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MSME sector is key to COVID-19 inclusive recovery for Phl – UNDP

Majority of the MSMEs still need assistance to recover from their losses. At least 60% of the respondents reported that they have not received any assistance from any stakeholder (gov’t, private sector, NGOs, and others) yet. Among the most pressing needs of MSMEs are access to credit facilities, tax breaks, and deferred loan payments.

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Despite the lifting of the enhanced community quarantine (ECQ) in Metro Manila, majority of the micro, small, and medium enterprises (MSMEs) are still temporarily closed or are operating at decreased capacity—an indicator of the difficulties they are facing in getting back to their business operations according to the recent survey conducted by the United Nations Development Programme (UNDP) on the impact of COVID-19 on MSMEs in the Philippines.

MSMEs comprise 99.5% of business establishments in the Philippines and are employing approximately 63% of the country’s workforce. In the past years, MSMEs were responsible for 40% of the country’s Gross Domestic Product (GDP). During the second quarter of 2020 and almost four months since the community quarantine was put in place, the country’s GDP sank to 16.5% as the Philippines experienced recession due to the COVID-19 pandemic.

In the first MSME online forum organized by the Philippine Disaster Resilience Foundation (PDRF) and UNDP Philippines through SIKAP (Synergizing Recovery Initiatives, Knowledge, and Adaptation Practices for MSMEs), the results of the survey were presented to more than 170 MSME owners and development organizations.

The survey also showed that out of the 285 respondents, 81% reported experiencing low consumer demand. This low demand alongside shortages related to transportation and logistics, and lack of financing capacity were cited as the primary challenges of MSME owners in resuming their operations.

Since the implementation of community lockdowns, MSMEs continued to suffer from disrupted cashflow and continuing expenses, which led to income losses. Close to 80% of the respondents reported a reduction in their average monthly income from April to June compared to their average monthly income prior to the pandemic. While 20% of the respondents tried to retain employees with full pay despite income losses, their cashflow was so severely affected that 25% of them began to lay off employees.

“We are in the middle of a once in a lifetime medical emergency. I know you are worried about your health, scared to open your businesses. But for the sake of our families and ourselves, we have to take that step and reopen while maintaining safety standards. We have to find a way to keep going as long as we need to,” said Butch Meily, President of PDRF.

MSMEs comprise 99.5% of business establishments in the Philippines and are employing approximately 63% of the country’s workforce. In the past years, MSMEs were responsible for 40% of the country’s Gross Domestic Product (GDP).

To address the adverse impacts of the COVID-19 pandemic, MSMEs started implementing adaptive business measures. Among which are digitalization or the use of online platforms for their business transactions, cost reduction, diversification of products and services, utilization of non-cash payment options, and allowing employees to work from home.

However, despite these adaptive measures, majority of the MSMEs still need assistance to recover from their losses. At least 60% of the respondents reported that they have not received any assistance from any stakeholder (gov’t, private sector, NGOs, and others) yet. Among the most pressing needs of MSMEs are access to credit facilities, tax breaks, and deferred loan payments.

“MSMEs play a crucial role in the Philippines’ efforts to recover from the crisis brought about by this pandemic. UNDP will continue to support Government and its development partners to facilitate their sector representation in policy dialogues and program planning so as to capitalize on available solutions that could prevent further closures of MSMEs. We are also working very closely with the private sector to provide online resources and to ensure that all MSMEs can get the right access to e-commerce trainings to support their digital transition. Digital infrastructure in the country is key to enable the development of a new market space online,” said Enrico Gaveglia, Officer-in-Charge of UNDP Philippines.

The result of the survey intended to provide data-driven recommendations that can help the Inter-Agency Task Force come up with more effective policies and programs that are responsive to the immediate and long-term needs of MSMEs.

Majority of the MSMEs still need assistance to recover from their losses. At least 60% of the respondents reported that they have not received any assistance from any stakeholder (gov’t, private sector, NGOs, and others) yet. Among the most pressing needs of MSMEs are access to credit facilities, tax breaks, and deferred loan payments.

Among these recommendations were the integration of MSMEs in public sector procurement, a balanced and complementing mix of monetary and fiscal policies including wide-reaching government guarantees for MSME lending that will support overall spending, and mechanisms to increase household consumption in the country. Other recommendations included addressing the challenges in public transportation to ensure safe and efficient mobility of people, products, and services, and the strengthening of supply chain management by integrating more local suppliers.

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Toxic workplaces increase risk of depression by 300%

Love thy employees; as evidence shows that companies who fail to reward or acknowledge their employees for hard work, impose unreasonable demands on workers, and do not give them autonomy, are placing their staff at a much greater risk of depression.

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A year-long Australian population study has found that full time workers employed by organisations that fail to prioritise their employees’ mental health have a threefold increased risk of being diagnosed with depression.

And while working long hours is a risk factor for dying from cardiovascular disease or having a stroke, poor management practices pose a greater risk for depression, the researchers found.

The University of South Australia study, published in the British Medical Journal today, is led by UniSA’s Psychosocial Safety Climate Observatory, the world’s first research platform exploring workplace psychological health and safety.

Psychosocial safety climate (PSC) is the term used to describe management practices and communication and participation systems that protect workers’ mental health and safety.

Lead author, Dr Amy Zadow, says that poor workplace mental health can be traced back to poor management practices, priorities and values, which then flows through to high job demands and low resources.

“Evidence shows that companies who fail to reward or acknowledge their employees for hard work, impose unreasonable demands on workers, and do not give them autonomy, are placing their staff at a much greater risk of depression,” says Dr Zadow.

Internationally renowned expert on workplace mental health, ARC Laureate Professor Maureen Dollard, says the study found that while enthusiastic and committed workers are valued, working long hours can lead to depression. Men are also more likely to become depressed if their workplace pays scant attention to their psychological health.

Due to the global burden of depression, which affects an estimated 300 million people worldwide and shows no sign of abating despite available treatments, more attention is now being paid to poorly functioning work environments which could contribute to the problem.

High levels of burnout and workplace bullying are also linked to corporations’ failure to support workers’ mental health.

A second paper co-authored by Professor Dollard and published in the European Journal of Work and Organizational Psychology earlier this month, found that low PSC was an important predictor of bullying and emotional exhaustion.

“Lack of consultation with employees and unions over workplace health and safety issues, and little support for stress prevention, is linked to low PSC in companies.

“We also found that bullying in a work unit can not only negatively affect the victim, but also the perpetrator and team members who witness that behaviour. It is not uncommon for everyone in the same unit to experience burnout as a result.

“In this study we investigated bullying in a group context and why it occurs. Sometimes stress is a trigger for bullying and in the worst cases it can set an ‘acceptable’ level of behaviour for other members of the team. But above all bullying can be predicted from a company’s commitment to mental health, so it can be prevented,” Prof Dollard says.

The global costs of workplace bullying and worker burnout are significant, manifested in absenteeism, poor work engagement, stress leave and low productivity.

The extent of the problem was recognised in 2019 with the International Labour Organization (ILO) implementing a Global Commission on the Future of Work and calling for “a human-centred approach, putting people and the work they do at the centre of economic and social policy and business practice”.

“The practical implications of this research are far reaching. High levels of worker burnout are extremely costly to organisations and it’s clear that top-level organisational change is needed to address the issue,” Prof Dollard says.

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Is there a good reason online retailers should invest in physical stores?

By directing new customers to purchase a “deep product in-store” as their first purchase from a new retailer, they are more likely to: 1) buy deep products in the future online, indicating that they generalize trust across channels; and 2) buy adjacent categories online, indicating that they generalize trust across categories.

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Researchers from Colorado State University, Amazon, and Dartmouth College published a paper that examines the role of physical stores for selling “deep” products.

The study, forthcoming in the Journal of Marketing, is titled “How Physical Stores Enhance Customer Value: The Importance of Product Inspection Depth” and is authored by Jonathan Zhang, Chunwei Chang, and Scott Neslin.

While some traditional offline retailers are struggling and are closing stores (e.g., Macy’s, Walgreens), online retailers are opening them (e.g. Amazon, Warby Parker). This conflicting trend raises the question, what is the physical store’s role in today’s multichannel environment?

The research team posits that products differ in the inspection depth – “deep” or “shallow” – customers require to purchase them. Deep products require ample inspection in order for the customer to make an informed decision. We propose that physical stores provide the physical engagement opportunity customers need to purchase deep products.

To test this thesis, the researchers conducted three studies. The first used transaction data from a national multichannel outdoor-product retailer. Two lab experiments demonstrated the same effect.

The large-scale transactional data involving 50,000 customers show that by using a “deep products in-store” promotional strategy to migrate new customers from a “low-value state” to a “high-value state,” average spending per trip increases by 40%, long-term sales increases by 20%, and profitability increases by 22%.

The lab experiments show that:

  • By onboarding new customers to purchase a “deep product in-store” as their first purchase from a new retailer, their re-patronage intention for this retailer increases by 12% compared to all other product/channel combinations.
  • By directing new customers to purchase a “deep product in-store” as their first purchase from a new retailer, they are more likely to: 1) buy deep products in the future online, indicating that they generalize trust across channels; and 2) buy adjacent categories online, indicating that they generalize trust across categories.

The last decade has witnessed a marked increase in the opening of physical stores by online retailers, despite myriad changes in the retailing environment. This attests that these findings are not ephemeral. Zhang says “The general lesson of our research is for retailers to create a concrete, tangible, and multi-sensory experience for customers buying products that require this physical engagement. This sets the stage for favorable experiential learning and increased customer value.” Retailers can do this in numerous ways:

First, when retailers find that a customer is buying deep products online but their spending is decreasing in value, they can provide a promotion for deep products in-store. This can increase customer value.

Second, retailers need to enhance physical engagement for deep products through merchandising and training sales personnel to walk customers through the engagement – e.g., by helping customers try and use deep products in-store.

Third, retailers cannot infer product inspection depth solely from predefined product categories because there is much variation in inspection depth within a particular category. Rather, management should infer inspection depth using the proposed measures, or expert, independent judges.

Fourth, retailers should use a deep/offline onboarding strategy for new customers. That is, they should use acquisition channels that encourage the first purchase to be deep/offline.

Zhang adds that “We also discuss related issues such as using stores versus showrooms; fielding full or limited staff; selling private label goods; designing loyalty and buy online, pickup in-store (BOPIS) programs; and leveraging technology to create physical engagement in online settings.”

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Xendit launches payment gateway services to individual business owners

When individual sellers integrate their business with Xendit, their customers can make direct payments via direct debit through Bank of the Philippine Islands (BPI) and UnionBank of the Philippines (UBP), e-wallets such as GCash, GrabPay, and PayMaya, or Over-the-Counter via 7-Eleven and Cebuana Lhuillier. Meanwhile, sole proprietors, corporations, and partnerships can also process credit card payments.

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The ongoing pandemic has brought out the creative side of many Filipinos, who have found ways to supplement their incomes by selling various products or services on social media. Xendit is making it easier for individual business owners to settle payments with access to a world-class platform that makes billings simple, secure, and easy.

“The pandemic has seen a rise in individual sellers who utilize social media to sell their goods and services. The digital nature of transactions means payment methods need to adapt. We want to empower these rising contributors to the Philippine economy with a platform that handles payments for them while they focus on their business,” says Alyzza Acacio, Philippine SME Task Force Lead of Xendit Philippines.

When individual sellers integrate their business with Xendit, their customers can make direct payments via direct debit through Bank of the Philippine Islands (BPI) and UnionBank of the Philippines (UBP), e-wallets such as GCash, GrabPay, and PayMaya, or Over-the-Counter via 7-Eleven and Cebuana Lhuillier. Meanwhile, sole proprietors, corporations, and partnerships can also process credit card payments.

Since Xendit handles payments on the individual seller’s behalf, entrepreneurs can focus on fulfilling orders and growing their business. They no longer need to coordinate with each customer for payments because transaction statuses are updated in real-time on the Xendit dashboard. 

Xendit’s mission is to make payments simple, so that even entrepreneurs and small and medium enterprises (SMEs) unfamiliar who are not as technically savvy can integrate with the platform easily. Xendit is available in platforms such as Wix, Shopify, or WooCommerce. Those who rely solely on social media for business can generate payment links that customers can access. Sellers also have access to their transaction history on a centralized dashboard to monitor sales and payments.

“We need to continue to support the Filipino micro-entrepreneurs and small business owners to embrace the digital age; they have experienced the ease that online selling and marketing and smartphones have brought them closer to their customers. The next step is to help them grow their business by helping them manage day-to-day tasks in their enterprise and improve their financial literacy as they experience and use fintech products and platforms more and more,” says Ana Mijares, Senior Trainer for the Go Digital ASEAN initiative.

To welcome SMEs, Xendit is offering up to P1.6 million worth of waived transaction fees for new sign-ups. The platform is also waiving P1 million in fees for individual sellers.

Opening its platform to individual sellers is just one of Xendit’s many ways to empower SMEs using technology. Its Level Up accelerator program supports entrepreneurs through masterclasses and challenges that give them the tools and know-how to scale their businesses. The program also includes giving P3.5 million in free transactions for 1,000 startups for one year through its video challenge

Xendit is the simplest and most trusted name in digital transactions in the region. It powers SMEs as well as the Philippines’ largest enterprises. Xendit is committed to building a solid payment infrastructure for the country and the rest of Southeast Asia.

“We launched an SME task force at the beginning of the year to help create solutions for Filipino businesses that may have been affected by the pandemic. We hope to continue our support for Filipino MSMEs so they can grow their business and help the Philippine economy,” says Yang Yang Zhang, Managing Director of Xendit Philippines.

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