Holy Week Reflection 1: Micro Business is Not for Every Poor Person

It is not even for everyone. It is not for me, I am sure.

There have been campaigns lately encouraging the low-income groups, even the new graduates, to start their businesses instead of seeking employment. Sometimes, the better off and better educated are quick to judge the aspiration, or the lack of it, of the “masa.” Bakit mas gusto nilang maging OFW kaysa maging magsasaka? Bakit mas gusto nilang mamasukan kaysa magtayo ng business? I do not intend to answer the questions but maybe my experience both as a micro entrepreneur and a “micro laborer” can help the public understand better the low-income groups. I know it is not politically correct, but for the purpose of convenience, please allow me to call my class the “poor.”

I started my venture into business at the age of 11. That was summer after finishing fifth grade and just a few months after my father died. Losing our breadwinner changed our lifestyle—we sold our family car, the kind of food served on the table changed, and my desire to study in a science high school in the city, which would add economic pressure at home, went pfft. In order to help ease my mom’s burden in sending us three siblings to school, I spent my two-month school break making paper bags out of the pages of old telephone directories. Plastic bags were not yet that popular and purchases from the public market were often placed in these small paper bags, neatly placed in bayong. Think tuyo, tinapa, and balot. Yes, we were more environment-friendly back then.

My cost of production was nil. I got the telephone directories, our relatives’ and ours, for free. The cornstarch I used to make paper paste, I stole from our kitchen. My mom sold my bags to the market vendors at P0.01 each. That summer I made Php20.00, gross of costs of paper, paste, fuel, and (my) labor, and distribution charges or sales commission (and this I realized only after passing BA 99.1 in college). My micro business was practically risk-free. However, I ran out of supply of free raw materials (directories) after two or three summers of production.

Then I became a contractual laborer. My cousin was manufacturing shirts for export and my mom got a job as her subcontractor. My mom in turn “hired” me to join her one-person assembly line, matching the front and back of shirts, and doing quality checks and packaging. I was paid Php0.25 per finished and packed product. I do not remember anymore how much I earned that summer but I must have enjoyed my full “take-home pay”—no need to pay for costs of production and sales, no hassle in sourcing raw materials, and no risk of not being able to sell in the market. However, I had to stop my summer employment when I reached college and that’s another story.

On my final year in college, I was able to save Php5,000 from my allowance. Thanks to government’s National State Scholarship Program that provided us scholars with monthly stipend of Php500 and book allowance of Php1,000 per semester. I used my savings to buy stuff, both branded (Giordano mostly) and unbranded from Hong Kong, where my sister used to work. My target market for these goods was my college friends and org-mates. Most, if not all, of my sales were on credit, understandably because my market lived on their school allowance just like myself. With some of my buyers, collection became a problem and yes, I incurred bad debts. Moving the last few pieces of my inventory was also a concern; hence I asked some of my friends to help me sell them. Monitoring and control was tough. A few items became losses in my accounting books while some found their way into my cabinet. ROI was 12 %, net of losses and bad debts; payback was less than a year. Not bad, but I had sworn since that I would not venture again into business type that requires inventory of goods (that explains why I am now into consulting). I also failed to input the cost of money in my ROI computation, which would have reduced my rate of return. Imagine if I got my capital from 5/6 or from a microfinance institution (MFI).

My mom did not ever bother to get into buy-and-sell, despite our (custom-free) access to Hong Kong goods at that time. First, she always says pangit siyang magpautang, laging hindi siya nababayaran. But what is business if you do not extend credit to your buyers? Second, I do not think she is OC-enough to manage inventories. Third, she did not know or did not have access to the right market for these goods. Finally, with her limited financial capacity, she could not absorb the risks involved, both market and credit risks. Instead of putting the little money she had in business, she just placed it in risk-free time deposit. Obviously, my mom does not make a good target of MFIs. And neither do I.

It is so easy for others to push the poor to get into small business to make them economically productive. However, who could be the poor’s market? With the inadequate infrastructure to bring their products out of their home base and their lack of network that could bring their goods to the right market, the poor usually serve only the needs of their immediate communities, whose purchasing power is more likely to be the same as the micro entrepreneurs (just like me selling stuff to my college friends). They have to deal with credit risks as much as lenders and MFIs do. Even if they serve the right market, sales are not always guaranteed—so what do they do with the excess inventory, especially if they are selling perishable items? Lucky me, I sold clothes and so I could wear the old, unsold inventories—out of fashion na nga lang. The poor’s choice of business also depends on the resources available, accessible, and affordable to them (think of my telephone directories). Lastly, what kind of micro business gives a net income enough to cover the cost of money from non-bank institutions and at the same time support family consumption and children’s education? Please let me know; I want to invest in it.

Hence, for some, employment remains the preferred option because 1) it gives regular, risk-free returns; no need to bother with collection and repayment; and 2) it does not require one to know everything about the business, from production, to marketing, to human resource, to financial management. It is not that the poor have misguided aspirations; oftentimes, they just do not have options. Many do not have the capacity to manage their own enterprise, much less the capacity to absorb risks. They do not even have the ego-drive to be their own boss.


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