Revisiting the Barangay Micro-Business Enterprises Act of 2002: A Policy Evaluation Using National-Level Data

Abstract

While micro, small, and medium enterprises are widely considered as the backbone of the Philippine economy, their potential to contribute more to development is often hindered by high levels of informality. To help address the issue of enterprise informality, the government enacted the Barangay Micro-business Enterprises (BMBEs) Act of 2002, with the aim of formalizing microenterprises through the provision of incentives. Using data from a national-level census of BMBEs and business counselors directly involved in the implementation of the law, this study sought to evaluate the BMBE Law vis-à-vis its goal of reducing informality. In doing so, it focused on evaluating business registration, incentives and benefits received by the BMBEs, impact on microenterprises' formalization rate, and impact on BMBEs' business operations and development. Results from the descriptive statistics reveal that the law has been largely ineffective in addressing informality and fostering microenterprise development. In this light, this study recommends policy amendments to account for the recent enactment of the Tax Reform for Acceleration and Inclusion (TRAIN) Law, administrative burdens, and conflicting regulatory priorities. However, given the lengthy legislative amendment process, a more immediate approach would be for implementing agencies to update the implementing rules and regulations and conduct awareness campaigns to enhance the policy's reach and impact.