Editor’s Note, June 2015

Posted on June 21, 2015

Categorized under: Newsletters

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Entrepreneurship has a special role to play in the inclusive growth agenda of the Philippine government. Self-employed individuals, primarily those who have their own businesses, comprise 28% of the total employment rate of 93.6% (as of April 2015). As the economic, social and political environment becomes more conducive for people to start their own businesses, the unemployment rate is expected to decline further, and hopefully, with entrepreneurship driving this.

According to the June 16, 2015 BusinessWorld article of Benjamin E. Diokno, former secretary of Budget and Management,  the Economic and Social Commission for Asia and the Pacific (ESCAP) measures inclusiveness using multi-dimensional factors, and economic inclusiveness is one of them. The following are indicators of economic inclusiveness: (1) rate of poverty, (2) income inequality, (3) ratio of highest income vs lowest income quintile, (4) unemployment rate, and (5) ratio of female-to-male labor participation rate.

One of the government programs is the Go Negosyo Act of 2013 (RA 106441) which aims to encourage the growth of SMEs, primarily geared towards increasing access to finance, since funding has always been identified as a barrier to success of start-ups. The program also helps prepare businesses for integration into the larger ASEAN community by increasing awareness of the various ways the SMEs can avail of the means to improve their productivity and efficiency through the Negosyo Centers.

There is, however, a better option and that is through direct selling. Direct selling has the ability to address all 5 of ESCAP’s economic inclusiveness indicators. Direct selling’s low entry barrier allows individuals with limited means to start up their own business with reasonably lower entry costs, minimum educational background requirement (99% of the population has at least gone through primary education), and with no gender preferences (females comprise at least half of the direct sellers). Engaging in direct selling can be counted as self-employment, and therefore, the industry has the ability to reduce unemployment rate. Lastly, with better income derived either by doing direct selling on a part-time basis or as the primary source of compensation, income inequality can also be addressed.

Direct selling provides distributors with a turnkey business that is fully equipped and ready to go into operation on the day of sign-up: (1) there is no need to invest in research and development for a new product, (2) staffing issues are avoided, (3) investment in physical infrastructure such as manufacturing facilities or shops is unnecessary, and more importantly,(4) DS companies often provide free in-house training, and even if this is not available, group leaders or experienced sellers will often provide coaching and mentoring necessary to nurture new business owners and guide them towards success.

The DSAP is an organization that creates a fertile environment for direct selling businesses to grow. Through DSAP, member companies and individual direct sellers get access to information, gains credibility through its strong partnerships with government agencies such as the SEC and DTI, and other industry stakeholders, and training and development through seminars and conferences arranged by the organization from time to time. More importantly, the DSAP is making good progress in terms of the drafting of an antipyramiding law, which, when enacted, will level the playing field and provide a stable environment for the industry to grow.