MANILA, The Philippines — Prior to the outbreak of COVID-19, the Philippines was on track for both economic growth and a reduction in poverty levels. In the past five years, Filipino growth averaged around 6%, and it was expected to reach 7% this year. This would surpass the growth rates of China, India and Indonesia. Now, with COVID-19, the Philippines’ growth rate is expected to be around 3%. Poverty rates have declined with the growth in the economy. In 2012, 10.2% of the population lived below the $1.90 poverty line. In 2019, only 2.7% lived below the $1.90 poverty line. But, the Philippines’ poor have suffered during the pandemic. Furthermore, slowed economic growth could push more into poverty. The Filipino government has long promoted entrepreneurship as being a major vehicle for lifting people out of poverty. Here is how entrepreneurship in the Philippines may help tackle poverty.
How Entrepreneurship Reduces Poverty
De La Salle University defined entrepreneurship as the creation of a new good or service, the assumption of any risk that comes with creating that good or service and the receipt of rewards or profits. Entrepreneurship can create jobs, wealth and social empowerment, all of which may contribute to a decrease in poverty. Most people in the Philippines are employed in the informal sector. Around 38% are self-employed, running small-scale businesses and barely making a living. Entrepreneurship allows people to escape the informal economy, create social agreements in more established sectors and make more money.
Researchers conducted a study that showed that entrepreneurship in the Philippines increased the probability that a Filipino household could move from being poor to non-poor from 2008 to 2011. Entrepreneurship also decreased the probability of a Filipino household moving from being non-poor to poor in that same time period. Additionally, the study concluded that entrepreneurship is an effective and important way to alleviate poverty in the Philippines. It advised the Filipino government to promote entrepreneurship.
Promoting Entrepreneurship in the Philippines
The 1987 Philippine Constitution states that entrepreneurship is an effective vehicle for raising the quality of life. Article XII Section 1 states that private enterprises “shall be encouraged to broaden the base of their ownership” to prevent income inequality, support the production of goods and services and increase productivity.
The Philippine Development Plan (PDP) contains numerous strategies aimed at promoting entrepreneurship in the Philippines and expanding the economy. Furthermore, the plan aims to grow the Industries and Services sector until it becomes globally competitive. It also aims to increase trade, providing more opportunities for entrepreneurship. The National Competition Policy aims to put small businesses and large corporations on the same level in the Filipino market. This will give consumers more choices and allow smaller businesses to succeed.
Other organizations, like Opportunity International, are also working to decrease poverty by bringing financial services and financial literacy training to the population. Professor Russ McBride at UC Merced brought his philosophy of ‘Functional Entrepreneurship’ to the Philippines in a series of lectures aimed at students. He even created a program where Filipino students worked in teams to raise money for an organization that promotes social good.
The Filipino government has made a concerted effort to promote entrepreneurship in the country as a means to expand the economy and lift people out of poverty. Through plans to expand the economy and increased protections for smaller businesses, entrepreneurship in the Philippines gives people the opportunity to access larger markets and establish connections outside of the informal economy. With supportive policies in place, entrepreneurship could be a key vehicle to alleviating poverty in many countries around the world.
– Harry Yeung