LA TRINIDAD, Benguet – Present business operators and those intending to venture into micro business enterprise may do well to become well-versed about the Barangay Micro Business Enterprises (BMBEs) Act of 2002 or Republic Act (R.A.) 9178, for them to learn the ropes on how to become more business-savvy, competitive and financially viable.
BMBEs was conceptualized and passed into law to encourage the formation and growth of barangay micro-enterprises by granting them incentives and other benefits. It was signed into law November 13, 2002.
Micro, Small and Medium Enterprises, (MSMEs) or, shall we say, start-up business entrepreneurs, should, in fact, enhance their knowledge about RA 9178, considering that their micro-business firms comprise more than 90 per cent of MSMEs in La Trinidad, Benguet, according to a study.
The study, titled, “Awareness and Perceived Implementation of Barangay Micro-Business Enterprise Act of 2002 (Republic Act 9178) in La Trinidad, Benguet, Philippines,” was conducted by Cynthia D. Carambas and Jeftee Ben B. Pinos-an, both from the College of Home Economics and Technology of Benguet State University (BSU).
RA 9178, on the other hand, was also issued as Department of Trade and Industry (DTI) Department Administrative Order No. 1., series of 2003, on February 7, 2003 and this law primarily exempts micro-business owners from income tax and gives them priority access to government technical and financial assistance.
Specifically, incentives and benefits granted to a BMBE include exemption from taxes and fees, exemption from the minimum wage law coverage, availing of loans from identified banks, technology transfer, production and management training and marketing assistance, the BSU researchers explained.
RA 9178 also seeks to bring the “underground economy,” into the mainstream. Underground economy is pointed to as a venture into business without the burden of paying any taxes. It’s also called “black market, legal or otherwise.”
As noted by Carambas and Pinos-an, the Small and Medium Enterprise Development for Sustainable Employment Program (SMEDSEP) reiterates the BMBE law “is a policy of the state to hasten the country’s economic development by encouraging the formation and growth of barangay business micro-business enterprise.”
With more business formally registered by local governments, raising tax revenues would be enhanced, jobs and livelihood generated, these eventually contributing to economic growth of Benguet.
It is perceived that the BMBE law addresses the clamor of most micro-business entrepreneurs in implementation of their business plans.
However, the study also uncovered that the level of awareness about RA 9178 is generally low, leading to underutilization of support mechanism.
During interviews, La Trinidad micro-business owners revealed that even though they went through registering and renewing their business, implementing agencies did not inform them of the existence of the law.
Low level of awareness among respondents in the study has significant implications for business sustainability and growth. Further, limited knowledge of tax exemptions and financial assistance programs may lead to unnecessary financial burdens on microenterprises, affecting their profitability and long-term viability.
In interviews with implementing agencies in La Trinidad, the BSU researchers found these agencies have been approving BMBE applications, but not as numerous as compared with other places in other regions.
Main reason discovered for not applying as BMBE is the difficulty in securing a Certificate of Authority that authorizes one to be a BMBE.
Also, the complicated guidelines on the registration of micro-enterprises by the Department of Finance and the voluminous required documents discourage applicant to pursue being BMBE.
There is also this question of whether barangay authorities at their level are fully aware of RA9178 and whether such officials are conversant with the law, leading to this study conducted and its perceived low implementation at barangay level.
Recipients of the BMBE law being the micro-business entrepreneurs, the medium of disseminating the law being the barangay leaders and implementing agencies were considered in the study as the intervening variables.
Micro-business entrepreneurs in La Trinidad studied were limited to food entrepreneurs where total assets were estimated at not more than Php 3 million. Business capital and registration were used as profile indicators and were correlated with the entrepreneur’s awareness of the existing law.
According to Section 3(a) of RA 9178, “A Barangay Micro-Business Enterprise,” is defined as any business entity engaged in the production, processing, or manufacturing of goods, including ago-processing, trading and services, with total assets not exceeding Three Million Pesos (P3,000,000.00), exclusive of land.
The hypothesis was that the higher the business capital, the higher the awareness level was as the entrepreneur valued the amount of money spent in establishing a business.
At the barangay level, though barangay officials are not the ones implementing the law, they play an essential role in disseminating information, especially those that benefit their constituents. It is understood that leaders in the barangay assume the responsibility of disseminating the BMBE to their constituents.
However, La Trinidad barangay leaders during the time of the study explained the BMBE Law “was not downloaded to their respective units,” thus they were not able to disseminate the same.
As for implementing agencies, these include the Local Government of La Trinidad, Bureau of Internal Revenue (BIR), Land Bank of the Philippines and Department of Trade and Industry (DTI).
Under RA 9178, the Local Government Unit, specifically the Office of the Treasurer of each city/municipality is in charge of registering the BMBEs and issues a Certificate of Authority to enable a BMBE to avail of the benefits under the law.
First respondents of the study included 50 micro food service business owners from barangays Alapang, Alno, Ambiong, Bahong, Balili, Beckel, Bineng, Betag, Cruz, Lubas, Pico, Poblacion, Pugis, Shilan, Tawang and Wangal.
Among the 50 micro-business owners, 48 or 96 per cent were not aware of the existence of the BMBE Law, only 2 or 4 per cent being aware. Hence, their lack of knowledge hindered them from registering as BMBE.
Second respondents group was composed of barangay leader representatives from the 16 barangays and the third group consisted of staff members of implementing agencies in La Trinidad.
It was found by the study that barangay leader representatives “were not aware of all the provisions in the BMBE Law.”
In contrast, the law implementers “were partially aware of the BMBE Law provisions.” Implementers were fully aware of the first provision (which is the 100 per cent tax exemption), partially aware of both the second provision (minimum wage law exemption) and fourth provision (technology transfer).
But the implementers were not aware of the third provision of the law which is credit delivery. Therefore, it was evident that the implementers were only aware of the provisions which applied to their respective units, the study pointed out.
In La Trinidad, almost all business is considered micro-enterprises and make significant contributions to the overall economy of the province. Sadly, however, the study discovered through intensive interviews with micro-business owners and barangay leaders that the BMBE law was perceived not being implemented.
In contrast, the implementers perceived that the provisions in the said law are partially being implemented. The implementers’ concern in fully executing the BMBE Law are connected to the expected reduction of the municipality’s revenue if every micro-business registers as BMBE.
On the other hand, despite MSMEs being significant in the Benguet economy, these small business counter that they encounter problems starting from business registration.
When starting, most small business owners claim that capital is the common problem, added with the difficulty of processing a business and heavy-laden taxes and other fees collected by different agencies before allowing the entrepreneur to start the business.
Start-up capital is also one of the anticipated concerns of budding entrepreneurs in Benguet. Other problems that arise include the difficulty of registering the business and the fees being collected by different agencies during business registration.
As grounded upon result of the study, it thus recommended that:
For law makers, a thorough review of the BMBE Law considering the economic status per municipality is in order. Since a municipality’s total revenue will be in jeopardy if every micro-business will be granted as BMBE.
Second, implementing agencies in general should synchronize as regards implementation of the law.
