Nanoenterprises

Nanoenterprise is a SEDPI-coined term that refers to unregistered livelihoods of self-employed individuals. They typically operate informal businesses alone or with the help of unpaid family members targeting their own immediate local communities.

The vast majority of the entrepeneurial poor in the Philippines are nanoenterprises estimated to be about 8 million. They typically access loans from informal sources which make them vulnerable to predatory financing practices. Most of them borrow money from cooperatives, rural banks, microfinance NGOs and pawnshops.

On average, nanoenterprises borrow a small sum of money ranging from PhP3,000 to PhP20,000 to finance their livelihoods such as sari-sari stores, carinderia, farming, fishing, dressmaking and vending. Microfinance institutions offer collateral-free loans to them payable in three to six months with interest rates ranging from 2% to 5% per month.

Microenterprises

According to the Department of Trade and Industry (DTI), there are nearly a million microenterprises in the Philippines. DTI considers any business with less than PhP3 million in assets and less than 10 employees as microenterprise. This technically includes nanoenterprises as described above.

SEDPI created the nanoenterprise category to represent the bottom of the pyramid and distinguish it from microenterprises. The financial behavior, enterprise management and access to basic services of nanoenterprises is vastly different from microenterprises. Nanoenterprises have the least means to these.

Digital financial inclusion and entrepreneurial capacity

Nanoentarprises and microenterprises are individuals who typically have low educational levels and are involved in micro-scale production or service delivery. They typically use obsolete or rudimentary equipment in their livelihoods.

As part of the informal sector, their livelihood is not registered with the government and hardly maintain bookkeeping transactions. At the personal level, they also lack civil registry documents such as birth certificates and marriage certificates that makes it challenging for them to access government welfare services as well as formal banking services.

This group lack managerial and technical skills to grow their livelihood and are forced to be entrepreneurs due to lack of employment opportunities. They also have limited access to technology, information and financing that leads to low productivity and low product quality.

Overall business environment is hampered by high cost of labor, raw materials, inadequate services and infrastructure. The pandemic only made matters worse aside from their vulnerability to disasters and negative effects of climate change.

Development needs

At the height of the lockdown last April 2020 due to the pandemic, almost 70% of nanoenterprises and low-tier microenterprises shut down. As of January 2021, 97% of them have already resumed their livelihoods albeit with weaker demand.

The informal sector displayed extraordinary resilience compared to micro and small enterprises. This is because their livelihoods require low capital, low skill sets, low barrier to entry and are adaptable to the local market.

However, they are still worse off than their pre-pandemic levels with only 10% of them saying they’re back to their pre-pandemic normal operations .