Table 6: Assignments by Special Target Groups Group
28
Number of Enterprises Assisted
Women enterprises
23
Persons with Disability
2
Rural cooperatives
254
Subcontractors
14
Total
293
Chapter II The PBSP-BAP and the Enterprising BoP
A total of 599 VAs have been recruited and included on the roster, of whom 347 are men and 252 women. Most of them (39 percent or 234) come from the corporate sector, PBSP members and non-members combined. Those from the academe and government agencies follow at 23 percent and 13 percent (or 135 and 76), respectively. Almost all VAs are actively employed; only eight are retirees. The volunteers have varied expertise in the fields of accounting, finance, marketing, information and communications technology, production and operations management, organizational development, tourism, culinary arts, agro-processing, business process outsourcing, food technology and food production standards. Table 7: Distribution of Volunteer Advisers by Area, by Gender Male
Female
Total
Luzon
Area
149
101
250
Visayas
106
66
172
Mindanao
92
85
177
Total
347
252
599
Figure 9 shows the distribution of volunteer advisers on the roster by area of expertise. Those with expertise in Accounting and Finance have the most number at 242 followed by experts in Production/Operations Management at 232. Experts in Marketing (225) and Organizational Management and Development (22) are in the third and fourth ranks, respectively. Those in tourism, culinary arts, product design, and food processing have the least number. There has been considerable improvement in the recruitment of volunteers with expertise in Good Manufacturing Practices (GMP) and Hazard Analysis and Critical Control Point (HACCP) who are needed by food processing firms.
Chapter II The PBSP-BAP and the Enterprising BoP
29
2%
Others GMP/HACCP
2%
Agribusiness
2%
Tourism
3%
ICT
5%
20 24 15 36 58
Org. Dev.
21%
Marketing
21%
P/O Mgt.
22%
Acctg./Fin.
22% 0
222 225 232 242 50
100
150
200
250
300
Fig. 9: Distribution of Volunteer Advisers by Expertise
PBSP-BAP Prospects for the Enterprising BoP As a strategy for poverty alleviation and helping the enterprising BoP, the PBSP-BAP shows promising results. The evaluation conducted by CESO in March 2008 reveals that at least 90 enterprises including 45 owned and managed by women and 20 rural enterprises, have realized outcomes from business advice, including new jobs generated or sustained, improved production efficiency, and increased sales and profits. At least 559 new jobs (310 men, 249 women) were generated, which provided continuing employment and income to at least 600 persons with disability, 115 coconut farmers and 290 farmers of organic products. Specifically, the outcomes among the sample group in the evaluation include the following: •
73 percent of the enterprise-respondents (47) reported higher income and sales through increased production capacity and/or improvements in productivity;
•
95.3 percent reported having products and services available in the market;
30
Chapter II The PBSP-BAP and the Enterprising BoP
•
58 percent reportedly hired more workers in order to cope with the demand of their businesses;
•
27 percent maintained their employment level, while around 11 percent decreased their labor force due to re-structuring; and
•
9 percent were able to avail themselves of financing from various resources to further their growth and development.
In its first five years, PBSP-BAP has witnessed the struggles and success of many micro and small entrepreneurs that it served.
Some are stories of
humbling experiences. Others are testaments to women’s hard work as a backbone of the community’s social and economic life. All in all, the enterprises are tales of an indefatigable search for the best, of the pains of overcoming resistance and overcoming change, of the joy of acquiring new skills and seeing its fruits in a better physical layout, longer shelf-life of products, of being visible where it matters namely the market. They are testaments that the enterprising BoP’s quest is doable and worth supporting. Indeed PBSP-BAP has stories and lessons to tell and share. The cases in the next chapter show the possibilities that MSMEs can open to the BoP and how business can help them overcome their common problems. They also prove that there is a vast resource in our midst—the Volunteer Advisers—that is more than glad and willing to help the micro and small entrepreneurs who believe in their dreams and do their very best to make them come true.v
Chapter II The PBSP-BAP and the Enterprising BoP
31
Chapter III
pbsp-bap: handholding the enterprises
A note on the cases The cases in this study represent a cross section of the enterprises assisted under the PBSP-BAP. Region-wise, there are three each from Mindanao (DOCHSEI, KATAKUS, MANCOR), Visayas (AMCHA-MPC, Capiz Shell, Tienda Boholona), and Luzon (Bulacan GTH, Lailen’s Pastries, NFCPWD). Two (Bulacan GTH, Capiz Shell) are in garments and handicraft, two in food processing (Lailen’s Pastries, Tienda Boholana), two in furniture (NFCPWD, AMCHA-MPC) and three in trading and production (MANCOR, KATAKUS, DOCHSEI). They were included also because of their viability coupled with their labor intensiveness. This is in addition to their diversity as a reflection of the variety of enterprises served by the Program. In terms of the nature of the enterprise, four began as for-profit enterprises: Bulacan GTH, Tienda Boholana, Lailen’s Pastries, and Capiz Shell. The proponents of these endeavors saw resources in the area and found ways to capitalize on them. Five began as advocacies: NFCPWD and AMCHA-MPC to seek ways of helping persons with disabilities become productive and self-reliant; MANCOR for organic rice trading; and DOCHSEI (on coconut husk) and Katakus (on durian waste) for the productive use of a waste product. However the enterprises began, there was a conscious move to involve the BoP in the production chain either as employees or contractors and suppliers. And as each project progressed, those that began as for-profit increased in social awareness, while those that began as advocacies became more conscious of their need for operational and financial efficiencies. With regard to sensitivity to current issues in enterprise development and other sectors arising from the Millennium Development Goals (MDG), all the cases here show active consciousness of the need to recognize the role and contribution of women and the importance of paying due attention to the environment. The cases furthermore reflect the kinds of business assistance their nature required to become sustainable, again reflecting the services PBSP-BAP offers. The large commonality of the interventions they needed—operational efficiency, financial management, recording and documentation, quality control, research, access to credit, marketing, among others, show would-be entrepreneurs and those who seek to assist them the kind of interventions that are priority for such businesses. Conversely, they exhibit the common, if not classic, problems faced by MSMEs, which was another reason for their inclusion in this book. These include limited funds and personnel, operating on the fringes of the mainstream market, limited professional and technical skills, and a low level of strategic planning ability. They show sensitivity to the requirements of their particular geographical and business environments, but oftentimes, for lack of skills, they are immobilized to act in a manner that makes significant and visible impact in their respective markets. However they have progressed and however they have overcome their particular difficulties, the cases show how the BoP can in fact be involved in the flourishing of business not only as customers but also as active actors in the production chain.v
34
Chapter III PBSP-BAP: Handholding the Enterprises
seek help and you shall find Lailen’s Pastries by Cynthia Chapter III PBSP-BAP: Handholding the Enterprises
Abella 35
From passion to business Several stories have been told about enterprises which started out as a hobby to the owners and later on became a real business. This is true in the case of Lailen’s Pastries. Evelyn Mangio, a bank employee, who had a great passion for baking, planted the seed of what became a flourishing business later on. She had been accustomed to baking pastries as Christmas presents for her friends. Then the pastime became a sideline when orders started pouring in from friends and relatives who savored the delectable taste of her pastries. With the support of her two daughters, Eliza and Elaine, Evelyn established Lailen’s Pastries in 1982 at San Fernando City, Pampanga. When Evelyn retired from employment in 1994, the family business grew even bigger when she opened a restaurant. To meet the growing demands of the two businesses, Eliza was asked by her mother to manage Lailen’s Pastries. And Lai (Eliza’s nickname) was ripe for the challenge. After obtaining a bachelor’s degree in business management, she took baking lessons under the tutelage of the famous culinary expert, Heny Sison. In no time, she was able to create other pastry recipes that earned the patronage of clients. Instantly, demand and sales began to rise. Crisis came Lailen’s way a year after Eliza took over the business. The catastrophic eruption of Mount Pinatubo in 1995 engulfed several towns in Pampanga. The pastry business and the restaurant were not spared. Unfazed by the tragic incident, Eliza restarted her business. She relocated to a makeshift kitchen in her aunt’s place in Angeles City. Later on she moved to their new home in San Fernando. With Php14,000 she borrowed from her mother, she resumed production and started supplying pasalubong (homecoming presents) stores. Eventually, more outlets were selling Lailen’s products—bus terminals, public markets, gasoline stations, Tita’s stores, and Cindy’s stores. The year 2000 marked the biggest break for Lailen’s when it began supplying SM branches in Metro Manila. Eliza showed profound zeal for the business. As a young entrepreneur, she knew how to chart the course of the enterprise. She registered her business with the Bureau of Food and Drugs. She took advantage of DTI’s seminars on packaging
36
LAILEN’S PASTRIES
and labeling because she wanted to improve her products. To gain new prospects she would often participate in trade fairs. Eliza invested over one million pesos in 1999 to buy new equipment and upgrade her production facility. She delineated her responsibilities to her business from her obligations to her family. She made this possible by distancing the business site from her home. All these factored in achieving high quality products that defined Lailen’s edge over competitors. With raw materials locally sourced, from two products, Lailen’s now produces 20 various foodstuffs. The number of retail outlets carrying Lailen’s products now totals to 40 which include supermarkets, convenience stores, pasalubong outlets, and bakeshops. Thirty-eight dedicated people, composed of 34 female and four male, make up Lailen’s workforce. This happened because of the hard work initiated by Eliza. But she has inspired her workers to toil just as hard. She is no different from other entrepreneurs who wish to see their business grow big. Eliza is convinced that when an enterprise expands, the poor people around it can be uprooted from joblessness and be given an opportunity to earn a living for their families. When goals of individuals coincide, targets can be achieved successfully, she believes. The workers, on the other hand, hoped that they would continue in their jobs. With such deep conviction of both owner and workers to succeed, everyone put their best foot forward to support the goals of Lailen’s. Eliza earned the high regard of the members of the Sweets and Delicacies Association of Pampanga (SnDAP), having been elected president of the association for two consecutive years now.
Table 8: Growth of Lailen’s Pastries in terms of product offerings BEFORE
NOW
Brownies and Sylvanas
Tarts (10 flavors), sylvanas, sansrival, brownies, sweet and spicy tamarind, butterscotch, oraro, banana-langka candies, marzipans, and special cakes and other products
LAILEN’S PASTRIES
37
Table 9: Distribution outlets of Lailen’s Pastries BEFORE
Pampanga: Pasalubong outlets in bus terminals, public markets and Tita’s stores Tarlac: Gasoline stations, Bus terminals, pasalubong outlets, Cindy’s stores
NOW
Bulacan, Pampanga, and Tarlac: Pasalubong outlets, Bus terminals, Public markets, Gasoline stations, Convenience stores, Tita’s and Cindy’s stores Department Stores: SM outlets, Rustan’s, and Shopwise and other retail stores
What more can Lailen’s ask for? The brand was gaining strength. Demand was increasing. Market was expanding. More new products were being developed. Workers were dependable. Sales were going up. Returns were encouraging. In other words, business for Lailen’s was good. Eliza did more than this. She discloses her plans for the enterprise in the area of operations that give priority to improvements in production, organizational management and product development Upgrading of the quality of her products, particularly the tarts, was also needed. Eliza wanted to keep the chewy distinctiveness of the product and lengthen its shelf life. She was told that the tarts hardened up after two weeks from production date. Thus, the distributors were repeatedly advised that the tarts were best consumed within two weeks after production. This condition prevented Lailen’s from maximizing its production capacity. Lengthening the shelf life of the products would result in increased demand. Eventually sales and profit would increase and production costs reduced.
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Change in the plant layout was another item in Eliza’s things to do list. She considered adapting the gang style of production. An improvement in the layout would ensure a smooth flow in the process, resulting in increased productivity, she thought. In addition, Eliza decided to introduce mango rolls because she believed these had market potential. But she needed assistance on product development. Also, Lailen’s had been asked to supply SM Baguio with her pastries— a new business for the enterprise. With this development plus the increasing demand, distributors were needed. Improving the welfare of workers became vital.
Incentives, salary
increases, benefits, work values, and production quota, thus, were some of the key points on this agenda. Committed to carry out the plans in due time, Eliza realized what she could and could not do. It was at this point that she decided to seek help.
Lailen’s seeks help Eliza came to know about PBSP-BAP through DTI Pampanga.
When
asked why she sought PBSP-BAP’s help, she remarked, “I needed someone who could help me improve my plant layout. I had purchased additional machines so I wanted to organize the whole area. The shelf life of my products was another concern. I admit I did not have the expertise in these areas.” Wasting no time, PBSP conducted a business diagnosis on Lailen’s Pastries. Through the information she shared with PBSP, the plan of assistance was prepared. Two major needs were prioritized: upgrading productivity and plant relayout and design; and improving product quality control and production process. To address these needs, a two-part BAP intervention was recommended. The first one required improvement of the plant layout, setting up of production standards and orientation of workers on the gang system of production.
The second
intervention, on the other hand, involved prolonging the shelf life of the products.
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Improving productivity From September 2004 to March 2005, the first intervention was undertaken. The assistance focused on production standards, proper plant layout, orientation on the gang system of production, which assigned workers to tasks suited to their physical capability, work values and ethics, and an employee incentive system. Dhon Dungca, Chairperson of the Industrial Engineering Department of Holy Angel University in Angeles City was tapped as the Volunteer Adviser (VA) to execute the intervention. Eliza conveyed to the VA that “a lot of times I was not able to meet the demand on time so there were delays in the delivery. I also wanted to know if the daily rate I paid my workers was commensurate to their output.” She added that basically, she wanted to improve the productivity of her people and was willing to provide incentives to optimize production. The initial activity involved an actual observation by the VA of the production process. Through time and motion study and measurement of work, the capacity of the plant was determined. Eliza was present throughout the observation process and took note of every instruction and recommendation made by the VA. Her zeal did not escape him; he says, “Eliza was very receptive and interested in the advice I gave her. That was an attitude indicative of her openness to improve her business. It took me several visits to figure out what should be done to help her execute her plans. We had good rapport because she was very cooperative and friendly.” The VA proposed a new plant layout in order to maximize its capacity, reduce traveling time from one section to another and improve the work processes. Eliza plans to implement the proposed plant layout when she renovates the building. Better production, better sales The intervention showed overwhelming results on productivity. Volume of production increased from 6,683 to 9,184 per day. Overtime was lessened and overhead cost was minimized. The recommendation to shift from daily wage rate to piece rate increased workers’ salary by 55 percent. It also generated additional employment for six women, led to improved production, and promoted observance of safety and sanitation standards. Placement of equipment and fixtures was made more systematic so that workers were able to complete the tasks with less
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movement. Aprons, hairnets, gloves and other sanitation paraphernalia have since been used. Products were standardized by employing scientific measurements in food preparation, processing and quality control. Uniformity in size and weight of the products was ensured. Eliza and the VA next worked on developing an incentive scheme to encourage and reward good performance. Both were convinced that though lacking in formal education, the workers could be trained well to be at par with other highly skilled workers. “When I saw the big change in productivity in Lailen’s, I proposed to Eliza to get additional people to assist her in marketing and distribution.” To this, Dungca got a nod of approval from Eliza. When PBSP personnel visited Eliza later, she expressed her appreciation for the BAP intervention. To her, “the business advisory services made a big difference in the productivity of my people. We used to work overtime almost every day. I was not certain if it was due to increase in orders or my people were simply slow. But now we have maximized production and the workers can go home much earlier than before. The factory is more organized and actually I have made an expansion in the plant. So I am truly grateful about the outcome of the program. In fact I need Dhon’s help again because I am planning for another expansion.” Prolonging shelf life Upon completion of the first intervention, Eliza’s attention shifted to prolonging the shelf life of her products. The analysis provided in the business diagnostic report showed that prolonging the shelf life of sweet delicacies could be solved by improving product formulation, or improving the quality of packaging, or both. For this task, PBSP tapped Oscar Diongco, a food technologist, to assist Lailen’s. An inspection on the various aspects of production was conducted: ingredients handling, preparation and cooking, packaging and storage. One advice given was to improve the packing process. This led Eliza to seek technical assistance from DOST for the design of a packing machine as specified by the VA. Diongco also advised the hiring of a food technologist or a food chemist with
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experience in food processing, particularly sweets and delicacies using milk, milk products, flour, and fruits, to assist in product development and quality control. Eliza got her machine through a loan from DOST. However, this is not yet being used because some minor adjustments still have to be made. What this gesture proves is that she is determined to follow the advice of the VA for the good of her business. Similar to the first intervention, Eliza reported favorable results with the second one. Definitely, the shelf life of her products has been prolonged. Buyers have increased their orders as they can now store the goods longer. It also resulted in reduced overtime work. After the second intervention, Eliza informed PBSP that there were subsequent communications between the VA and herself, “Mr. Diongco continued to follow up on developments regarding the products and the packaging machine that we have agreed on,“ she says.
Moving forward After two years of BAP assistance, Lailen’s may be said to be on its way to greater success. A food technologist has not yet been hired because of fund constraints, and some other needs continue to nag. But for one, marketing has improved. As of now, Eliza handles this herself, although she recognizes the need for a marketing person. She believes her case is a proof that good results come about when the entrepreneur is committed to pursuing the recommendations of the VA. She adds that deep communication between entrepreneur and consultant matters, and thus this important aspect of the consulting process must be enhanced. Another consideration is the precise matching between the needs of the enterprise and the technical assistance. In the case of Lailen’s Pastries, the two VAs explained that during their first encounter with the client, they inquired about the main concerns of the enterprise. They saw that the problems as stated by Lailen’s were exactly as described in the business diagnostic report. This congruence allowed for a perfect matching of the needs of the enterprise and the BAP intervention.
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The experience of Lailen’s Pastries may be similar to other PBSP-BAPassisted enterprises. But success must also be credited to the investments Eliza was willing to put in. Specifically, these are: financial resources when she expanded the plant and procured additional equipment; training and incentives for her people thereby resulting in improved productivity; and added technology in packaging. Both BAP and the VAs agree that Lailen’s provides experiential lessons in enterprise development, and that is the need to invest, innovate, and improve. The enterprise happens to have the resources required to fund its needs. Improved production and product quality are two characteristics Eliza would recommend for the enterprising BoP to pursue.v
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SWEET TREATS ON BOHOL’S DAUIS HILLS Tienda Boholana by Arlette Melgar
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T
he story of Tienda Boholana is like that of the Oscar-winning movie “Chocolat”. A beautiful woman one day appears with her precocious daughter in a
French countryside. For days on end, the mother hovers around a stone oven, teaching her daughter how to transform cacao into luscious chocolates. As if by magic, the woman and her daughter enliven a quiet village by simply cooking and baking chocolates. Tienda Boholana’s beginning was like this, except that the setting is in the island of Bohol and the goodies are peanut-based concoctions. The year was 1975. Estela Bautista was a housewife in Tagbilaran, Bohol, with a talent for baking. She concocted her own Boholana recipe for peanut crunch and baked polvoron. She served these to her children as snacks upon their arrival from school, and gave them to family friends as gifts. The youngest among the girls, Hediliza, nicknamed Heddy, was then 12 years old. She was particularly interested in how her mother prepared the goodies, and later became an assistant to the baking chore. Soon, word spread about Bautista’s homemade delicacies and orders started to come in. She and Hediliza did the cooking, while the rest of the children helped by sealing the peanut crunch wrappers with candles as sealant and by tying up the baked polvoron wrappers by hand. Optimism shone when Tienda Boholana was incorporated in 1977. Four cooks were hired. When Bautista died in 1992, the business was passed on to Hediliza. Her mother had only been too glad to bequeath to her the secret polvoron recipes, along with the ovens, baking pans, tins, and all paraphernalia in the family kitchen. With the help of her sisters, Hediliza decided to print packaging paper with the company name and to provide a display area for their products. They also decided to sell these through other outlets. About this time, the eldest daughter had the ground floor of the family house converted into a bakeshop. This became the official carrier of Tienda Boholana’s products. In 1996 Hediliza earned a home economics degree. Like her mother, she loves to spend time in the kitchen. Her experiments produced saccharine goodies that captured the Boholano palate. The new products she developed proved worthy additions to her mother’s. These are:
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•
peanut polvoron, a variation on the standard Filipino powdery snack
•
peanut cookies, using peanut chips instead of chocolate chips as main ingredient;
•
cheese bar, which is cheesecake sold in small, singular strips
•
brownies, which are not as sweet as the regular brownie and also sold in small bars; and
•
torta Boholana, a kind of cupcake popular in Cebu but made by Tienda less sweet and triple in size.
Two more supermarkets then offered Tienda Boholana consignment contracts, expanding the reach of its products. Meanwhile, her sister’s bakeshop had expanded to six branches in Bohol, carrying Tienda Boholana’s products on its shelves. By the late 1990s, Tienda Boholana had become accessible to the ordinary Boholano who could then enjoy cheesecake and brownies without buying an entire cake or piece. Business was doing well and Hediliza had to hire nine more people to help her with production. From then on to this time, the market of Tienda Boholana is composed of Boholanos and some local tourists who send the products as gifts to their friends, and those who come home for vacation and buy these for pasalubong (homecoming gift).
The burdens of entrepreneurship While Tienda Boholana goodies became more accessible, Hediliza was exhausted. Even with hired help, she personally prepared the mixtures, so she found herself working 18 hours a day. As if this pressure was not enough, expanding the product line also forced her to learn how to get raw materials. Thus, the housewife who wanted only to cook and bake had no choice but learn the rudiments of managing a business as well. Hediliza wondered if the business was worth continuing. Her anxiety was worsened by a feeling of helplessness when she saw the mushrooming of many enterprises imitating her packaging. To top this off, these new enterprises were aggressively promoting their products in and outside Bohol. This disheartened
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Hediliza since she knew firsthand the hardship of developing a recipe and maintaining homemade quality. An introvert by nature, she was pained to see all of these, and decided to close shop by the end of 2004. By some stroke of luck, the closure did not happen. At that time, CESOBAP was extending assistance to the Bohol Profoods Cluster of which Tienda was a member. However, Hediliza could not be helped by CESO-BAP individually because the assistance was extended to the cluster as a whole and not to the individual members. Fortunately, PBSP-BAP (formerly CVED), which by design would succeed CESO-BAP, was then starting its operations in Cebu and Bohol and was willing to help individual enterprises. This proved providential for Tienda. In its diagnostic report, PBSP-BAP found that: Tienda Boholana is doing fine since it gets a daily sales of Php5,000 which is higher than its break-even sales of Php3,500. However, Hedeliza believes that her business can still generate more income if it can penetrate other markets and implement effective marketing strategies. She is thinking of tying up with pasalubong outlets, supermarkets and groceries in Cebu to expand her area of operation. Its peanut crunch and baked peanut polvoron are considered her most saleable products because of their taste and attractive packaging. These products are now creating their own niche in the sweets and delicacies market in Bohol as what peanut kisses had done before. What is needed then is to push further these products by making them more visible to the prospective buyers.
Six months later, PBSP-BAP deployed a Volunteer Adviser (VA) to Tienda Boholana in the person of Margaret Ann Gravador, a part-time instructor at the UP-Cebu Graduate School. In her review of operations, Gravador recommended a mentoring program on production, packaging and marketing. Specific activities conducted were: •
Gathering of baseline information on Tienda and its products
•
Analysis of macro-industry trends (potential markets, distribution channels, promotion channels, competition)
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•
Analysis of baseline information
•
Development of a marketing plan
•
Setting up of implementation procedures, monitoring and control
Because Hediliza was at the end of her ropes, she was willing to try the course of action proposed by PBSP. Thus, she agreed to the business advising that was scheduled for two hours every two weeks. Gravador thus began visiting Tienda every two weeks in a span of six months. On each visit, Hediliza was mentored on pricing principles and wrote her assignment. In one session, for example, she learned the concept of markup. Then Gravador asked her to identify the expenses she incurred for each of her products. The expense list was continuously analyzed per product and a reasonable mark-up was set. The VA left Hediliza an outline and a pricing template on excel format for the succeeding meetings. On each of those visits she was to have inputs and answers on this template. The assistance resulted in the following: •
Development of a detailed marketing plan
•
Identification of new markets, focusing on institutional buyers
•
Improvement of product packaging and labeling to include pasalubong packs
•
Improvement of cleanliness and orderliness in the production area
•
Hiring of three additional employees for marketing and production
•
Improvement of workers’ efficiency
During the engagement period, sales doubled compared to the previous year as a result of the expanded market and improved packaging. In terms of distribution, Gravador showed Hediliza the value of visual merchandising. She encouraged her to meet people and took her on a trip to Metro Supermarket in Ayala-Cebu to familiarize her on how to relate with the merchandising manager. On her next trip to Cebu, Hediliza tried to replicate the meeting at the SM Supermarket and was proud of herself when she pulled off conducting a meeting on her own.
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With regard to packaging, Gravador advised her that there was too much information on the wrapper, and that the colors should be chosen based on the image that Tienda wanted to have. Hediliza conscientiously took down all this information and brought it to the Department of Science and Technology which, three months earlier, had offered her packaging assistance. When she expressed disappointment that a competitor had copied her mother’s flavor for the baked polvoron, the VA advised Heddy to put in her packaging the words “since 1977” so that the buyers would know Tienda Boholana had been in the market way ahead of the others. Like PBSP, DOST encouraged Hediliza to continue the business. With the latter’s help, she acquired three special mixers (for kneading, dough and batter preparation), one dough cutter, and one gas-powered coffee bean roaster under a rent-to-own scheme for three years without interest. These pieces of equipment were installed and used in her 500-square-meter kitchen, extended in 2007 from the original 200 square meters. There are now separate areas for dough/premix preparation, baking and packing. Aside from a brand-new kitchen and high-tech equipment, DOST likewise completed a new packaging design for Tienda Boholana. Thus encouraged and equipped by her newly-learned management basics from the PBSP-BAP assistance, she started to develop new products. These are: •
classic baked polvoron—unlike the flagship product, this comes with milk;
•
rosquella Boholana – biscuits like Cebu’s rosquillos but without holes
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oatmeal cookies – unsweetened, compared to its competitors’
•
mango oatmeal cookies – oatmeal cookies with ripe mango shreds
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corn coffee – coffee powder derived from grilling corn kernels
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carrot cake – again unsweetened
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banana cake – also unsweetened; and
•
butter cake – which was mostly ordered by higher-income families during holidays
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Business after PBSP-BAP The direct result of PBSP-BAP assistance is that the pricing used by Tienda Boholana is more rationale, the mark-up based on the on the template given by the VA. This has worked well since 2006, and continues to be practiced by Hediliza. Tienda Boholana’s mango oatmeal cookies, packaged and marketed as suggested by her mentors, are now being ordered by upscale resorts in Panglao which they pair off with brewed coffee in their own coffee shops. Corn coffee, which is produced from roasting native Bohol corn, is sold brewed in her sister’s bakeshops which now number 15 all over Bohol. Still as a result of the aggressive marketing strategy introduced by Gravador, Tienda has diversified its product lines to include non-food items such as key chains, fashion accessories and native bags to fill her lean months. The owner taps the talents of four Badjao women, a minority group in Dauis, to help her produce the fashion accessories. She also tapped the IDEA Foundation in Tagbilaran City to train four hearing-impaired female students in making bags and who help her in the production. Today, Hediliza is a different person. She makes decisions based on management principles she learned from Gravador. She is no longer shy, and this has obviously augured well for her business. She has improved so much so that she was elected secretary of the Food Processors Association of Bohol! She who once walked into a trade fair exhausted and unsure of herself is now in charge of promoting local and international trade fairs for the benefit of the Bohol processed food industry. Her active involvement in the industry has likewise allowed her to participate in a group loan which she used to construct the Tienda Boholana showroom in the front yard of her shop in Dauis.
A landmark in Dauis The Tienda Boholana Showroom and Souvenir Shop opened in Dauis in 2008. Now a landmark on the Dauis highway, it has become a favorite stopover area of motorists, bikers and tourists booked in the nearby Panglao resorts.
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Motorists discovered it by chance and, pleasantly surprised, told friends about it. Many have come back bringing their friends, and it has evolved into some sort of a secret sweets haven on the Dauis slopes. Despite the upscale market it now serves, Hediliza remains true to Tienda Boholana’s beginnings as a homebaked-goodies shop for friends and family. She has set up a cozy bakery that sells assorted breads for the neighborhood. In Dauis, Tienda Boholana is the place to go to for loaf, piniko, cheesebread, cocobread and pan de sal. One even gets the privilege of sitting on one of two benches in the spacious garden.
The future is here The aroma of freshly-baked goodies continues to waft in Bohol’s air, whipped up by a local’s own hands. But more than this, what matters is that delectable and luscious concoctions teamed up with strong entrepreneurial spirit and basic management skills to sum up into Tienda. The 12-year-old daughter who sat on the stool in the 1970s listening to instructions from her mother in the family kitchen in Tagbilaran is now the very able proprietor of Bohol’s latest addition to its must-see sites. The setting of this success story remains in Bohol, on Dauis hill. Hediliza’s daughter has learned her recipes and, more importantly, is keen on taking over Tienda when the time comes. Indeed, Tienda Boholana’s story continues to the next generation.v
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Women find work iN Durian Waste Kababayen-an alang sa Teknolohiya nga Haum sa Kinaiyahan ug Kauswagan, Incorporated (KATAKUS, Inc.) by Mary Fe Arquiza
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W
omen have been churning out pretty fibers of handmade papers and earning a living out of the mountain of garbage of durian peel in Davao City. These women are workers of the handmade-paper-making venture
of the Kababayen-an alang sa Teknolohiya nga Haum sa Kinaiyahan ug Kauswagan (KATAKUS), Incorporated. The name is vernacular for Empowering Women through Appropriate Technology. KATAKUS was organized in May 1996 by the defunct Women in Development Technology Institute, which started the handmade-paper-making project in 1994. As a nongovernmental organization, its main program is sustainable agriculture but it also serves as the marketing arm of agricultural products of its partner organizations. The Kababayen-an sa Katipunan Alang sa Kalambuan (KKK) or Katipunan Women for Development, on the other hand, is an organization of peasant women consisting of 45 members. KKK is the production arm of KATAKUS based in Panabo City. The handmade-paper project aims to provide livelihood to women to augment their families’ income. After all, the area has abundant raw materials such as banana stalks, durian peel, rice straws, cogon grasses, coconut husks, ramie and other fibers that could be used as basic material for crafts that could provide the women with viable sources of income. KATAKUS used to be a dwarf among the giants in the handmade-papermaking industry until it stumbled upon durian fiber. The durian paper was an invention that sprung out of the “can you turn it into paper?” challenge of Alex Hermoso, Executive Director of PREDA, Inc. to Betty More, Executive Director of KATAKUS, in October of 2004. Hermoso gamely asked More to transform the junked durian peels into paper. More nonchalantly accepted the challenge. At home, she worked on the idea for two weeks, using available gadgets in her kitchen. Marveled at her invention, she kept the new product a secret, unaware that it would be KATAKUS’s key to claiming a share in the handmade-paper industry. Davao City is the durian capital of the Philippines. More claims that around ten tons of durian peels are generated every day, more during peak season from July to October. The durian paper project was launched in August 2005 during the Davao City Kadayawan Festival. According to Ethel Lacre, the Social Enterprise
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Development Officer (SEDO) of KATAKUS, the first durian paper product was a lampshade with bamboo stick pole. KATAKUS produces lampshades, photo frames, photo albums, scrap books, occasion cards, boxes, candle holders and other novelty items. As a social enterprise, KATAKUS is aware of its purpose of creating economic and social value by employing women in the community. Thus promotion is extensively pursued in both domestic and foreign markets. There are around 20 distributors in Davao City and Manila, most of which are specialty stores and handicraft shops. Export destinations include The Netherlands, Japan, USA, Kuwait, United Kingdom, Hong Kong, Canada and Germany. Although organized in 1996, KATAKUS started operation only in 2002. Sales slowly rose each year. From approximately US$4,000 in 2003, sales doubled in 2004, and increased to US$10,000 in 2005. In 2006, after the discovery of the durian paper, sales astonishingly increased by 160 percent to US$28,000. However in 2007, KATAKUS lost some of its export buyers and sales relied mainly on the local market, although this too decreased by eight percent. At the height of its operation in 2007-2008, KATAKUS hired as many as 31 piece-rate women workers earning an average of Php200 per day, even higher than that of their husbands’. Two student workers successfully earned their college degrees.
A thriving enterprise KATAKUS had a lowly beginning. It started from a Php5,000 loan from the Development Link, Inc. an NGO previously marketing the products of small handicraft producers. According to More, based on their feasibility study, KATAKUS needed a capitalization of about Php4 million to propel the handmade-paper-making enterprise. But, according to her, the previous Board of Directors was hesitant to borrow. As a consequence, the organization depended on income from sales, small grants and prize money to finance its operations. Yet KATAKUS continued to thrive.
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KATAKUS, INC.
Lack of capital greatly affected KATAKUS’ operations. It could not even hire a marketing staff. Instead, the marketing task was distributed among three personnel. This multi-tasking arrangement was obviously not healthy for the business. The SEDO, for example, handled almost all aspects of the operations apart from her official tasks under the Sustainable Agriculture program. The business was moving at a snail’s pace and it became profitable only in 2007. Upgrading the technology to be women-friendly was made possible with the help of Aid to Artisans and the US-based Geneva Global. Problems in production persisted.
Although they had been trained
in social entrepreneurship, the women still did not know how to standardize production techniques, which remained costly. The situation indicated the need for a consultant. As it was, the organization could not afford to hire one. In the past, it had availed of consultancy support on e-commerce, product design and development and marketing from the Asia Fair Trade Forum. Clearly, these were not enough.
Not by sheer luck More learned about PBSP-BAP in a meeting with the DTI. Knowing what she needed and realizing that business advising could be valuable to KATAKUS, More immediately applied for assistance. Beginning in early 2006, KATAKUS has received three business advisory assignments from PBSP-BAP. These cover the areas of inventory management, development of marketing plan, and improvement of production process. Managing inventory The first assistance was triggered by the need for proper inventory of raw materials and finished products. At that time, the stock level of assorted products was not monitored and physical inventory was done only annually. A computerized inventory system would help KATAKUS keep track of its products and generate needed reports at any given time.
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The VA assigned was Dr. Alfonso U. Bantilan, an IT expert and a faculty member of the University of Southeastern Philippines (USEP). Analyzing the business process of KATAKUS, Bantilan found that there were different items to be inventoried, such as raw materials, paper sheets, and the finished products. Through a series of consultations, Bantilan designed a simple inventory system using the Excel application covering four modules: incoming, outgoing, remaining and consigned products. A user’s manual was prepared, and two staff members were trained. With the installation of the inventory system, Bantilan felt that he had responded to the problems presented. He recognized that eventually, KATAKUS would have to upgrade to a superior program even if this would entail additional costs. However, lack of capital prevented KATAKUS from buying an additional computer and from hiring a staff that could keep track of inventory. Because of this constraint, KATAKUS was not able to implement the assistance given. Beefing up Marketing The development of a marketing plan and the identification of potential local and international buyers was the second assistance to KATAKUS two months after the first one. The VA assigned was Leilanie Tiu, Manager of Mik’s Ideas (a marketing firm in Davao City) and a former professor at the Ateneo de Davao University. Tiu found that KATAKUS was confronted with problems on three fronts, namely: organization, marketing and production. She noticed the glaring absence of a brand name for easy recall. KATAKUS wanted to popularize Womenkraft as a brand but the business name KATAKUS, Inc was the one recognized by the buyers in trade fairs. In addition, the distribution channels were limited and there was no showroom to display the products. Tiu emphasized that KATAKUS needed to view its business as distinctly an income-generating undertaking needing full-time and professional attention and not just part of an advocacy work. Because it viewed itself more as a social advocacy outfit, the organization pampered and treated its workers with kid’s gloves, Tiu noted. She recommended that production be handled by a separate entity so that KATAKUS could concentrate on marketing. If possible, a cooperative
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of workers should be established that could ably manage the Panabo production area, she added. KATAKUS had to find other ways to sustain its advocacy. More appreciated the need for KKK to evolve into an independent producer, thereby enhancing women’s control over production. In this new arrangement, KATAKUS could serve as the consolidator of products from small producers. A marketing kit was conceived and two websites were developed.
Indeed, the
assistance boosted domestic sales despite the withdrawal of foreign buyers. It continued to develop a brand name and has since moved to a larger office, part of which serves as a showroom. Standardizing production process The third assistance began on February 11, 2008. Engr. Robert Quinto, General Manager of Jhaymarts Industries, Inc. was the Volunteer Adviser assigned. Quinto found that the following needed attention: absence of standards in production; excessive wastage; remoteness of the source of raw materials which made the papers very costly; weak teamwork and leadership; and lack of entrepreneurial attitude among leaders and workers. The absence of standards increased cost. Wastage was rampant in the effort to curtail sub-standard outputs. There was even no acceptable level of rejection established because of the overzealousness about the women’s feelings. Production cost was immensely affected by the shift in raw materials from banana and cogon grasses to abaca and durian fibers. These two substitute fibers were being sourced from Davao City, an hour’s ride by bus from Panabo City. This entailed high hauling cost, reducing KATAKUS’ competitive advantage in production. Quinto recommended using raw materials available in the area, but More says that the shift to abaca and durian fibers was triggered precisely by the conversion of farmlands into banana plantations in Panabo City making the source of cogon grasses inaccessible. Weak leadership aggravated problems in production. Workers were trained to be responsible for the operation, but according to Lacre leadership was rotated among the workers monthly to farm out responsibility. Like Tiu, Quinto also pushed for the appointment of a manager at the Panabo plant.
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Quinto gave a seminar on teamwork, product standards, and entrepreneurship. According to the workers, because of this training, rejects were minimized from 20 sheets per week to two. Materials were applied proportionately based on established standard measurement. The use of firewood in the steam dryer was reduced to about 50 percent by using sun and air drying. The workers practiced quality control at every stage of production. As a result, production cost decreased and workers’ productivity increased. The standardized process visibly improved production. The workers began loving their work more and appreciating themselves as a team. On his part, Quinto believes that he was able to change the dole-out mentality of the workers. He had opened their minds to the importance of earning and the need for competition, and of doing things in a better way. Their transformation has not escaped the notice of observers. More noted that the intervention of Quinto validated the workers’ perception about the need to professionalize production. Thus the cost of a 20”x30”sheet of paper was reduced by 78 percent from US$0.37 to an average of US$0.083.
More work At present, KATAKUS is raising funds to implement some of Quinto’s recommendations, notably the installation of a lever or pulley to hasten the transport of cooked materials from the cooking to the washing area. And to address the wastewater problem, the installation of a treatment facility to comply with fair trade practices is being planned. KATAKUS is also keen on pursuing its computerized inventory management system. As it grows, KATAKUS needs additional tools and equipment to improve its production. It needs to continually upgrade the skills of the workers on new techniques and in handling different materials. More is confident that, with business advising, KATAKUS can realize its potential as a profitable enterprise by and for women. Already, they have proven peel need not to go to waste.v
60
KATAKUS, INC.
JUST BEING DIFFERENTLY ABLED Atlas Mining Community Handicapped Association Multipurpose Cooperative (AMCHA-MPC) by Arlette Melgar
KATAKUS, INC.
61
M
ore than 60 kilometers above Cebu, passing through a winding highway toward the mountains, one reaches the city of Toledo. A man alights from
a vehicle and welcomes the visitor. He gets off the driver’s seat, and one wonders how he is able to drive with only one leg. One arm on his crutch, he offers a firm handshake and introduces another man with a steel right leg. Another drive is made a kilometer away from the city proper to the barangay called Cabitoonan. The vehicle turns left onto a narrow street in what appears to be a quiet residential area. At the end of the street, a gate is opened by someone making signs. The driver explains, “He is hearing-impaired.” Later, one is shown into the office where a disfigured lady offers a chair. A hunchback enters to offer a drink. After a short rest, the visitor is led to the factory across and more people one usually does not meet are seen. Unusual, for the one that cuts and shapes the wood has a limping leg. Women who sand the wood have crutches at their sides. A welder has one leg. The production supervisor goes around checking the assembly line on a wheelchair. More hearing-impaired are outside, hauling finished products into a truck. “They will be delivered to Leyte,” the hosts explain. Welcome to a regular working day at Atlas Mining Community Handicapped Association Multipurpose Cooperative-known simply as AMCHA-MPC. AMCHA-MPC started as a community service project of Atlas Consolidated Mining and Development Corporation (ACMDC), which was a large mining company based in Toledo, Cebu in the 1970s. Many of its employees were injured in mining operations and while management took care of them financially, the company felt it had to do more in terms of moral support. A cooperative was formed for the disabled to undertake community projects in Toledo, the premise being that disabled persons can also assist the community-if not lead “normal” persons in the endeavor. The cooperative annually undertook livelihood training programs for the barangays using Atlas Mining facilities. Unfazed by accidents that punctuated life in the mines, life went on for members of this community service-oriented group. In fact, life even became more meaningful as they now had the responsibility to help in community development. In the late 1980s, however, price of copper fell in the world market and Atlas Mining, fully dependent on exports, was one of the worst hit. By 1994, the
62
AMCHA-MPC
company was forced to cease operations, and in the process laid off thousands of employees. The impact of the closure of Atlas Mining in Toledo was felt not only by the employees but also by the entire town and adjacent areas. For more than 20 years, the company single-handedly sustained the economy in that part of Cebu and all of a sudden, it was gone. The operations manager, who worked for the company right after graduation, pondered the next moves. He had not known any other world but Atlas Mining; he did not leave the company even after his left leg was amputated ten years before due to a mining activity. If he was unsure of the future, what more his co-employees who were also disabled in line of duty? Clearly, they had to band and find ways together.
Activating AMCHA-MPC It was for this reason that operations manager Engr. Rey Merida decided to continue the community service organization he became part of while an employee. With 15 other former co-employees who believed that they could continue to be productive and gain a decent livelihood, Merida started running AMCHA-MPC as a stand-alone pre-cooperative in February 1995 and registered it with the Cooperative Development Authority on February 4, 1998. Capitalizing on the goodwill and relations he had previously built with town officials, Merida asked the town mayor for a space where AMCHA-MPC could operate. The mayor responded by “lending� AMCHA-MPC a 500-squaremeter unused motorpool building. Utilities were also provided for free. This unequivocal support by the local leadership encouraged the small group although admittedly, none of them had a clear idea what their income-generating activity was going to be. In its first two years, AMCHA-MPC focused on advocacy, promoting the rights of the disabled and conducting seminars on the subject. They had to raise fund for their activities hoping that one day, they would be able to embark on a business that could support their families. Hope was high with Merida. He knew that being in Toledo was not enough; they had to know what similar organizations were doing. He actively joined the
AMCHA-MPC
63
64
AMCHA-MPC
National Federation of Cooperatives of Persons with Disability (NFCPWD) and attended its meetings. In one such meeting in December 1994, he met the Executive Director of the Philippine Foundation for the Rehabilitation of Disabled Persons (PFRD) and shared AMCHA-MPC’s aspirations. Promptly, the official offered the services of a German woodwork expert, Peter Hammerle from the Christian Blind Mission International (CBM) who then went all the way to Toledo to teach the rudiments of carpentry to AMCHA-MPC members. Thus AMCHA-MPC’s business of producing armchairs for schools began. The year after, AMCHA-MPC started bidding for projects with DepEd Region 7. The few that they won allowed them to issue hefty dividends to their members that had grown to 144. Membership expansion was quick because they decided to welcome PWDs not affiliated with Atlas Mining. Soon, its reputation grew in the industry as a producer of high quality armchairs at lower cost and hand-made by disabled laborers at that! By 2001, AMCHA-MPC had built a wide client base that included Regions 6, 7 and 8. Business was so good that it was able to purchase its own delivery truck in 2003. However, AMCHA-MPC’s incorporators were overworked. Aside from personally attending biddings, they also handled liaison work with government and non-government organizations. They were also in charge of soliciting donations. The officers felt burned out. They knew they needed to put in place an organizational structure and prepare their members to take a more active role. But because they were all production people, they had no idea how this was to be done. In the meantime, the local government served notice that the Hall of Justice would be built on the lot lent to them. This meant they needed to leave the place.
Strong entrepreneurial spirit All this happened in 2005, and AMCHA-MPC addressed the issues one by one. First, an alternative office and factory space had to be purchased. Members were dispatched to look for an appropriate location at a reasonable price. Second, AMCHA-MPC knew it had to slow down in bidding for projects since demand
AMCHA-MPC
65
was exceeding its production capacity. Third, it would ask help to put in place the organizational structure needed. The first task was completed in 2006 with the purchase of a 2,000 squaremeter property in Barangay Cabitoonan, a residential area three kilometers away from the city proper, amounting to Php4 million. AMCHA-MPC knew this would drain its operating funds, but it had no choice. It figured that it would approach foreign funding agencies for its payment and upkeep, but this was a problem they would have to solve in the future. The second task was referred to the NFCPWD, which promptly advised AMCHA-MPC to agree on centralizing the project bidding at the national office. In this way, the burden of marketing would be taken away from AMCHA-MPC while safeguarding its operating income.
Thus, AMCHA-MPC stopped direct
bidding for DepEd projects and became a subcontractor for NFCPWD in 2006.
Entry of PBSP For the third task, AMCHA-MPC approached the DTI. DTI, in turn, referred it to PBSP-BAP. When AMCHA-MPC approached PBSP-BAP, it was already preparing to transfer to its newly acquired property in Barangay Cabitoonan. For this reason, AMCHA-MPC and PBSP-BAP agreed during the diagnostics that assistance on plant layout and production planning was in order first. The assistance on enhancing the organizational design would come later. One of the members of PBSP-Visayas, Pacific Traders and Manufacturing Corp., is a furniture exporter and a Gawad Shell awardee no less. In 2006, through PBSP-BAP, Pacific Traders lent its operations manager, Andre Lim, a seasoned industrial engineer, to be the volunteer adviser (VA) for AMCHA-MPC. After one week, Lim completed the assessment of AMCHA-MPC needs. In his assessment, he noted the following problems: 1.
There was a high demand for armchairs, but AMCHA-MPC was deficient in production capacity
2.
Across the organization, standard production and accounting documents were not prepared;
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AMCHA-MPC
3.
There was no job description, such that officers were doing all sorts of work; and
4.
There was no proper distribution of responsibilities, such that the people managing the cooperative were the same people who were supervising production, delivery and collection
Volunteer advisers in action Lim made an overall plan to increase production capacity, set in place standard operational processes, prepare a transactional flow, and draft a succession plan. To address problems in demand, Lim studied the nine stages of production: cutting, bending, welding, drilling, stabilizing, rust removal, painting, scott putty application or sanding, and coupling of plywood to steel frame. He then undertook a methods and lead-time study which revealed that the total production time per unit was 164 minutes (2 hours and four minutes), resulting in a daily output of only two units. For this lead-time and output, nine workers were required. The VA later proposed that additional workers be hired, raising the factory personnel to 16. With this number, total time per production of one unit of tablet armchair would be cut to only 108 minutes (1 hour and 48 minutes) and the daily output would increase to four units. While production test run was ongoing, Lim documented the process flow for AMCHA-MPC. He also taught AMCHA-MPC personnel the value of documenting their individual daily output (IA) so that they would feel valued and empowered by the whole production process. Although tedious, this was explained to be helpful to management in determining incentives and promotions for them. Recognizing that all these were new to the organization, Lim also conducted four seminars on weekends to train both the administrative and production staff on the standard documents needed by a production business. He also translated into layman’s language and in the Cebuano vernacular the technical terms used in production. Thus, over a period of three months, AMCHA-MPC personnel became conversant with the rationale and use of different documents
AMCHA-MPC
67
such as procurement form (RFP), purchase order (PO), materials receiving report (MRR), individual job order (IJO), materials issuance slip (MIS), borrower slip (BS), delivery receipt (DR), invoice receipt property (IRP), charge invoices (CI), trip ticket for owned truck (TT), and official receipt (OR). Capping the workforce training, Lim brought AMCHA-MPC personnel to Pacific Traders for them to see the actual application of leadtime standards as well as the use of documents in all the aspects of operations. Although his company, on whose experience Lim based his advise, was much bigger, he advised that the same management principles apply to AMCHA-MPC’s operations. To address organizational management problems and needs, Macario Balili, an Organizational Development practitioner from East Asia Utilities Corp. (also a PBSP member company) was assigned as VA to AMCHA-MPC. Balili found the existing organizational structure lean. Some officers and staff members were hardly qualified for their positions. Most of the tasks were done by the General Manager. With Balili’s help, AMCHA-MPC came up with an organizational design that clearly identified critical roles and responsibilities of each personnel and the competencies required by each function. They then drew up an organizational structure that matched the competencies of people with the expectations of the job. A succession plan was also prepared. To enhance the institutional capability of AMCHA-MPC, Balili conducted a series of training and mentoring sessions on effective leadership, supervisory and management skills, and team-building.
After PBSP-BAP Having found the test-runs successful, AMCHA-MPC constructed its new facility, four times bigger than its previous plant, and transferred there in 2008. More importantly, the new plant is a testament to AMCHA-MPC’s more than 15 years of hard work. Since AMCHA-MPC opened its doors to all PWDs in Cebu province, its membership has grown to 144—with 30 working full-time in the factory. As a result of PBSP-BAP’s intervention, AMCHA-MPC is now a betterrun production plant and better-managed organization.
68
AMCHA-MPC
Production capacity
increased by 20 percent resulting from the implementation of proper layout, the practice of the 5S of good housekeeping principles, and clear delineation of tasks and responsibilities. The proper matching of skills and competencies with the assigned job also boosted workers’ morale and attitude. Realizing the importance of accounting as a business tool, AMCHA-MPC now retains an accountant who helps manage its obligations while keeping operational funds afloat. The facilitating factor may have been the successful PBSP intervention but success may likewise be attributed to the fact that all officers of AMCHA-MPC led by Merida are knowledgeable in running an enterprise, particularly in the areas of production and marketing. Their openness to advice and their willingness to change bring them closer to their vision. Two years after working with PBSP, AMCHA-MPC is now secure in its place as the foremost organization in Cebu that is run by and for persons with disability. Its reputation as an organization that gives employment to some of the most marginalized sectors of society—the PWDs—is sealed. Anyone who cannot hear, speak, lost an arm or leg, or who suffers from any physical disfigurement— could rely upon AMCHA-MPC to take them in and help them secure the necessities of life. Because of it, PWDs all over Cebu can hold their heads high for having the power to earn their own keep. It is no coincidence in the end that the property where AMCHA-MPC now stands is located in a village called Cabitoonan which in English means, “where stars converge”. For the differently abled taken in, nurtured and enabled by AMCHA-MPC, stars are truly shining bright. They now can join the market and create wealth as productive members of society. Definitely, being differently abled but not disabled, they are no burden to the economy.v
AMCHA-MPC
69
TRANSFORMING LIMITATION TO LEVERAGE National Federation of Cooperatives of Persons with Disability by Cynthia Abella
70
NFCPWD
Empowering PWDs The huge warehouse at Km. 23 Ortigas Avenue Extension, Taytay, Rizal stores voluminous stocks of skillfully crafted knock-down school chairs and desks. The sight lays bare what the National Federation of Cooperatives of Persons with Disability (NFCPWD) has become after twelve years. Imbued with the mission to become “a united, strong and economically stable Federation of persons with disability (PWDs) towards total integration in the mainstream of the society,� NFCPWD was founded in 1995. Initially, there were only six cooperative-members: 1) SIKAP, Cainta, Rizal; 2) AMCHA-MPC, Toledo, Cebu; 3) BBMC, Camarin, Caloocan; 4) LBMPC, Candelaria, Quezon; 5) FARAD, Baguio City; 6) ADAP, Davao City. The member-cooperatives were engaged in different livelihood activities but chair-making was their common and main line of business. Registered with the Cooperatives Development Authority (CDA) in 1998, the Federation and its member primary cooperatives are wholly owned, managed and operated by persons with disability. The primary cooperatives established in different parts of the country started as sheltered workshops for PWDs. The workshops provided training and, eventually, employment for them. The products were mainly stone and rattan crafts manufactured for local and foreign markets. The PWDs were fast workers so that production in bulk was no problem for them. In the early 90s, however, the income generated by the business was not even enough to defray the freight expenses of sending the products abroad. Given these conditions, production stopped. To sustain the operation of the sheltered workshops, they had to think of more viable products. Help came through the Christian Blind Mission International (CBM), which has been supporting the sheltered workshops since 1992. Founded in Germany in 1908, CBM operates in more than 113 countries all over the world to fulfill its mandate of improving the quality of life of persons with disabilities. Peter Hammerle, a German national and a professional carpenter, was sent by CBM in 1992 as technical consultant. When Hammerle arrived in the Philippines he first worked with the Northern Luzon Association for the Disabled (NLAD), a sheltered workshop in Baguio City. Cognizant of the problem NLAD was going
NFCPWD
71
through, he introduced chair-making. Peter and Johnny Lantion, who used to work in NLAD, then conducted and supervised the training on carpentry and chair-making. The first challenge to NLAD’s chair-making capability came in 1993 with an initial order of 25 chairs from St. Joseph the Worker High School in Baguio City. “Making chairs was a new experience for some of us but we managed to finish the chairs in four weeks’ time with ten workers on the job,” recalls Lantion. After the first deal, successive orders from various schools in Baguio City poured in. Having been successful in these projects, Hammerle and Lantion wasted no time meeting with then DepEd Secretary Ricardo Gloria. A deal was completed, and DepEd offered to buy their chairs. This prompted Hammerle and Lantion to mobilize the groups of PWDs from other parts of the country. Thus did the National Federation of Cooperatives of Persons with Disability come into being. Lantion later became its General Manager. NFCPWD performs the roles of marketing and providing public relations services for its member-cooperatives—promoting their products and ensuring a continuous flow of business. The Federation also takes charge of all other forms of transactions—from negotiation, to the distribution of job orders, purchasing of raw materials, organizing the production line, to the delivery of the finished products. To help the Federation’s member-cooperatives meet orders, CBM supplied the necessary equipment, tools, and materials.
Gemelina wood, the primary raw
material used for production, was sourced from the provinces of Cotabato and Agusan; other raw materials came from local suppliers.
Table 10: NFCPWD Member-Cooperatives (as of May 2009) PRIMARY COOPERATIVES
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LOCATION
MEMBERS MALE
FEMALE
TOTAL
1. Maddela Kilusan ng May Kapansanan Multi-Purpose Cooperative (MKMK-MPC)
Quirino Province
18
7
25
2. Father Rafael Desmedt Multipurpose Cooperative (FARAD-MPC)
Baguio City
38
10
48
3. Bigay Buhay Multi-Purpose Cooperative (BBMC)
Camarin, Caloocan
25
3
28
NFCPWD
4. Samahang Ikauunlad ng mga may Kapansanan Multi-Purpose Cooperative (SIKAP-MPC)
35
16
51
5. Gintong Pangarap (Golden Dream) Cainta, NCR Multi-Purpose Cooperative (GPMPC)
17
28
45
6. Lingkod Banahaw Multi-Purpose Cooperative (LB-MPC)
Candelaria, Quezon
15
6
21
7. Bicol Persons with Disability MultiPurpose Cooperative (BPWD-MPC)
Albay, Bicol
19
8
27
8. Association of Differently-Abled Persons Multi-Purpose Cooperative (ADPI-MPC)
Iloilo City
44
11
55
9. Atlas Mining Community Handicapped Association MultiToledo City, Cebu Purpose Cooperative (AMCHA-MPC)
93
31
124
10. San Francisco Association of Differently-Abled Persons MultiAgusan del Sur Purpose Cooperative (SAFRA-ADAPMPC)
25
4
29
11. Katipunan ng may Kapansanan sa Cotabato City Multi-Purpose Cooperative (KAMC-MPC)
Cotabato City
28
8
36
12. Association of Differently-Abled Persons Multi-Purpose Cooperative (ADAP-MPC)
Davao City
90
37
127
447
169
616
Total
Pasig, Metro Manila
When business started to pick up, the Federation saw to the establishment of more primary cooperatives. From six, it now has 12 member-cooperatives nationwide: seven in Luzon, two in Visayas, and three in Mindanao (see Table 10). The DepEd, local government units (LGUs), and private schools make up their major clients. The tipping point came in 2005 when NFCPWD negotiated with DepEd for a Php40.5-million project, which represented 10 percent of the total budget of DepEd for the purchase of school desks. The agency estimate (AE) pegged the cost of secondary-school tablet armchair at Php550 per unit and Php1,200 per set of elementary-school table (one piece) and chairs (two pieces). The Federation’s
NFCPWD
73
quoted price was Php710 for secondary-school armchair and Php1,500 per set of elementary-school table and chairs. DepEd required NFCPWD to further justify its prices. Lantion insisted their prices were already the lowest they could give considering the quality and the durability of their products. He found the agency estimate unfeasible. He needed to balance the value of the contract with the profitability and the sustainability of the member-cooperatives as well as the development of the sector. He was ready to give up the contract. But there was still hope to win the bid as it took some time for the job order to be awarded to a deserving contractor. The bidding and procurement was to be handled by the Department of Budget and Management (DBM), so renegotiation had to be done. This time another problem surfaced. The agency estimate had to be reduced by 4 percent from the original cost such that the price for the secondary-school armchair was reduced from Php550 to Php528 and that of the elementary-school set from Php1,200 to Php1,152. Concerned about sustaining the business of the Federation, Lantion had to think about how to win the bid. He felt he had to consult an expert to help him review and determine the accuracy of his product costing and pricing in the light of DBM’s prescription. This had to be done to support its renegotiation with DBM. The prospect of closing the deal hinged on the result of the cost and price analysis of an accountant acceptable to DBM and DepEd. He knew he needed help.
PBSP-BAP’s assistance The meeting between PBSP-BAP and NFCPWD was unusual. Lantion came to know about PBSP-BAP in an issue of the Entrepreneur Magazine back in 2006. He remembered an article about one enterprise assisted by PBSP-BAP, which lauded the unique service provided by PBSP through BAP. Eager to avail of its services, he then called the PBSP to introduce himself and get acquainted with the program. PBSP-BAP thought the assistance needed by the Federation was very definite, necessary and doable. All NFCPWD wanted at that time was to determine whether the cost of their products was accurately computed and the mark-up reasonable.
74
NFCPWD
NFCPWD
75
A later and deeper assessment of the Federation’s operations revealed that there were other areas that needed fixing. But during the preliminary orientation, NFCPWD focused on its immediate concern. Thus, the intervention was planned according to how Lantion identified the major problem. Although it had seen other needs of NFCPWD, PBSP-BAP could not undertake any action beyond what the client requested. Jose Tayag Jr., then Managing Partner of Isla Lipana & Co., the Philippine member firm of PricewaterhouseCoopers and a member company of PBSP, was called and briefed by PBSP-BAP on the nature of assistance NFCPWD needed. During the entry conference, Lantion and Tayag discussed the problem. Tayag then reviewed the costing of the school chairs and desks and found it in order. This gave the Federation the confidence to go back to the negotiating table. The assistance could have been completed when costs and prices were found correct. However, PBSP-BAP felt the need to go the extra mile in assisting the Federation until the contract was awarded. Thus, Tayag helped NFCPWD in renegotiating with DepEd. The holding-hand relationship proved providential for NFCPWD won the contract on December 21, 2006. The job order involved 120,000 pieces of school desks at Php750 per piece with a total contract price of Php90 million. (Another Php90 million contract was awarded in April 2008.) Lantion considered the PBSP-BAP assistance “very beneficial in securing the contracts for the Federation. If not for Tayag’s help, the contract could not have been awarded to us,” Lantion gratefully remarks.
Continuing business Today, NFCPWD continues to grow. It employs six male and five female regular staff stationed at the head office in Taytay, Rizal. In the evaluation conference with Lantion, PBSP-BAP was informed that the total number of cooperatives nationwide had gone up to 16 and employ close to one thousand PWDs, a number far beyond the 500 it hoped to reach by the end of 2008.
76
NFCPWD
Contracts have kept coming and will keep all the member-cooperatives of the Federation operational and profitable in the coming years. The job orders have resulted in the establishment of more cooperatives in other regions, more PWDs given jobs, and poverty experienced by the families of PWDs reduced. Rightfully, in spite of the bountiful business it enjoys at the moment, NFCPWD is concerned about its sustainability. On this matter, Lantion says, “The Federation aspires for the institutionalization of the special provision of the General Appropriations Act (GAA), which states that at least 10 percent of government contracts for products and services will be manufactured or provided by PWD cooperatives. When this is institutionalized, the projects from the DepEd and other government offices may be more easily accessed even if there are changes in management.” He adds: “NFCPWD also intends to seek partnership with banks and other financial intermediaries that can extend the financial assistance that will support the requirements of big contracts such as the one with DepEd and other government agencies. The lack of capital oftentimes hinders the completion of projects.” Thus, while the Federation has assumed the responsibility and the commitment to provide business to its member-cooperatives, there is a need to present other options that would help the individual members generate their own businesses. This is definitely an area where the PBSP-BAP can be of help, Lantion believes. The Federation, he says, is more than willing to help reach the primary member-cooperatives and set as a proof the winning contract made possible by the advisory services of PBSP-BAP.v
NFCPWD
77
Strategic Partnership for Growth Bulacan GTH Cluster by Cynthia Abella
78
Bulacan GTH
A collective effort Eye-catching embroideries on soft toys for children, fancy trimmings on decorative candles, lovely glitters on Christmas decors, finely crafted board boxes—these are but some of the merchandise displayed in a souvenir shop located at Villa Rosalinda, Malolos, Bulacan. The retail outlet showcases products of the members of the Bulacan GTH (Gifts, Toys and Houseware) Association. The goal of Bulacan GTH is to expand domestic market and access the international markets for the products manufactured by its 37 member-enterprises. Though organized in 2004, its member-enterprises came into existence from five to over 20 years earlier. Here looks a typical Bulacan GTH enterprise: Because of limited resources, what is supposed to be a room in the house, or terrace, backyard, or dirty kitchen becomes a production area. They need not be told what a plant should be, where things must be placed, how workers should do their work. Call the system defective. But all they want is to produce the products the best way they know how at the least cost possible—typical of small and young enterprises. Relatives, friends, people in the community who are jobless commonly compose the workforce. Majority are women who have children to feed and send to school. Desirous to stay on the job, they do their best to meet the expectations of the enterprise. Unsurprisingly, Bulacan GTH members rely on free training to upgrade the knowledge and skills of their workers. They also depend on loans to finance most of their business activities. The products are marketed directly to end-consumers and to retailers on consignment basis. To augment revenues, they take advantage of participating in trade fairs whenever possible.
The riSKY road to success Is there a good side to the story of Bulacan GTH? Yes! Behind its constraints are tales of triumph. Four of its members have earned the Tatak Bulakenyo, a brand and quality seal awarded by the provincial government. These enterprises are Merr-C Embroideries, C&K Handicraft, FNB Craft, and RSJ Candle Factory. This
Bulacan GTH
79
was the result of the technical assistance in packaging, labeling, and marketing provided by the Provincial Cooperative and Economic Development Office (PCEDO) in cooperation with the DTI and the private sector. Members are cohesive and hardworking, and know that the quality of their products must improve to be competitive. But all they could do at the time was to resort to simple solutions like copying the designs seen on other products and publications. This did little to address their need, as there was a basic deficiency in facilities and manufacturing processes. Enrico Miguel, the president of Bulacan GTH Association, realized they could not fully respond to these problems by themselves. It was time to seek help. The DTI in Bulacan introduced the group to PBSP-BAP.
Bulacan GTH meets PBSP-BAP The condition faced by the members of Bulacan GTH provided the backdrop to map out the business advisory work plan. Resolved to employ a doable program at the right time to attain the best results, PBSP-BAP visited the enterprises to verify technical reports. The initial step undertaken was a strategic planning workshop conducted on May 24, 2006 to identify the felt needs and problems of the group and to draw up a plan to meet these needs. During the workshop, lack of competitiveness was identified as the major problem. The causes recognized were lack of knowledge in product development and quality control, inefficiency in production systems, and ineffective sourcing of raw materials. These limitations led to high production cost, low sales and low profit. After the strategic planning, seven enterprises applied for assistance in product development. Eventually, only four pursued their application—MERR-C, C&K, Wenrib and RSJ. Development Cluster.
80
Bulacan GTH
Collectively, they formed the Bulacan GTH Product
In no time, PBSP designed an assistance program on product development, including product quality improvement, new product conceptualization, design development, execution and developing prototype.
As a cluster, common
sessions would be provided by the Volunteer Adviser to the group in addition to the individual coaching that would be extended to address individual needs. Felizardo “Peji� Cipriano, Jr., a freelance architect and product designer, was the designated VA.
Wenrib Merchandising No less than the National Bookstore (NBS) is the exclusive outlet tapped by Wenrib Merchandising (WM) to distribute its products consisting of Christmas trimmings, Santa hats, Christmas wall decors, throw pillow, and a variety of gift items. Equipped with a single hi-speed sewing machine, compressor, binder, and spray guns, WM was born in 1992. After the retirement of Bethuel Sarabia, the proprietress, and her spouse at the NBS, they decided to embark on Christmas decormaking. The former colleagues of the couple at NBS made it easy for them to gain entry to several of its outlets nationwide. Aside from the Christmas decors, WM also retails school and office supplies in Malolos to augment the working capital. Given the reputation of NBS as a distribution channel, was business easy and lucrative for WM? Bethuel admits the seasonality of the products makes production unstable and sales limited. During lean months, the couple tries to create new product designs and improve existing ones. But the new ideas do not always work out due to limited skills and knowledge. WM knows it has to step up its capabilities if it wants to remain competitive. But how can it respond to such challenges in the face of inadequacy? WM found hope when it turned to BAP for support.
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MERR-C Embroideries Export International MERR-C Embroideries Export International is the largest and oldest among the members of Bulacan GTH Association. But the business did not start or grow big overnight. Proprietor Enrico Miguel and his wife simply wanted to augment family income when they ventured into subcontracting for a garments manufacturer in 1980. The next ten years were wrought by unpredictable and difficult trade due to meager capital. Enrico recounted that at times he and his wife had to walk just to save on transportation cost. Good fortune came in 1990 when they participated in a trade fair organized by CITEM. Fascinated with the embroidered products displayed by the Miguels at the exhibit, a buyer from Hawaii asked them to work on some samples of embroidered educational toys. The samples provided by MERR-C met the quality standard of the buyer and unbelievably in no time, MERR-C engaged in export. Currently, the enterprise exports 99 percent of its products to the USA and Europe. According to Enrico, importers provide the design and MERR-C produces the prototype which is then sent to the buyer for approval. Once approved, production takes place. What used to be a simple family-owned subcontracting business has turned itself into a diverse group of home-based subcontractors providing jobs and incomes to nearly 1,000 Bulakeños. From 2003 to 2006, sales doubled, demand increased, and more contractual workers were hired by many of the subcontracting firms—indicating a robust business. MERR-C Embroideries employs 26 regular workers, 20 of which are assigned to the production unit. Sixteen among the regulars are female. Behind the notable growth of the enterprise, Enrico recognizes the emergence of inevitable challenges. The quality of the existing products should be maintained, if not upgraded, he believes.
Monitoring of production is
becoming more tedious as the number of subcontractors increases. Likewise, product development is a major concern. MERR-C acknowledges it cannot fully respond to the aforementioned needs—reason why Enrico solicited the assistance of PBSP-BAP.
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RSJ Candle Factory The story behind RSJ Candle Factory is unique. Solita Agustin, the proprietress, started making candles in 2002 as a hobby.
But when she saw its
potential as a business, she began producing ordinary and processional candles with seven sacks of wax.
The candles were sold to retailers in public markets.
Sales were up during the holiday season from October to January. As the venture proved to be profitable, Sol decided to formally register the business with the DTI. RSJ makes itself visible in trade fairs. In the 2005 Likha Central Luzon Trade Fair, she was introduced to Pandayan Bookshop which took interest in her scented and decorative candles. From then on, delivery of the candles to five branches of Pandayan Bookshop in Manila and Bulacan was regular. RSJ also supplies products to gift shops and other walk-in buyers. In spite of the seasonality of the product, sales remain encouraging. Solita was not clueless in managing her business.
Although she is
employed full-time in government, she handles production and distribution pretty well. During lean months, production is distributed to stockpile inventory in time for All Saints Day. This she does often to keep the workers occupied and help them earn their bread and butter. She also builds inventory while the price of wax is low in order to gain the best profit margin. RSJ employs eight workers—six work in the production (four are contractual, two are regular), one regular employee is assigned to marketing and one to finance. Six out of the eight employees are female. While the business proves profitable, Sol confesses that she cannot maximize her delivery due to limited designs.
She considers this as a major
impediment to the growth of her enterprise. In the meantime, business is as usual. Why not! But in the long run, RSJ loses the opportunity to promote sales as long as the problem stays unsolved. On top of this, the workers who depend on RSJ for their livelihood are concerns that Sol cannot disregard. But she found relief when she heard of the assistance PBSP-BAP willingly offers to enterprises in need.
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C & K Handicraft C&K Handicraft was established in 1992 as an indirect exporter of papier mache, board boxes, and paper/board holiday decors to the USA. The workers assigned in production consists of 50 workers—37 female and 13 male. Of these, three are regular and 47 are contractual. Business was good and smooth since it took off 17 years ago until demand from the US dropped some years after, Alice Aniag, the general manager, recounts. Instead of brooding over the downturn, Alice pondered the local market. It was then that she realized the big potential of the decorative utility boxes in the Philippines. Surprisingly, the enterprise clinched deals with renowned shops as local distributors of C&K stuff. Among the current outlets are National Bookstore, Pink/Blue Soda, Body Shop, Bright Ideas, Notions, and Regalong Pambahay. New buyers were also found when they participated in Likha ng Central Luzon Trade Fair in 2000. Sales from 2003 to 2005 steadily maintained a 25 percent increase. While C&K is back in the mainstream after the decline in exports, the enterprise agrees it has to sustain its competitiveness in both local and foreign markets. This, however, entails hard work to improve the quality of the product, develop new product designs, upgrade the production facilities and processes, and expand the market. How can C&K address its growing needs when the workforce has limited know-how? Thus, without reservation, C&K joined the roll of those who wanted to avail of the services of PBSP-BAP.
The fruits of PBSP-BAP intervention The evaluation reports reveal that as a result of the PBSP-BAP assistance Bulacan GTH mebers were able to improve the quality of their products and apply the principles of product development and design. They developed prototypes and models which led to more toys, candles, handicraft and decorative items. These found their way to a well-established mall and bookstores.
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“Napakalaking bagay ang naitulong ng PBSP-BAP sa aming miyembro ng Bulacan GTH,” (The PBSP-BAP has immensely helped the members of Bulacan GTH) enthused a jubilant Enrico Miguel. “Nagkaroon kami ng dagdag na kaalaman sa paggawa ng bagong produkto maliban pa sa improvement na nagawa naman sa mga existing products namin. Ngayon, mas confident na kaming sumali sa mga trade fairs dahil mas marami na kaming designs. Hindi lamang kami natulungan ng mga training, maging sa financial. Sa mga pagkakataon na nakakasali kami sa trade fairs, ang laki ng nagagawa ng subsidy na inilalaan ng PBSP para sa booth. Kaya konti na lang ang nagastos namin.” (We have acquired knowledge in developing new products and improving our existing products. Now, we are more confident in joining trade fairs because we can exhibit more and better designs. PBSP has not just provided us training; it has also extended financial support. When we participated in trade fairs, we paid a minimal amount because PBSP subsidized a portion of the booth rental.) Alice Aniag and Bethuel Sarabia, owners of C&K and Wenrib, respectively, echoed Enrico’s affirmation of the effectiveness of the business advising. “Nadagdagan ang sales namin dahil tumaas ang orders. Kinakailangan din naming kumuha ng dagdag na tao para matugunan ang order ng buyers.” (Our sales increased because of additional orders.) Sol Agustin of RSJ also claims, “Nagkaroon kami ng confidence and competence after the training.” (We gained confidence and competence after the training). Wenrib and C&K were able to develop three new product designs and improve existing ones. Wenrib also discovered canvass cloth as a good substitute for styrofoam for some Christmas decorative items. This resulted in savings in raw materials. More branches of the National Bookstore (NBS) accepted the new products developed by Wenrib and C&K. Both enterprises are now supplying 60 outlets of NBS. Likewise, RSJ was able to penetrate NBS. It has been supplying 82 branches since a year ago. Sales notably increased by 20-30 percent, an offshoot of the favorable response of the market. Inventory was down to 10 percent. These are some of the concrete results attributed by the enterprises to the BAP.
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REQUEST FOR MORE PBSP-BAP ASSISTANCE The approach to service delivery used for Bulacan GTH was the ‘clustering method’.
In forming clusters, strategic planning workshops are conducted for
a group of potential cluster member enterprises either organized (like Bulacan GTH) or non-organized. Another feature of the PBSP-BAP intervention applied to Bulacan GTH was the conduct of a hands-on training-workshop plus one-on-one consultation with the cluster members. Both Bulacan GTH and PBSP believed there could be no method more effective in imparting knowledge than this. The needs of the cluster members may be similar, but the differences among their products made the one-on-one approach ideal and more practical. It also gave the members a feeling of importance when they were assisted individually. The intervention strategy drew the interest of the member-enterprises. They were convinced that for any program to prosper, the interest and the willingness of the target to listen and participate are always critical. The personality and the expertise of the VA also contributed to the strength of the strategy. After the product development cluster assistance, other member enterprises sought help in marketing plan development with emphasis on the domestic market and effective distribution channels. Lack of exposure particularly to the domestic market was one of the problems identified during the planning workshop. The request for assistance in this area was made more urgent by the downturn in exports due to the global crisis. Seven enterprises are currently being assisted in this ongoing assignment.
MOTIVATING THE ENTERPRISING BOP The PBSP-BAP assistance to Bulacan GTH reflects the Foundation’s belief in empowerment, which, in this particular case, provided a remarkable lift to the enterprises. The cluster identified product development to be a major need. Their need was met in the form of training and coaching. The learning that resulted was
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put into practice in their respective businesses and tangible outcomes were seen. The new designs caught the interest of buyers which paved the way to increased demand. To satisfy the additional orders, new workers were given employment. As market expanded, business improved. Jobs were created. This affirmed PBSP’s belief that an enterprising BoP is easy to motivate and satisfy. All it takes is to recognize their important role in the supply chain and build their capability to play that role effectively.v
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SELLING SEASHELLS TO THE WORLD Capiz Shell Phils., Inc. by Arlette Melgar
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T
he Tubilla family of Negros Occidental migrated to the province of Cebu in the early 1960s. Negros’ economy, being the sugar bowl of the Philippines, was
and largely remains to be agricultural. The family, however, has an entrepreneurial bent. Moreover, they set their sights to a distance much farther than the sugarcane fields of Negros. Specifically, they wanted to join the world market. The family, though, did not want to leave their home province completely. If it could be based in Cebu yet source raw materials for its enterprise from Negros, this would be a good combination. But what product could it source from Negros that would not be costly? The province is, after all, sugar country. After thinking the matter over, the family members decided not to look at the land resources in their home province but rather, at the sea. What could they source from the Negrense seas, process in Cebu, and then sell to the world? What could be harvested easily without regard for the seasons and don’t easily spoil? The answer was, seashells! But then again, what to do with the seashells? The Tubilla family studied the matter carefully then decided to literally pluck the seashells from the depths of the sea and bring them to the best tables, desks and bedrooms of fashionable houses worldwide. It then happened that the Tubilla family, assisted by 12 workers, established Capiz Shell in Cebu City in 1972. Its initial products were wind chimes of all shapes, colors and sizes which collectively became a hit in the local and export markets. The wind chimes are a familiar sight in the country, often majestically hanging from the ceilings of posh hotel lobbies and convention centers. The layers of shells cascading down the ceilings are colorful chandeliers that lend elegance to any reception hall. These chimes are the same welcome dÊcors prevailing in almost all resorts nationwide. When windblown, they exude a symphony that is pleasing to the ear. In their smaller versions, chimes may be found on doors of homes designed in the Filipino motif. With this winning product, the company experienced the boom in exports from the 80s to the 90s. It reached its peak export volume of four container vans a month during this period. Capiz Shell expanded its product line by developing designs that combined shell and brass, a combination now found in elegant candle holders, lamp shades and light diffusers. These were also produced in various shapes, colors and sizes. Market-wise, they were certified blockbusters.
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Capiz Shell then expanded its products to other kinds of table accessories, made from laminated, overlapping seashells. Thus, by 2002, Capiz Shell had already a modest but sure share in the USA, Belgian and Danish markets. Only five percent of its products were sold locally, and only to the wholesalers of Cebu. It was at this point that the owners purchased a 1,500-square-meter property in Minglanilla town, about 20 kilometers from Cebu City, and moved their operations there in 2004.
Purely handcrafted All seashell products are handcrafted, from segregation upon arrival to delivery. Capiz Shell fully relies on the artistry and manual dexterity of the Filipino worker. In the spacious production area that also houses a showroom, every step of the production process is done by hand. When the shells are unloaded, workers segregate the broken pieces by hand. Then these are washed repeatedly inside three roller washers lined with sponges and brushes. The shells are next wiped dry one by one, again by hand. Once dry, they are manually cut again according to the shape specified in the job order. When the shape required is round, the shells are brought across the street to the company’s 3,500-square-meter work area. Here, workers operate four fabricated giant punchers. Even if the shape required by the customer is not round, cutting is still done manually with the use of huge scissors. Needless to say, this stage of production results in shell scraps. After being cut to specification, the shells are brought to the corresponding department: wind chime, with village women flattening, gluing and pasting the shells together; soldering, for products combined with brass; or the lamination department, for table accessories. Once completed, the product is painted—each literally a work of art because this is again done by hand. For the wind chime particularly, the thousands of layered shells cascading in ballrooms and halls are amazing works of hand.
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Precisely because every step of production is done by hand, Capiz Shell found itself swamped with job orders. But here lay the downside. Because of this rather slow pace of production in contrast to mechanized methods, the company suffered production delays in 2005 when it failed to meet demand. This spelled potential tragedy for the business, as it does any business.
the downside opens doors Capiz Shell regularly participates in trade fairs and is an active member of the Cebu Gift, Toys and Housewares Foundation, Inc. where Roger Tubilla is an officer. The active work of the company with different institutions paved the way for Capiz Shell to meet PBSP-BAP and, together, to find ways to meet market demand. Capiz Shell was assisted twice by CESO-BAP in 2000 and 2004 in export marketing and product management, respectively. These helped a lot in improving production and in reaching the export markets. The CESO-BAP Expert Adviser introduced the in-house job scheme where raw materials preparation and finishing jobs, until now, are done within Capiz Shell’s compound while the rest of the work is done by subcontractors in their own backyards. The company also hired a Production Manager, Dave Villanueva, to oversee the entire production process. In turn, Villanueva introduced the line production system that further enhanced production capacity. Strict monitoring was made and quality control was prioritized by placing a supervisor on the production line. These improvements resulted in a 20 percent increase in production output. The client also made an improvised capiz cleaning equipment which made raw materials preparation faster by 200 percent. Sales increased dramatically from 2001 to 2005. The community was drawn into the vortex of activities when nearly 200 of the barangay population, mostly the poor and indigent but willing learners, were hired as workers. And because purchase orders kept coming in, the company farmed out its jobs to 125 home-based subcontractors. However, Tubilla was not satisfied with the improvement the company had gained so far because he was still experiencing delays in production. He consulted
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with the production manager and both agreed that the main cause of delay was the slow production of the subcontractors. Another factor was the manual system used in finishing. Tubilla thought that mechanizing some aspects of production could further improve productivity. In 2005, Capiz Shell again applied for CESO-BAP assistance and since PBSP-BAP was already operating in Cebu at that time, the latter took in Capiz Shell’s request. Capiz Shell sought help on addressing the problem of delay, and on reducing waste or using it for other products. PBSP-BAP deployed an industrial engineer, Leonardo Alindajao, to help Capiz Shell in late 2005. A productivity specialist of San Miguel Corporation in Mandaue City, Alindajao’s knowledge in production, machining and fabrication proved an asset to his assignment. He reviewed the whole of Capiz Shell’s production process, and bottlenecks were analyzed for appropriate solutions. Below are the findings: •
Transporting raw materials across the street was not safe. The VA proposed that raw materials cleaning and production be done on the same side of the street.
•
There was no specified soaking time of shells subject to the items for which these were being prepared. The VA proposed that soaking time rules be set per product.
•
Cutting of seashells was done manually and this took time. The VA proposed the fabrication of a huge puncher that could cut at least five shells at a time running on electricity.
•
Baking time of shell for the laminated products was not established. The VA proposed the development of baking time standards.
•
The finishing/painting area was not adequately ventilated. The VA proposed a well-ventilated painting room.
•
Moisture was found in some painted products. The VA proposed the installation of a moisture trap.
•
Packaging of finished products in plain boxes needed improvement. The VA proposed boxes with Capiz Shell logo or name.
•
Subcontractors were slow. The VA proposed the establishment of a performance monitoring system for subcontractors.
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•
In-house workers were slow. The VA proposed the conduct of a time and motion study.
•
Concept of production flow was not understood across the organization. The VA offered to conduct a seminar series on the “5S” principles of housekeeping.
Partnership in action For almost a year, the management of Capiz Shell in partnership with Alindajao held regular meetings to evaluate and act on the findings and recommendations. The technical knowledge of the VA was thus paired with the knowledge of Capiz Shell officers on the shop floor. Thus, the exchange of ideas was exhaustive and brought out the best on both sides. According to Villanueva, the recommendations of Alindajao served as an eye-opener. However, not all the recommendations of the latter could be immediately implemented for one reason or another. For example: •
Standardizing and mechanizing their production was a complex task given the nature of their business and its implications on cost.
•
Production was highly dependent on irregular job orders and specific requirements of clients. As such, standard soaking and baking time for shells could not be implemented. The company kept a low level of inventory; thus, all raw materials that come in were immediately processed.
•
Addressing the bottleneck on die-cutting, mechanization of the process was prioritized. Since there was no existing machine for it, Alindajao referred Capiz Shell to a fabricator, who customized a machine for them. After testing, however, Capiz Shell realized that the machine had to be adjusted since the shells broke. Unfortunately, the fabricator passed away before the machine was returned to him. In the end, Capiz Shell preferred not to pursue mechanization in consideration of the workers who would lose their jobs.
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•
Moisture trap was installed; however, Capiz Shell had to do it slowly because of plans to transfer the painting area.
•
Capiz Shell felt that the risk in transporting shells from one side of the street to the other was negligible since the area is a rural residential zone. The only huge vehicle that enters it is the company’s own delivery truck. Besides, there is not enough space for the transfer.
•
The marketing department thought that the protection of the products should be the priority in packaging rather than the printing of Capiz Shell’s name and logo on packaging materials, since the buyers re-packed the products anyway with their own trade marks.
breakthroughs On the other hand, management fully recognized that there was a need for a properly-ventilated painting room. Capiz Shell went beyond this recommendation and erected an open area where hand-painting is now done. The VA’s intervention brought to the attention of Capiz Shell owners the magnitude of waste products generated, and the need to maintain a clean and neat production area. This was significant to PBSP-BAP because prior to the intervention, this was a matter not seriously addressed by the company. Thus, the management unanimously approved the conduct of a “5S” Housekeeping Tool seminar for all Capiz Shell personnel from management to rank and file. For eight months, the VA conducted eight seminars on the principles and application of 5S for Capiz Shell. Everybody agreed that this was definitely a breakthrough in management’s awareness of the need for orderliness. To further address the waste management concern, PBSP-BAP sent another VA, Kevin Castillon, a consultant of an international manufacturer and supplier of testing technologies. He conducted seminars on ISO 14001 Environmental Management System and helped Capiz Shell secure the environmental clearance certificate and prepare the environmental management plan. As a result, Capiz Shell was able to get the Certificate of Non-Coverage from DENR declaring that the company’s operation is unlikely to cause adverse environmental impact.
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The heightened awareness on the environmental aspects of their operations led Capiz Shell to appoint Pollution Control Officers to continually monitor compliance with standards. The company also installed a dust collector and a dry-type filter in the production area. Workers particularly those directly working with chemicals and paints were provided with cotton masks. Where before, everyone found nothing wrong with the proliferation of seashell scraps around the property, employees became aware of the importance of proper waste disposal and maintenance of a clean and safe working environment. With Castillon’s insights, at least one percent of capiz cuttings that went to waste were used for other designs. Capiz Shell believes that its focus should be on the maintenance of a modest share of the export market. This it does by keeping operating costs to a minimum and creating new designs. To reach this twin-goal, it put on hold the construction of a new facility and instead, recently hired four industrial designers; likewise, it will soon launch its Research and Development Department to improve on existing products and develop new ones, especially on how to maximize the use of waste capiz in the new designs. Considering the rigor of conducting a time and motion study, Capiz Shell decided that the solution to the poor workers’ productivity was to outsource 80 percent of its production. This was done immediately, thereby eliminating the problem of slowdown as well as administrative burdens like performance monitoring. To help the subcontractors cope with the demand and requirements of Capiz Shell, PBSPBAP is now assisting the subcontractors in quality control and on-time delivery.
Job generation continues As a lead enterprise, Capiz Shell plays an important role in providing business to subcontractors and jobs to the community. So long as livelihood is retained and improved, PBSP says it would continue to assist Capiz Shell. Today, the bulk of production is subcontracted to different villages in Minglanilla town where it operates. Capiz Shell retains only 40 regular employees that handle 20
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percent of production. Because of the outsourcing model, the company, through its 55 subcontractors each of whom hires a minimum of 20 workers per job order, indirectly provides jobs to more than a thousand villagers. So long as seashells thrive in the seas of Negros, Capiz Shell will continue to transform seashells into works of art that are as much a gift to the world as they are a reward to the Filipino artisan and entrepreneur.v
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The Coco Coir Social Enterprise: Cashing in on Coco Husks
Davao Oriental Coconut Husk Social Enterprise, Inc. (DOCHSEI) by Mary Fe Arquiza
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A
fourth-class municipality with 31,000 people, San Isidro in Davao Oriental is one of those somnolent farming and fishing towns that struggle to stay
up amidst the continuous decline of agriculture. Poverty incidence is a high 53 percent and unemployment is at 60 percent. The province which is 150 kilometers away from Davao City, is a top producer of copra but is also among the top poorest 20 provinces in the country. Majority of the households in San Isidro and the rest of the province depend on copra production for their livelihood, which means that a good number of the people are unemployed many months of the year. When San Isidro ex-Mayor Justina Yu ended her three-year term as municipal mayor in 2001, she and her family set up an NGO called Kalumonan Development Center, Inc. (KDCI). Kalumonan is from the Mandaya, a local indigenous people’s dialect meaning brotherhood or sisterhood. As the town’s former chief executive, creating local jobs and alleviating poverty were always among her goals. Yu describes herself as an environmentalist and a waste manager. One time, she joined Margie Moran-Floirendo, a former Ms. Universe and a civic leader, in one of the latter’s coastal clean-up campaigns. While cleaning up the bottom of the sea, they found out that tons of coconut fibers gathered along with silt in the corals, killing marine life in the coastal waters. These were coconut husks probably carried by the flood to the sea. Yu saw that something useful and profitable could be made from this waste. This refuse from the two billion coconuts that Davao Oriental produces a year could surely help San Isidro. In 2003, Yu met Ma. Angela Villalba, the director of Unlad-Kabayan Migrant Services Foundation Inc., an NGO engaged in mobilizing migrant workers’ capital for job creation in the country. An opportunity for cooperation was discussed and a partnership was born. In 2004, they set up the Davao Oriental Coconut Husk Social Enterprise Inc. or DOCHSEI. KDCI donated 1.6 hectares from the Yu family’s land for the setting up of a coconut coir processing plant, while Unlad-Kabayan put in approximately half-a-million pesos for the purchase of machinery. The enterprise aimed mainly at improving the income-earning capacities of farmers and mothers by tapping into the economic potential of coconut husks and generating local and migrant investments for expansion and up-scaling of production. Yu revealed that the main purpose was handicraft production and there was no plan for it to become an export earner. Right from the beginning of the enterprise,
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the officers saw to it that the women of San Isidro benefited from the project. Yu and Villalba, two exemplary women who conceived the project, were strong advocates of women development who felt that women’s roles in the community’s development ought to be supported and enhanced. To augment family income earned from coco coir, they began an economic activity that would not get in the way of the mothers’ household chores. The handicraft project was thus set up to benefit 80 women. With the two women leaders at the helm, the handicraft project immediately gained support from their network of friends, advocates in business, and government. Their products found their way into trade fairs and exhibits on invitation from the DTI as well as in the NGO market that patronized women’s handiwork. A month after the launching of DOCHSEI, the potential for coco coir as a major export product became popular. It helped that all over the world people were turning away from synthetic products and going back to natural fibers for both household and industrial uses. Coco coir and coco fibers were discovered to be good alternative products. Coco coir is a highly valued product that fetches good currency in the export market. In the local market, a kilo of coir fiber costs around Php280. Coco husks have two main by-products: coir fiber and coco dust or coco peat. Coco dust is a by-product of decortications, the process of extracting raw fiber from the coconut husk. It makes good base for soil conditioning and fertilizer. Coir fiber, on the other hand, is used as stuffing for mattresses, furniture and other upholstery. It is also good raw material for brushes, rugs, carpets, doormats and twines With this opportunity, DOCHSEI moved from mere handicraft production to a bigger coconut-husk processing industry.
UNDERPRODUCTION At the onset of operations, the processing plant had a skeletal workforce of 10 workers trained in coco production. The initial phase mainly involved purchasing of coconut husks from some 23 farming households and processing these into coir fiber. A husk was bought at Php0.03 apiece if picked up from the farmer’s house and Php0.125 if delivered to the processing plant.
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The enterprise had difficult beginnings. Low productivity was a big constraint. The former decorticating machine could churn out only 200 kilos of coco fiber per day, way below standards. While orders for coco coir had gone up to as many as 12 container vans or more per month, the DOCHSEI could produce only three to four vans. On rainy seasons, husks were even less available as bad roads and muddy areas made hauling doubly difficult. Wet and muddied fiber translated to high moisture content and poor product quality. Actual output was thus 30 percent less than required or only 280 tons against the expected monthly output of 400 tons. After just six months into the venture, operations had to be suspended—a measure which project managers had to resort to every time losses were imminent. Operations went on and off, according to former Plant Manager, Rotchie Ravelo, as the company could not afford to incur so much loss. Low productivity was compounded by competition. There were three other privately-managed coir processing plants in Davao Oriental, one of which was owned by a Chinese-Australian businessman and could boast of modern equipment. Compared to these three companies DOCHSEI sorely lagged behind. It had no dust conveyor, resulting in its products’ higher moisture content of 60 compared with the others’ 20 to 30. While the other plants had more workers taking turns in three work shifts, DOCHSEI’s resources could finance only two shifts. As a result, it produced only one van or 252 bales a week versus the competitors’ two to three vans. DOCHSEI also had a problematic workforce. There were team leaders in the production line that performed below par, according to Ravelo. The workers were not conscious of standards, profit, or the threat of competition. Most did not even appreciate coming to work on time, having worked all their lives as subsistence farmers with no idea of meeting market demands. Quality assurance appeared beyond their ken. A recurring marketing problem, for instance, was poor product quality due to impurities and high moisture content. This means depreciated prices or returned deliveries translating to company losses. At the managerial level, job performance was just as challenging. The Plant Manager worked part-time as he was also a barangay captain and a consultant to the Provincial Governor. In fact, Benilda Rom of Unlad-Kabayan observed poor control and supervision as a major culprit in the woes of the organization.
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Interventions lead to achievements The problem of low productivity led DOCHSEI to the doorstep of the Canadian Executive Services Organization-Business Advisory Program (CESOBAP). Unlad-Kabayan had ties with CESO-BAP through one of its projects, the Ubi Convergence in Bohol, which was assisted in production and mechanization processes. In its case study, CESO-BAP cited the reasons for supporting DOCHSEI as follows: 1) the enterprise’s potential to help coconut farmers; (2) the environmentfriendly idea of turning waste into money; and (3) the potential to provide jobs to women through coco coir handicraft. In June 2006, CESO Volunteer Adviser Engr. John Connor was deployed to help DOCHSEI in assessing its production system and in measuring optimization of processing machines. Connor diagnosed operations problems involving production monitoring and control and provided corresponding recommendations. Specifically he focused on product quality and drying efficiency; scheduling of raw materials and monitoring and evaluation. He conducted a time and motion study, which resulted in the setting of standards for each phase of production. This led to minimized waste. The CESOBAP Evaluation Report in 2006 listed Connor’s recommendations as follows: (a) improve the whole production process from husk hauling down to the baled coco fiber; (b) use of scheduled pick-up mapping with the farmers to make them aware of their respective schedules; (c) use of a trailer truck to boost pick-up capacity for coco husks or to set up an emergency stock pile during harvest while the truck runs on two shifts; (d) improve working conditions; (e) install baffles in the retting tank to prevent husks from moving behind the conveyors; (f) lower the load end of the conveyor and install submersible bearings on load end to smoothen self-loading; (g) replace standard knots with a torque prevailing type for the decorticating bars to reduce frequency of tightening; (h) build a concrete dryer; (i) enclose the screen and feed warm ambient air through ducts to the screen during to the screening process; (j) put up a storage area as a production buffer for the dried fiber prior to baling; (k) store baled fibers on blocks and use electric transtaker with fork extension for easier storage and loading of the finished goods; (l) use roller flight conveyors of finished products to trucks; and (m) set up a production monitoring system to measure output at certain points of the process so they can plan or target
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the output. The focal points of his recommendations were work upgrading and the purchase of new machines. By that time, the CESO-BAP project was at its completion stage. DOCHSEI needed more assistance and thus sought the help of PBSP-BAP, which by design would succeed the CESO-BAP. PBSP-BAP deployed Engr. Robert Quinto, President of Jhaymarts Industries, as the Volunteer Adviser. Quinto conducted an analysis of the production processes and introduced interventions and new methods of work improvement. Validating Connor’s findings, he introduced innovations, among which were developing a Manual of Operations and formulating a personnel plantilla system complete with individual job descriptions and output quantification, installation of work measurement standards and operations methods. An incentive scheme was likewise put up, boosting the morale of the workers. Following the recommendations, DOCHSEI’s upgraded its technology and installed new methods of work. In September 2006, a higher-capacity decorticating machine and a baling press were purchased with the help of the Canada Fund for Local Initiatives. Commercial production immediately improved from 200 kilos to 2,300 kilos of fiber in eight hours. A marked improvement in the recovery rate during dehusking was also achieved. Where before ten husks were needed to produce a kilo of fiber, now only eight husks were needed for the same period. Baling capacity likewise improved, from two bales per hour to 4-5 bales. Other productivity accomplishments were: a 50 percent improvement in baling efficiency, a 121 percent increase in sales, an increase in drying capacity, a decrease in loading time and labor needed, among others. Absorption capacity of the processing plant was at 4,500 coco husks per hour. This was for a 16-hour daily operation for six days a week producing 3.5 tons a week. There was also an increase by 34 percent in production output between 2006 and 2007, and there were more exporters that linked with DOCHSEI. The geotextile nets (or geonets) used for soil-erosion control or road-slope protection, and other products also expanded market. Business was so brisk that by 2007, a total of 115 farmers in four municipalities of Davao Oriental were earning Php600 every month in supplemental incomes from selling their coconut husks to the company. The handicraft project was also reaping from the success of coco coir. Thirty-five women were engaged in producing coco fiber-based products like twines, flower
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vases, rugs, curtains, hats, among others. Women earned as much as Php115 a day at the peak of production. Improvement in plant operations also included increasing production personnel from the initial 10 to 16 people, who were hired on a full-time basis. This included the manager, the team leaders of the production sections and the administrative staff. Wage earners also increased to 70. This brisk period following the series of interventions in 2006 was reflected in the company’s yearend report: “As of December 31, 2006, DOCHSEI counts a total asset size of Php5.4 million and gross annual revenue of Php4, 464,813.77.” Manifold support generated by DOCHSEI was evident. Parties who made it easier for DOCHSEI to worm through the venture included the local government unit, the DOST, the Department of Labor and Employment (DOLE), the Department of Agriculture (DA) and the DTI. One fourth of the cost of the dryer, for example, was funded by a loan from DOST payable in three years.
A balance between production and marketing Despite improvements in production, DOCHSEI felt it needed more help, this time in marketing. Thus, right after the completion of the first assignment it once more enlisted PBSP-BAP support in the marketing of coir fiber including improving the women’s handicrafts, which, for some time, had not been doing well. In fact, Unlad-Kabayan infused an additional Php1 million to keep it afloat. Earlier, seeing the unsold goods, Quinto advised them to abandon products that did not sell. He said, “One should not fall in love with one’s products. If it’s obsolete, it has to go.” Yu, however, was convinced that the handicraft project should remain; she was confident better times were on the horizon. In January 2008, Manuel de Luna and Bernardo Luis Alejandro, freelance consultants, were assigned as VAs to help DOCHSEI prepare a marketing plan. Farmers and other farm workers were trained in the rudiments of marketing. They were intensively briefed on the importance of financing and effective marketing. With these inputs, the potentials of the coconut products became evident. For example, an important product that shows strong market potential is the geo-
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textile whose use is encouraged by the Department of Public Works and Highways. DOCHSEI is the sole distributor of geonet to the municipality of Varuela, Agusan del Sur, and has sold the latter at least 1,600 meters or some Php84, 480. It has also supplied the municipality of Talacogon in the same province some 36 rolls at Php2, 705 per roll. Processing of coco dust into fertilizer was also conceptualized together with the DOST and the Davao Oriental College of Science and Technology. The municipal government has allocated Php1 million for the purchase of biofertilizers from DOCHSEI.
AGAINST THE ODDS Despite its difficulties brought about by limited funding and the precarious balancing between being a social advocate and earning profit for its survival, DOCHSEI has demonstrated the viability of an agriculture-based social enterprise in a poor, rural setting. A big market exists that rural women can tap to earn from the natural resources that come to them practically as nature’s gift. In tapping PBSPBAP to help them work and produce better, look at their financials more meticulously, and market their products more efficiently, the women and the coconut farmers in San Isidro are convinced that they are on the right track in turning coconut husks into the cash they very sorely need to improve their lives.v
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Organic Rice Trading: An Enterprise with a Heart Mindanao Agri Network Corporation (MANCOR) by Mary Fe Arquiza
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rofit earned is optimized to support other well-meaning projects—nurturing producers, caring for the well being of the consumers and ultimately gaining
revenues. This is what is meant by an enterprise with a heart. This was the concept that brought forth the establishment of the Mindanao Agri Network Corporation (MANCOR) in 2001. MANCOR is a spin-off enterprise of the Technical Assistance Center for the Development of Rural and Urban Poor (TACDRUP), an NGO based in Davao City, which has been into organic farming advocacy since 1992. Its Board of Directors realized the limitations of being an NGO and decided to form a corporation to manage its organic rice business. MANCOR has a separate BoD where TACDRUP is represented by the chairman and the executive director. One of its objectives is to generate funds to finance some of TACDRUP’s projects. MANCOR’s main product is organic rice, with a production capacity of 2,000 bags per month. It also generated income from milling (at Php35 per 50-kilo bag) and drying fees (solar drying at Php5 and mechanical drying at Php6, per bag). Since its beginning, MANCOR has been servicing Davao City, Davao del Norte, Davao del Sur and Magsaysay. It has a rice mill and a warehouse with a storage capacity of 50,000 bags in a 4.85-hectare property at Sinaragan, Matan-ao, Davao del Sur. The rice mill has an efficient recovery rate of 58 to 64 percent per sack compared to the 58 percent or below of other mills. The drying area measures 1,200 square meters with a capacity to stock 800 bags of palay. It has a 40-ton capacity mechanical dryer, with a six- to eight-hour drying time imported from Denmark. It has four silos and a sensor that detects full drying. MANCOR claims to have the best rice mill in Davao del Sur and one of the best mechanical driers in the whole world. The Nature Farming Technology System (NFTS), a Korean organic farming technology, was adapted by TACDRUP in producing organic rice as a better alternative to more expensive chemical fertilizers.
Struggling with generating capital Based on MANCOR’s business plan, the organic rice trading business requires Php50 million capital for it to operate on a scale that will make it viable. However, investments did not come in for MANCOR.
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Members of the BoD were encouraged to invest money to augment capital. Lito Lorenzana, BoD Chairman, however, was the only one who complied by investing Php5 million. Likewise, the people’s organizations (POs) that TACDRUP works with were invited to put in a 25 percent stake in the corporation. A socialized scheme of Php0.10 equity from the Php0.25 premium per kilo of rice milled was even offered to the POs to simplify investment. But all these did not materialize. Elmer Te Eng Fo, former General Manager, attributed this to the lack of readiness of the organizations to embrace corporate practices. As an alternative capital generation strategy, Lorenzana attempted to link Te Eng Fo with different banks, but the latter was frustrated. The first question often thrown at him by a bank loan officer was MANCOR’s capacity to provide collateral. Its post-harvest facilities that were acquired through a Php25 millionloan from the Integrated People’s Livelihood Cooperative System (IPLCS) in 1991 had to be surrendered to the Technology and Livelihood Resource Center (TLRC) because of defaults in payment arising from the organizational problems faced by IPLCS, which ended up releasing to TACDRUP only Php5 million. The TLRC then took over the project from IPLCS. In turn, TLRC offered the facilities for rent on renewable terms to MANCOR at Php50,000.00 monthly for a period of ten years.
Finding the niche As if this were not enough, MANCOR also faced organizational problems. At the start, MANCOR operated with one full-time and four part-time personnel. These were the general manager, finance officer, rice mill in-charge, cashier and marketing officer. Most of them were personnel of TACDRUP extending special functions to MANCOR. Te Eng Fo admits he was ill-prepared to accept the position. In 2001, he was all set to settle in the United States, if not for the death of his wife. He was more adept with NGO work and enterprise development was not his turf. But the resignation of the previous general manager of MANCOR forced him to accept the appointment with great hesitation.
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In 2003, a seminar on marketing sponsored by TACDRUP’s funding partner, OXFAM-NOVIB, awakened Te Eng Fo’s entrepreneurial spirit. His goal was to produce a product unique from the rest. He realized that unpolished rice could make his organic rice different from the well-milled rice. Thus, the more nutritious organic brown rice became MANCOR’s core product. But packaging brown rice in sacks became a problem. The fragrance and sweetness of the organic brown rice were attracting rice weevils, reducing the shelf life of the product to two weeks. In December 2003, Te Eng Fo experimented with vacuum packing. The new technology improved the packaging and extended shelf life up to six months. There was another problem: Organic rice had difficulty attracting customers. The real market is the A and B segments. With a restricted market, the target break-even volume of 500 bags per month was not achieved. It had to be actively promoted. However, there was no budget for promotions, so the marketing was made through the NGO network. Strategies that were adopted to attract customers were the distribution of fliers, the conduct of rice testing at the Lions’ Club International, and media work. These efforts, however, did not translate into sales. Worse, limited market share was being threatened by the entry of new players in organic rice trading. In 2004, two shopping malls in Davao City carried MANCOR’s organic rice. Although there was regular supply organic rice, sales continued to drop. Even establishing repeat sales from new customers was tricky. In some cases, ill-prepared brown rice that resulted from the customers’ failure to follow cooking instructions discouraged buyers to reorder. The fluctuating price of un-milled rice was another threat to the enterprise. Sometimes un-milled rice was bought at higher price from the farmers, but by the time it was milled, the price of grains had unexpectedly dipped. This brought additional losses to the struggling enterprise. The practice of providing premium prices to organic rice farmers also affected the cost of the product. Premium price was given to rice farmers that shifted to organic rice farming to serve as buffer fund for the three supposedly losing seasons during the transition period. But even after crossing the transition period, organic rice farmers were still clamoring for premiums. Some farmers had the misconception that an organic-rice trader was obliged to pay them extra for engaging in organic farming.
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As can be gleaned from the following table, MANCOR’s sales heavily dropped from 2002 to 2004. DOLE-Tropifresh, a big customer in 2003 which bought palay and exported milled rice to Japan, stopped exporting due to the rice exportation policy of the National Food Authority (NFA). Moreover, MANCOR could hardly sell its product to the local market. Table 11. MANCOR Sales Report, 2002-2004 2004 (in Pesos)
2003 (in Pesos)
2002 (in Pesos)
Sales
1,603.634.31
4,227,268.25
2,929,025.84
Cost of Sales
1,930,191.07
3,767,198.35
2,287,952.72
Administrative Cost
1,229,008.58
1,109,404.44
1,286,881.65
Net Loss
(2,850,708.21)
(1,295,142.87)
(645,808.33)
(62 %)
44 %
-
Percentage Increase/ decrease of sales
Source: PBSP-BAP Business Diagnostic Report.
The novice entrepreneur was groping. Te Eng Fo felt that his deficiency in marketing worsened the situation. Problems came from all directions, most of which were incomprehensible to him. To top it all, he felt he did not know how to strategize.
A shot in the arm In 2005, Te Eng Fo found help in PBSP-BAP. He needed help in preparing a feasibility study for MANCOR to access loans. However, the PBSP-BAP business diagnosis revealed that MANCOR’s main problem was its inability to properly identify the market for organic rice, thus the difficulty in coming up with a concrete plan to penetrate the market. As a result, the development of a marketing plan was agreed upon instead. Oliver John R. Tiu, a marketing expert and owner of Mik’s Ideas (a marketing firm), was designated Volunteer Adviser for the engagement. Tiu unearthed numerous problems confronting MANCOR, namely: (1) lack of consistency in
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branding and identity; (2) lack of distribution channels and sales agents to boost sales; (3) high pricing which affected the competitiveness of the product, (4) lack of promotional tactics to increase demand; (5) no separation and job description of sales and marketing functions; (6) no document to measure actual product movement on per month, per outlet, per size-kind-unit (SKU) bases; and (7) no business plan to guide management as MANCOR was operated like an NGO. Three weeks later, Tiu further discovered that MANCOR suffered from supply limitation that he deemed crucial. Tiu thus recommended the following: (1) conduct promotional campaigns; (2) explore C, D and E market segments to improve market bases; (3) tap other institutional buyers and food outlets apart from malls; (4) hire employees other than those loaned by TACDRUP to avoid dual reporting; (5) adopt product mix; (6) study pricing structure; and (7) do volume discounting. From Tiu, Te Eng Fo learned that an enterprise survives through its customers. He learned the concept of product mix that enlightened him on his inability to sell affordable organic rice to the poor. Armed with fresh insights, he sorted out broken rice from ordinary rice, packed it separately, priced it relatively lower and sold it to local retailers. Tiu also observed the under-maximized post-harvest facilities of MANCOR. Vacuum packing service was not considered a profit center. The one-kilo packaging also needed to be enhanced. He outlined the consequence to MANCOR, citing that a profit center was in fact operating as a cost center.
In
addition, Tiu recommended establishing relationships with the farmers. As a market consolidator, MANCOR could improve the lives of farmers by increasing their production volume. Following Tiu’s recommendations, MANCOR engaged two additional personnel to handle sales and promotions. One was paid by MANCOR and the other was loaned by TACDRUP. The two marketing officers started four new outlets in Davao City, in addition to the previous two. Packaging was improved from one kilo to five kilos. Sales considerably increased to Php662,355.00 with a profit of Php87,093.66 in 2005. It was the first time that MANCOR recorded positive profit in its organic rice trading venture.
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In 2006, the proposed Amway deal would have given MANCOR the most exciting development arising from Tiu’s assistance. Top marketing officers of Amway, a global multi-level marketing company, visited Davao City and noticed the organic rice of MANCOR. An exchange deal was proposed: MANCOR would supply Amway with organic rice; in return, MANCOR would market Amway’s organic fertilizer. There was a long discussion by the Board over this proposal. Ultimately, the decision was for MANCOR to decline the offer, as the Board feared being “devoured by big business,” detrimental though the decision was to the enterprise. Despite the setback, a few changes were adopted, like diversification of product lines, expansion of distribution channels and hiring of sales personnel. In the newly formulated marketing plan, MANCOR outlined its goals of mainstreaming the organic rice market, and making the organic rice market sustainable for farmers. With marketing in place, Te Eng Fo pursued his original plan of accessing additional capital for MANCOR’s operations. Tiu likewise recommended business planning to establish MANCOR as the marketing arm of TACDRUP.
Meeting obligations Business planning, thus, was the second assistance given by PBSP-BAP to MANCOR. Stephen Antig, a CPA and Vice President of AMS Group of Companies, was the assigned Volunteer Adviser from July 2006 to January 2007. Antig’s first observation on MANCOR’s product was its relatively high price.
He also believed MANCOR needed assistance in sourcing additional
funds and paying off loans. He recommended availing of credit from Philippine Development Assistance Program (PDAP), an NGO assisting organic farmers countrywide; afterall, MANCOR was part of the cluster formed by PDAP and was identified as a local market consolidator for organic rice. Like Tiu, Antig saw gaps in economies of scale. To be viable, MANCOR must concentrate on organizing organic rice farmers and helping in their production. The estimates showed that MANCOR needed to sell 1,000 bags of organic rice monthly to meet its obligations. MANCOR’s strategy was to “buy
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all, sell staggered.” Antig likewise recommended the preparation of a GANNT chart to reflect the schedule of buying, processing, selling and collection over a three-month period in order to program bank payments. He also encouraged MANCOR to issue cash-flow statements. In corporate practice, Antig stressed, debt repayment is an indicator of good credit standing. In 2008, as a result of Antig’s intervention, MANCOR produced a business plan that gave it access to a Php5-million non-collateral loan from the PDAP loan fund. TACDRUP, the mother company of MANCOR, also signed a Memorandum of Agreement with the Municipality of Magsaysay for the milling of MagRice from Magsaysay. This meant a steady flow of business for the enterprise. In September 2008, Sylvia Lorenzana, a retired banker and wife of TACDRUP Chairperson, took over as the new General Manager of MANCOR and infused an additional investment of Php1.5 million. She is assisted by four fulltime personnel including a salesman, cashier, warehouse man and general services manager. Lorenzana envisions a professionally run corporation where every cent could be accounted for. She wants MANCOR to be the leading distributor of organic rice in Mindanao. Her goals are to improve sales, meet obligations and apply corporate values and discipline in the day-to-day operations of the company. As for product promotion, she wishes to capitalize on the current wave for healthy lifestyle and organic foods. Her first achievement was the maximization of the use of the company’s post harvest facilities; thus, the milling contract with the NFA. She expects TACDRUP to fill in the organizing of farmers to ensure a steady supply of organic rice. As for increased sales, Lorenzana sees great potential in establishing partnerships with local government units that can help MANCOR to market its products. The LGUs can support organic rice farming adaptors by providing them incentives. There are also opportunities in new products from organic rice. With production and sales in place, coupled with corporate discipline, Lorenzana believes MANCOR can meet obligations.
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MANCOR recognizes its great turn-around potential and is taking steps to be a market leader. It is determined to address its needs for capital generation, product innovation, product diversification, and expansion of profit centers. A business plan shall be prepared that shall ensure that all aspects of a new product are looked into. Organizing efforts shall center on the benefits that would redound to those involved in the organic rice value chain rather than on dangling projects and providing premium prices. Marketing shall be redesigned to emphasize the establishment of appropriate strategies to increase sales. Promotions and proper branding should generate easy recall. Institutional buyers shall be boldly explored to generate volume sales and increase the current set of buyers. MANCOR shall take advantage of the “iron fortification law� in its promotional campaign. It will also support the production of organic fertilizers to ensure the availability of this input and expand the base of organic farmers. With these initiatives in place, MANCOR is on the road to becoming the lead distributor of organic rice in Mindanao—with a heart.v
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Chapter IV Conclusion: BAP for the BoP
Chapter IV
Conclusion: bap FOR THE bOP The preceding chapter on nine enterprises demonstrates how the enterprising BoP can be tapped as both a potent and creative investor in production and economic improvement, and a community force that can contribute to uplifting the community at large.
This chapter reviews the cases and
identifies lessons that can be applied when helping the enterprising BoP.
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Potent Tools for Creating Wealth: The Cases as Social Enterprises Five of the enterprises began chiefly as “social causes” in that they were put up mainly to help a particular sector improve the quality of life of its members through an economic activity. These include the NFCPWD and the AMCHAMPC for persons with disability, KATAKUS and DOCHSEI for women and the environment, and MANCOR for rice farmers. On the other hand, four began chiefly as for-profit enterprises, namely, Bulacan GTH, Lailen’s Pastries, Tienda Boholana, and Capiz Shells. If social cause and profit orientation were seen as opposite ends of a scale, one would notice that as they progressed toward their vision and goals, the enterprises took more notice of one end: the social causes became more concerned about their profitability and sustainability, while the for-profits became more aware of the contribution they could make toward the poor in their communities. In pursing their original orientation, they moved toward the other end of the scale as well. This observation strongly suggests that MSMEs can indeed be potent tools for creating local wealth. This should not be lost on those who wish to help both the MSMEs and the BoP. Profit can be a social good; at the same time, a social cause can be a viable source of income.
The Inputs They Need As mentioned in Chapter I, the following framework was used in reviewing the cases:
DESCRIPTION
> > > >
Operations Inputs Throughputs Outputs
ANALYSIS
> > > >
What worked What didn’t work Facilitating factors Hindering factors
THEORY BUILDING
> Lessons learned > Insights
Fig. 1: Theoretical/Conceptual Framework 120
Chapter IV Conclusion: BAP for the BoP
MODELING
> Recommendations
Input refers to the assistance or interventions provided, Throughput refers to the means or methodology to deliver the Input, and Output is the result of the Input plus Throughput. The cases prove that there was a fit between the Input and the Throughput, resulting in a favorable Output, as evidenced by the End-of-Project reports of CESO and CIDA (2008). The table below shows the interrelationship among the three factors. Table 12: PBSP-BAP Process Framework INPUT • • • • • • • • • • • • • • • • •
Marketing Product Design Packaging Improvement of Physical Plant Quality Control Product Research and Development Inventory Control Marketing Tools and Strategies Management Processes Financial Controls/ Management Product Inventory Project Proposal/ Feasibility Study Preparation Preparation of Manuals Strategic Planning Utilities and Equipment Management Quality Control Personnel Policies/Wage Administration
THROUGHPUT •
•
Clustering Approach (Lead Enterprise, Lead Product, lead Operating Result,) Modalities of Assistance (Business Advice, Institution Building, Linkage Building or Referral)
OUTPUT • • • • • • • • • •
Improved production/ operating procedures and processes Improved capabilities of managers, supervisors and staff Improved marketing plans and strategies Access to financial resources Improved organizational practices Production of strategic plans Availability of products in the market Generation of new jobs Increased sales Improved income
Adapted from CESO End-of-Project Evaluation (2008)
It is worth noting that the inputs provided to the cases studied are representative of the inputs given to the other enterprises assisted by PBSP-BAP. Diagnostic reports show that without exception, these were the kinds of input the clients articulated as their priority needs. Thus, it may be said that these are inputs most likely to be needed by beginning MSMEs and, by extension, the enterprising BoPs. Chapter IV Conclusion: BAP for the BoP
121
The THROUGHPUTS The Throughtputs may be grouped under two categories: Approaches and Modalities of Assistance. Approaches refers to the channel used in reaching out to the clients. As described in Chapter I, these include Clustering or the grouping of enterprises according to Lead Enterprise, Lead Product, or Lead Operating Result. Among the cases, Bulacan GTH is an example of Lead Operating Result, while MANCOR is an example of Lead Enterprise. Modalities, on the other hand, refers to the method or manner in which the assistance was provided. The three major modalities adopted are described below. Business Advice. This refers to interventions given directly to improve the enterprise via the services of the Volunteer Adviser (VA). More commonly known among the clients as mentoring, this was a face-to-face, on-the-job and on-site assistance given, in contrast to formal classroom and academic training. Table 12 summarizes some of the kinds of business advice requested and provided. Note must be made that these inputs were not mutually exclusive but in complementation with one another as needed. The cases demonstrate that these inputs were much sought after and appreciated by the enterprises. Again, as these are representative of the requests made by other participants to the PBSP-BAP, it can be said with high certainty that these are also needed by enterprising BoPs. Institution Building. Aside from business advice, the enterprises also benefited from the Institution Building interventions, which refer to strengthening the organization or the sector, mainly through formal and structured learning activities such as classroom-type training, seminars or workshops. Examples are the strategic planning sessions for the Bulacan GTH cluster, as well as the financial, organizational, human resource management, marketing, feasibility study and proposal writing workshops given to the cases studied. These interventions improved not only the manager or staff concerned but the whole enterprise and the other actors in the value chain as well. Vice-versa, Institution Building was an adjunct to Business Advising.
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Linkage Building. One of the methodologies that the entrepreneurs said they highly appreciated in PBSP-BAP was the linking of their enterprises and their organizations with markets and donors. Beginners as they were, they benefited from meeting groups that could use or buy their products or help them financially or technically. As such, Linkage Building was an important complement to the Business Advice and Institution Building modalities. In this methodology, the assisted enterprises were introduced to institutional buyers, helped in accessing support services from government agencies and LGUs, or linked with financial institutions. It helped that both PBSP and the VAs had favorable relationships with these groups and found it in keeping with their role to assist the enterprises in this manner. The commonest institutions approached were malls and supermarkets, bookstores, donor agencies, line agencies, and local government units.
The OUTPUTS The major outputs of the PBSP-BAP are summarized in Table 12. Improving their performance based on their needs and refined by the diagnostic assessments, the enterprises achieved to a great extent their objectives in seeking assistance: Lailen’s improved its plant, redefined its process flow, lengthened the shelf life of its products, and improved its compensation scheme; MANCOR increased its outlets and sales and accessed loans; DOCHSEI improved its plant layout, mechanized its operations, and improved its organizational structure; Bulacan GTH increased its visibility and sales by coming up with new designs and exploring new markets; Tienda Boholana likewise developed new products and increased its visibility to new markets; NFCPWD and AMCHA-MPC were able to sustain their contracts by improving their organizational and financial systems and tapping appropriate government line agencies; Capiz Shell continues to improve its plant operations and processes; and KATAKUS is well on its way to making its social vision sustainable by improving its business operations that led to a more productive workforce and improved production. In sum, these are increased production, increased sales and income, improved products, tapped new markets, generated employment opportunities, and accessed funding.
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Of course, there is the unspoken sense of accomplishment and satisfaction which is a critical factor in improved business operations.
The FACILITATING FACTORS What facilitated the success of the PBSP-BAP? The cases point to the following. 1.
The program scheme itself. The entrepreneurs in this study all mentioned that a major factor that contributed to their success was the PBSP-BAP itself. It is needs-based, customized according to the needs and unique characteristics of the enterprise, made use of local experts, and was provided only after thorough diagnosis of the business needs. In the case of the Bulacan GTH Cluster where the clustering approach was most evident, still, there was one-on-one advising given to the cluster members to meet their specific needs.
2.
The interest, sincerity and empathy of the VA. The enterprises unanimously agreed that one facilitating factor was the interest, commitment and empathy of the VAs. They were motivated to adopt recommendations because they sincerely believed that their VAs took their interest to heart.
3.
Their own openness to advice. The cases demonstrate that the entrepreneurs listened to the advice of the VAs and, in most cases, implemented them. Exceptions were when the recommendations were not feasible due to specific limitations, as in the cases of Capiz Shell (the technological innovations were deemed too sophisticated for them), DOCHSEI (because of financial constraints) and MANCOR (because of the reluctance of the Board of Directors to work with a big marketing network). In the other cases, though, the recommendations were religiously followed because they were found feasible and within their means to implement. Listening to advice enabled them to engage in dialogue and collaboration in and outside their organization, with their peers and others in
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their sector, and the community at large. It also motivated them to recognize the value of research and use the findings for business improvement. 4.
Results-oriented business advice. Advice was followed because it led to demonstrable results: improved marketing, access to market, product visibility, longer product shelf-life, access to funds, improved physical layout, more motivated and efficient workers, lowered production costs, and, in general, increased sales and profitability. These were among the immediate results mentioned that the entrepreneurs could directly attribute to the PBSP-BAP.
5.
Affordability of the assistance. The entrepreneurs summed up the affordability of the business advisory in this wise: they were able to get affordable assistance from experts at the least cost. They believed they enjoyed expert advice from recognized practitioners and experts.
6.
After-care service. Two factors enabled the PBSP-BAP to provide this. One is PBSP itself as a local organization with the expertise, organizational system, the financial means, the pool of resource persons, and the network of corporations that it could tap for such a program. The other is, as mentioned earlier, the concern of the VAs for the enterprise to succeed. It must be remembered that the VAs are volunteers; perhaps it is precisely because of this that the PBSPBAP was able to recruit only the best and the most motivated to be part of the program.
Hindering Factors While the program was evaluated successful, three hindering factors were prominently identified by the interviewees: 1.
Conflict in schedule, limited time of advisers. The entrepreneurs all agreed that the technical assistance would have created more impact in the enterprise if the VAs were able to share more extended time with them. But because they were also holding full-time jobs,
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the volunteers could only devote so much time. The entrepreneurs recommend longer durations of assignments. 2.
Limited resources. One of the reasons why the recommendations could not be implemented immediately was the unavailability of resources at the time they were needed. This was brought about chiefly by lack of financial resources to acquire them or their unavailability in the market.
3.
Recommendation does not seem to work. In the case of Capiz Shell, the recommendations were not wholly followed because they appeared too sophisticated, and too costly, for the size of the enterprise. In this case, PBSP-BAP listened and relented. In the other cases such as MANCOR and DOCHSEI, the reluctance to engage in new practices appeared to be more of a result of the conservativeness of decision makers.
The Pbsp-BAP for the BoP Writers (such as McClelland, Collins and Moore) on entrepreneurship generally agree on the qualities of a successful entrepreneur: high achievement motivation, the urge to build, risk taking and openness to experience, optimism, passion, persistence and determination, willingness to listen to advice and to submit to authority, and positive thinking (Wikipedia 2007). In enterprise creation, comprising its Co-Creation Logic, the SecondGeneration BoP Protocol (Simanis and Hart 2008) lists nine inter-related stages that are key to the success of co-creation: business concept co-creation, building deep dialogue, project team development, collective entrepreneurship development, business prototype co-creation, building shared commitment, new capability development, building the market base, and business enterprise co-creation. The enterprises and the entrepreneurs in this study strongly appear to validate these observations about these characteristics and stages. The more successful ones demonstrated a strong leaning toward these characteristics and qualities, while those experiencing some difficulties either did not feel confident
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Chapter IV Conclusion: BAP for the BoP
to take risks or were reluctant to try a new experience. Success came because of experimentation, building new capabilities, shared commitment among entrepreneurs and workers, consultation on new designs, products and markets, and above all, building a market. The cases show the synergistic interplay between these characteristics and stages and the customized, focused and committed business advisory program. While most of the entrepreneurs possessed many of these characteristics and most of the enterprises were going through these stages, they were largely unrecognized and therefore untapped. The PBSP-BAP, with its systems and resources, and the VAs with their expertise and passion to help, mirrored these to the entrepreneurs and nurtured them to fruition that led to the blooming of their enterprises. In the process, it has helped the enterprise, the workers, and suppliers of raw materials. The cases have also shown that there is a need to expand this affordable kind of assistance, as articulated by the entrepreneurs themselves. What it needs to strengthen, as itself admits, is its monitoring system to track down improvements in business practices and incomes, which are its primary objectives. It is also taking the right track in including ecological awareness in its assistance package, given the growing precariousness of the environment, which is practically the lifeblood of many MSMEs. Indeed the PBSP-BAP has proven that a sustainable market solution to poverty works, that MSMEs, which comprise about 99 percent of the country’s industries are a potent force for creating local wealth that can benefit the BoP, and that the BoP, as the bulk of the world’s population, have the ability and the willingness to create the wealth they need not only to be good and loyal consumers but, more importantly, to unshackle themselves from the prison of poverty.v
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References Boyer, Nicole. (2003). “The Base of the Pyramid (BoP), Perceiving Business from the Bottom Up.” GBN Working Paper, May 2003. Global Business Network. Bureau of Small and Medium Enterprise Development, Department of Trade and Industry. (2005). “Small and Medium Enterprise Statistical Report.” Borguignon, Francis. http://econ.worldbank.org. Downloaded August 18, 2009. Castillo, Gelia T. (2009). “Corporate Citizenship with a Difference.” Philippine Business for Social Progress. CESO (Canadian Executive Service Organization). (2008). Report on CESO-BAP.” Unpublished Report.
“Final Evaluation
DFID (Department for International Development). (2008). “Private Sector Development Strategy, Prosperity for all: making markets work.” UK. Downing, Jeanne, et al. (2006). “The New Generation of Private-Sector Development Programming: The Emerging Path to Economic Growth with Poverty Reduction.” MicroREPORT #44. Development Alternatives, Inc. Hammond, Allen L., et al. (2007). “The Next 4 Billion, Market Size and Business Strategy at the Base of the Pyramid.” World Resources Institute and International Finance Corporation. Jenkins, Beth, et al. (2008). “Supporting Entrepreneurship at the Base of the Pyramid through Business Linkages.” Report of a Roundtable Dialogue, June 10-12, 2008, Rio de Janeiro, Brazil. International Finance Corporation, International Business Leaders Forum (IBLF), and the CSR Initiative at the Harvard Kennedy School. Mielbradt, Alexandra O., and Mary McVay. (2004). “Developing Commercial Markets for Business Development Services: BDS Primer.” ILO-SEED. Nelson, Jane, et al. (2009). “Developing Inclusive Business Models, A Review of Coca-Cola’s Manual Distribution Centers in Ethiopia and Tanzania.” Harvard Kennedy School and International Finance Corporation.
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Nexus Associates, Inc. (2003). “Assessing the Poverty Impact of Small Enterprise Initiatives.” Working Group for Impact Measurement and Performance, Committee of Donor Agencies for Small Enterprise Development. Oldman, Eric, and Kris Hallberg. “Framework for Evaluating the Impact of Small Enterprise Initiatives.” Nexus Associates, Inc. PBSP (Philippine Business for Social Progress). (2007). “Nurturing Enterprises, Transforming Communities.” 2007 Annual Report. Prahalad, C.K., and Allen Hammond. “What Works: Serving the Poor, Profitably; A Private Sector Strategy for Global Digital Opportunity.” World Resources Institute, Digital Dividend, Markle Foundation. Prahalad, C.K., and Stuart L. Hart. (2002). “The Fortune at the Bottom of the Pyramid.” Security and Strategy. http://www.digitaldividend.org/pdf/ bottompyramid.pdf Simanis, Erik and Stuart L. Hart. (2008). “The Base of the Pyramid Protocol: Toward Next Generation BoP Strategy, 2nd. Ed.” Center for Sustainable Social Enterprise, Johnson School of Management, Cornell University. SNV (Netherlands Development Organization) and WBCSD (World Business Council for Sustainable Development). (2007). “Promoting Small and Medium Enterprises for Sustainable Development.” Development Focus Area Issue Brief. http://www.wbcsd.org/web/development.htm Shah, Anup. (2009). “Causes of Poverty.” Globalization.org. Tan, Quintin G., (2005). “Assessment of SMEC’s New Realities.” Philippine Business for Social Progress. The Interactive Asia Group. USAID (United States Agency for International Development). (2006). “Assessing the Impact of New Generation Private Sector Development Programs”. Impact Assessment Primer Series, Publication #1. Wikipedia. “Bottom of the Pyramid.” http://en.wikipedia.org/wiki/Base_of_the_ pyramid. Accessed April 4, 2009.
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the EDITOR Eugenio M. Caccam, Jr. was Associate Director for Training and Consulting of the Philippine Business for Social Progress until his early retirement in 2006. Concurrently, he supervised its Foundation Affairs Unit, which is responsible for the Foundation’s publications. Before becoming a full-time development worker in 1975, Mr. Caccam wrote articles for various national publications. Some of his professional papers have seen print in local and international journals. As an independent consultant, his work includes helping NGOs in their publication activities.
the CONTRIBUTORS Cynthia Abella is currently the Chair of the College Research Committee of the University of the East. Prior to that, she was the Chair of the Department of Marketing Management of U.E. She holds a bachelor’s degree in advertising and master’s in Business Administration, and is a candidate for Doctor in Business Administration. She is a Volunteer Adviser of Bulacan GTH. Mary Fe Arquiza holds an AB in Communication Arts degree from the Ateneo de Davao University, and graduate degrees in Business Administration and Humanities major in Women Studies. A PBSP-BAP Volunteer Adviser in Mindanao, she has extensive experience in project management, institutional development and community organizing. Arlette Lambanato Melgar has been a PBSP-BAP Volunteer Adviser in the Visayas since 2005. She holds a degree in economics from the University of the PhilippinesDiliman and an MBA from St. Louis University in San Fernando City, La Union. She is completing her doctorate at the University of the Visayas. Retiring early from the corporate sector, she is now a freelance management consultant while holding a teaching post at the Cebu Normal University. She is a member of the UP Sigma Delta Phi Sorority. Felix Tonog is Business Support Manager in PBSP’s Enterprise Development Group. His research interests include entrepreneurship and MSME development, labor migration, and corporate social responsibility. He holds a bachelor’s degree in Philosophy and master’s in Business Management. He has completed the academic requirements for M.S. in Economics.
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SMEC
The Small and Medium Enterprise Credit Program SMEC is a wholesale lending program that aims to help accredited rural banks, thrift banks and microfinance institutions increase their loan portfolios to micro, small and medium enterprises (MSMEs). It also provides business support to accredited financial intermediaries to enhance their lending capabilities to MSMEs. SMEC was established in 1989 through a US$13 million financial grant from USAID. At the end of the grant life in 1995, ownership of the Fund was transferred to the Department of Finance as beneficiary of the funds held in trust by the Development Bank of the Philippines. In 1995 and 1998, KfW augmented SMEC funding by Php389.7 million (€11 million) under a bilateral loan agreement among KfW, Land Bank, as the borrower, and PBSP as the Project Executing Agency. Program Goal To support the growth and development of MSMEs in order to provide decent job opportunities for men and women Program Objectives » Enhanced institutional capacity of intermediary financial and microfinance institutions through wholesale credit financing and technical assistance » Increased MSMEs’ access to financial and business development services Qualification of Intermediary Financial Institutions » Rural Bank, Thrift Bank, or Microfinance Institution » Operating for at least three years » Committed to MSME development » Financially stable » Governed by sound credit policies » Demonstrated management capability and performance Purpose of Loan. Loan funds may be used by MSME sub-borrowers for: » Starting a new business or expanding an existing business » Acquiring fixed assets such as land, building and machinery » For services such as equipment installation » Working capital
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Philippine Business for Social Progress
ENTERPRISE DEVELOPMENT GROUP Executive Director
Gil T. Salazar
Associate Director
Patricia C. Calilong
Business Support Manager
Felix A. Tonog
Small and Medium Enterprise Credit Account Manager
Deborah M. Gapas
Account Manager
Elmer E. Beleta
Credit and Documentation Supervisor
Agnes A. Cosme
Service Assistant
Katrina DJ. Dela Rosa
Staff Assistant
Ferliza G. Jimenez
Business Advisory Program
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Manager
Ma. Rocelyn L. Bernabe
Business Development Officer (Luzon)
Rowena D. Rivera
Business Development Officer (Visayas)
Lizlei Ann A. Puno
Business Development Officer (Mindanao)
Arianne Jane I. Sulla
Administrative Assistant
Maria Cristina A. Borbe
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