A public ation of

Philippines-Australia Community Assistance Program


Copyright © 2009 by PACAP. All rights reserved.
PACAP Consultant  Raul Gonzales
Cover Design  East Axis Creative
Publication Layout  East Axis Creative
Photo Credits   PACAP
All Rights Reserved © 2009
Philippines-Australia Community Assistance Program
If any part of this Social Enterprise Development Technokit is used, copied
or reproduced, in any form or by any means, one should make the proper
attribution to the Philippines-Australia Community Assistance Program
(PACAP).
Disclaimer
Every effort has been made to present all information accurately, however,
the Philippines-Australia Community Assistance Program or the Australian
Agency for International Development assumes no liability for any damages
or losses incurred in the use of this publication.
Published by the Philippines-Australia Community Assistance Program
2309 Prestige Tower. Ortigas Avenue, Pasig City, Philippines
http://www.pacap.org.ph/
ISBN
Printed in the Philippines
Contents
List of Tables, Text Boxes, and Diagrams   v
Foreword vi
Introduction viii
pa r t 1 A p p l y i n g E f f e c t i v e S o c i a l E n t e r p r i se
P r o c esses
“Official” Definitions of Enterprise 3
Section 1 What is an Enterprise? PACAP Definition of Enterprise 3
The Concept of “Social Enterprise” 5
Defining an Enterprise 13
Section 2 Enterprise Planning
The Basic Question 13
and Analysis: Overview Scope of Enterprise Planning
  and Analysis 13
Risk Assessment 14
The Key Questions 17
Section 3 Product and Market Product Appraisal 17
Considerations Market and Customer Appraisal 18
The Marketing Plan 22
Section 4 Production and Technology The Key Question 29
Assessment of Technology and
Considerations   Production Process 32
Form of Business Enterprise 43
Section 5 Organization Management Structure and
and Management   Personnel 48
Considerations Internal Controls 52
The Key Questions 55
Section 6 Financial Revenues 55
Considerations Costs 57
Projected Cash Flow Statement 57
Projected Income Statement 62
Break-Even Analysis 63
Profitability Ratios 64
Enterprise Appraisal at a Glance:
The Key Questions  67
pa r t 2 r e f e r e n c es a n d r es o u r c es
i n s o c i a l e n t e r p r i se de v e l o p m e n t
Section 7 Enterprise-Related
Registration Procedures for Starting
Philippine Rules   a Business in the Philippines 71
Government Agencies and Needed
and Regulations
Clearances 77
Labor Laws 86
Local Ordinances 87
Section 8 Directory of Selected Department of Labor and Employment 89
Resources Department of Science and Technology 90
Fiber Industry Development Authority 91
Intellectual Property Office 91
Philippine Coconut Authority 92
Technical Education and Skills 9-6 Variable Costs (in pesos) 112
Development Authority 93
Technology Resource Center 93
Foundation for Sustainable Society, Inc. 95
Peace and Equity Foundation 98
Section 9 Preparation of Background 101
a Business Plan Sample Business Plan 105
List of Text Boxes
Definition of Value Chain 127
Section 10 Participatory Value Chain What is Value Chain Analysis? 127
Analysis Empowerment through VCA 128
Value Chains Analysis for Enterprise
Development 129
The PVCA Approach 129
Limitations of PVCA 130
pa r t 3 t r a i n i n g m o d u l e o n s o c i a l e n t e r p r i se 4-4 Loom Weaving Industry Upscaling for Economic Development Project 40
p l a n n i n g a n d a n a ly s i s
Training Module on Enterprise Planning
and Analysis 133
List of Diagrams and Figures
List of Tables
1-1 Characteristics of Different Size Businesses 6
1-2 Differentiating Social Enterprise from Traditional Business 12
2-1 Scope, Objectives and Outputs of Enterprise Planning and Analysis 16
2-2 Risk Assessment Matrix 17
4-1 Projected Schedule of Enterprise Operations 32
6-1 Summary Presentation of Variable Costs/Unit of Product to be Produced 58
6-2 Sample Projected Cash Flow Statement 60
6-3 Sample Projected Income Statement 65
7-1 Procedures for Staring a Business in the Philippines 71
9-1 Local Price Chain of Palay and Rice (in pesos) 106
9-2 Projected Market of Palay and Rice 106
9-3 Estimated Production of the Target Sites 107
9-4 Major Palay Buyers Operating within ARFIA Areas of Operations 107
9-5 Production and Marketing Equipment of the Federation 110
9-7 Palay Procurement Schedule 112
9-8 Projected Sales Schedule for Year 1 113
9-9 Projected Average Selling Prices 113
9-10 Projected Cash Flow Statement for Wet Palay, Month 1/Quarter 1 114
9-11 Projected Cash Flow Statement for Wet Palay, Month 10/Quarter 4 115
9-12 Projected Cash Flow Statement for Dry Palay, Month 4/Quarter 2 116
9-13 Projected Cash Flow Statement for Dry Palay, Month 10/Quarter 4 117
9-14 Consolidated Projected Cash Flow Statement (Enterprise Level), Year 1 118
9-15 Projected Income Statement for Year 1 120
1-1 Business Center for the Products and Services of Persons with Disabilities 6
3-1 Enhancing Table Banana Production and Marketing in Angas 19
3-2 Making Handicrafts for the Tourist Market 24
3-3 Further Development of Markets and Services for the Traditional
Textile Producers of Aklan 26
4-1 Mud Crab Production 32
4-2 Sustaining Differently-Abled People’s Initiative for Self-Reliance
and Development 35
4-3 Rural Enterprise Development for Buri Handicraft Producers 38
5-1 Village Level Integrated Coconut Processing Project 43
5-2 Comprehensive Marketing Program for the Horticulture Industry
of Capiz 46
5-3 Enhancing and Protecting an Agro-Forestry Area through Abaca
Fiber Production 49
6-1 Dao Garments and Bags Industry 60
6-2 Enterprise Appraisal at a Glance 67
9-1 Detailed Format of the PACAP Business Plan 101
4-1 Schematic Presentation of Production Process 29
4-2 Sample Production Process Flow Chart 31
9-1 Marketing Activity Flow 109
10-1 The Forest, Timber and Furniture Value Chain 128

Foreword
Australia has been providing official
bilateral assistance to the Philippines
for nearly 60 years now, its overarching
objective being to make a contribution
to improving the prospects for economic
growth, poverty reduction and national
stability within a neighbouring country
with which it shares many common
perspectives on regional, economic and
security issues.
An integral part of Australia’s assistance for more than 23 of these years has been the
Philippines-Australia Community Assistance Program (PACAP), provided through
the Australian Agency for International Development (AusAID), and its counter-
part agency within the Philippines, the National Economic Development Authority
(NEDA). PACAP’s history has included a number of funding phases, the most signifi-
cant of these being the current six year phase ending in September 2010. During this
time PACAP has been delivering over A$20m (around Php 740m) to poor communities
throughout the Philippines.
PACAP partners with a variety of organizations – people’s organizations, non-gov-
ernment organizations and Local Government Units – providing these partners with
grants to implement development projects that aim, in one way or another, to improve
the quality of life of poor communities. All PACAP projects are community-initiated,
economically sustainable, ecologically sound, and gender responsive. During its cur-
rent phase, PACAP has in fact undertaken 448 such projects, over 80 percent of which
have contributed to economic growth in communities through a blend of agricultural
and/or small enterprise often with a social credit component. Less than one-fifth of
these projects are completed but already PACAP has benefitted in excess of 43,400
people.
All small enterprise projects supported by PACAP have been successful, although
vi    vii
in the way of things, some have been more successful than others. Most projects for in-
stance have generated additional employment opportunities (an average of 1.6 new full
time jobs for each project completed so far), while almost two-thirds of projects have led to
the development and marketing of new products. All projects have also reported increases
in their monthly returns. In fact for pre-existing enterprises (77 percent of small enter-
prise projects), an almost threefold average increase in monthly income has been reported
(from Php17,575 to Php68,813). On the other hand, start-up enterprises have only achieved
modest average monthly incomes (Php13,037).
This is hardly surprising – most start-up enterprises (especially those implemented by or-
ganisations that are in themselves new) struggle to ensure their sustainability, and it is this
concern that has resulted in the development by PACAP staff of this Social Enterprise De-
velopment Technical Kit. This Kit then is specifically aimed at helping fledgling enterprises
survive the challenging start-up phase. It addresses the difficulties all small enterprises
struggle with during start-up – whether in production, finance, staffing, management or
marketing – outlining in a simple and effective manner, lessons, tools, examples and refer-
ences that should help all start-up enterprises to not just survive the learning curve they are
confronted with, but to flourish in the process. The Kit has the additional advantage that is
a written record of the hard-won lessons of PACAP’s many and varied experiences – lessons
that are all too often lost at program closure or when staff depart.
In short, the Social Enterprise Development Technical Kit is meant as a key resource useful
for both the preparation of business plans and the design of operational procedures. In
terms of audience, it is a resource aimed at both PACAP staff for use in training and evalu-
ation, and its partners, being perhaps especially pertinent to those partners who plan to
expand their businesses after PACAP exit. It would be gratifying if it also found applica-
tion within the broader development community, including within academic institutions.
In any event, it will certainly prove useful as a basis for workshops, as part of the training of
PACAP stakeholders and proponents, and as the main tool by which to evaluate Enterprise
Development proposals.
To further enhance the usefulness and durability of this Social Enterprise Development Kit,
PACAP plans to sign Memorandum of Agreements with interested organizations allowing
them to use, expand, enhance and republish the Kit in ways that fit with their own ongoing
activities.
The staff at PACAP sincerely hope that all the effort and experience that has gone into the
creation of the Social Enterprise Development Technical Kit will bear fruit, especially in the
lives of the poor whom we seek to serve. n
David Swete Kelly
PACAP Program Director
Tuesday May 26, 2009
 fective with PACAP processes, such as: (a) the evolution of the original Area Focused Ap-

Introduction
proach and its current transformation into the major Focal Community Assistance Scheme;
(b) refinement of the operational and administrative procedures in the PACAP Operations
Manual and Project Management Manual; (c) institution of an Annual Quality Audit of
PACAP operational procedures to ensure progressive improvement; and (d) implemen-
tation of an effective program M&E Framework and the supporting M&E Information
System.
The Philippines-Australia Community On the technical side, however, PACAP has been less successful in learning from its many
Assistance Program (PACAP) is and varied experiences. While technical skills develop rapidly during the time that staff
members are employed with PACAP, the program has little capacity to retain this corporate
a bilateral development program memory when staff leave or effectively share this experience when training up new and
existing staff. In addition, there is the challenge to disseminate PACAP’s learnings and best
supporting community-initiated, practices more widely.

economically sustainable, ecologically To address this learning need, a series of Technical Kits have been scheduled for develop-
ment. The PACAP Technical Kits are envisioned as a series of separate packages developed
sound and gender responsive for the main proposal types received by PACAP. Issues are prioritised based on demand
but could include topics as wide-ranging as microfinance, potable water, sanitary land fill,
development efforts. It aims to achieve peace & conflict, gender, enterprise development, advocacy, and many others. First to be
developed was a Microfinance Technical Kit. This Social Enterprise Development Technical
this through financial assistance and Kit is the second of the series.

multi-level capability building in The Social Enterprise Development Technical Kit is meant to be a key resource that is ex-
pected to be useful for both the preparation of business plans and enterprise operations.
partnership with local government The Technical Kit will form the basis of workshops, sharing and training with PACAP stake-
holders and proponents and the main tool for appraising and evaluating enterprise devel-
units (LGUs), non-governmental opment project proposals.

organizations (NGOs), and people’s In terms of audience, the Enterprise Kit will be useful to both staff and partners (including
partners who plan to expand their businesses after PACAP exit) and have application to the
organizations (POs) with the end-view broader development community (including academic institutions).

of improving the quality of life of poor The following 14 PACAP-supported projects/enterprises were reviewed for inclusion in the
Enterprise Kit:
communities.
Project/Enterprise Title PACAP Partner
PACAP is a joint effort between the Australian Government and the Government of Rural Enterprise Development for Buri Handi- Antique Development Foundation,(ADF), Inc.
the Philippines. The National Economic and Development Authority (NEDA) acts as craft Producers and Buri Handicraft Association (BUHAI)
counterpart agency of the Philippines. Since its inception in 1986, the Program has Palay and Rice Trading Enterprise Aganan River Federation of Irrigators’ Associa-
been managed by a Secretariat comprised of locally engaged staff contracted by and tion (ARFIA)
accommodated within the Australian Agency for International Development (AusAID) Comprehensive Marketing Program for the Capiz Multi-Purpose Cooperative (CMPC)
Manila Office at the Australian Embassy. In January 2005, the management of PACAP Horticulture Industry of Capiz
was turned over by AusAID to GHD-Hassall, an Australian Managing Contractor.
Village Level Integrated Coconut Processing Capiz Small Coconut Farmers Marketing Coop-
Project erative (CASCOFAMCO)
Over its history, PACAP has made some efforts to capture lessons arising from its
projects both from a process and technical perspective. This has been particularly ef- uu

viii    ix
 Project/Enterprise Title
Dao Garments and Bags Industry
Cooperative Rice Trading
Further Development of Markets and Services
for the Traditional Textile Producers of Aklan
Mudcrab Production
Enhancing Table Banana Production and Mar-
keting in Angas
Sustaining Differently-Abled People’s Initiative
for Self-Reliance and Development
Enhancing and Protecting an Agro-forestry Area
Through Abaca Fiber Production
Business Center for the Products & Services of
Persons with Disabilities
Making Handicrafts for the Tourist Market
Loom Weaving Industry Upscaling for Economic
Development (LOUD) Project
PACAP Partner
Dao Federation of Small Farmers Multi Purpose
Cooperative
Federation of Agrarian Reform Communities
Cooperatives (FEDARCCO)
Handicraft of Aklan Multi-Purpose Cooperative
(HAMPCO)
Aspiring for Community Empowerment
through Livelihood Loans and Trainings (ACELT)
Pinaghiusang Pondok Alang sa Malahutayong
Agraryo (PAPASMA)
San Francisco Association of Differently Abled
Persons Multi-Purpose Cooperative
San Isidro Upland Farmers Multi-Purpose Coop-
erative (SIUFMULCO)
Tahanang Walang Hagdanan
Uswag Arts and Crafts / Uswag Development
Foundation
Visayas Cooperative Development Center
(VICTO-Bohol) and the Tubigon Loomweavers
Multi-Purpose Cooperative

One clear lesson that emerged from the above review is that, almost without exception, an
enterprise goes through a start-up phase where it meets significant problems – whether in
marketing, production, finance, or management – that can threaten the very survival of the
enterprise. Most of the 14 enterprises have already been able to surmount these start-up
problems, while a few continue to struggle through the “learning curve.”

Across the 14 enterprises surveyed, PACAP intervention occurred at different stages of their
development. In some, PACAP assistance was used to either start up the enterprise; in
others, it was shortly after the start-up phase. In many instances, PACAP became involved
after the partners and their enterprises had already conquered its start-up problems, while
for a few, PACAP entry coincided with their emergence from the learning curve. Without
exception, the enterprises that are now doing very well are those who had overcome their
start-up issues successfully before the entry of PACAP.

It is hoped that this social enterprise development technical kit will be able to help start-up
enterprises to shorten their learning curve. n

x  Social Enterprise Development: Community Businesses at Work

An enterprise is eligible for

PACAP support to the extent

that it is committed to a triple

bottom line, that is, it seeks to

accomplish objectives that are

social and environmental as

well as financial. n
Section1

Section 1
What is an Enterprise?
“Official” Definitions of Enterprise

Republic Act 9178 defines a Barangay Micro-Business Enterprise as “any business entity
or enterprise engaged in the production, processing or manufacturing of products or com-
modities, including agro-processing, trading and services, whose total assets including
those arising from loans but exclusive of land on which the particular entity’s office, plant,
and equipment are situated, shall not be more than PhP3-million.”

Similarly, the Department of Trade and Industry (DTI) classifies businesses in terms of
asset size and number of workers employed. Microenterprises are defined as businesses
with assets of up to PhP3-million and employing less than 10 workers. Small enterprises
have assets from PhP3,000,001 to PhP15-million and employ between 10-99 workers. And
medium enterprises own assets from PhP15,000,001 to PhP100-million and employ 100 or
more workers.

Apart from asset size and workers, other criteria – place of business, production process,
financial system, credit sources, markets and legality – have also been used to differentiate
between different-size businesses (see Table 1-1).

PACAP Definition of “Enterprise”

PACAP adheres to the income-generating aspects of the above definitions but is not strict
about the classification criteria of assets and workers employed. It does, however, make
a distinction between survival livelihood activities (usually operated by households) and
larger-scale activities (= enterprises) that deal with the complex range of enterprise issues
related to marketing, production, finance, management.

PACAP makes a further distinction between microfinance projects (quasi-banking activi-

ties of credit and savings involving a number of borrower-microentrepreneurs, each with
his/her small business) and enterprises (which are focused on a single business activity).
A third distinction is between enterprises and community water supply and other so-
cial service activities that incorporate user-fee schemes for cost-recovery and long-term
sustainability.

As a grant-making entity, PACAP supports projects that are, by definition, different from en-
terprises. Projects have definite start- and end-dates, while enterprises are expected to exist
indefinitely, at least in theory. In funding an income-generating activity, PACAP is actually
supporting the start-up phase of the whole enterprise or, more commonly, the start-up of
one of its components. The assessment of the PACAP-supported businesses cited in this

  3
 Table 1-1. Characteristics of Different Size Businesses
Micro-business Small Small-Medium Medium
Enterprise Kit has ignored this artificial distinction, however and chosen to focus instead
No. of 1-4 5-9 10-29 30-49 on the entire enterprise and not merely on the component funded by PACAP.
employees
Place of At home Shop next to Separate from Separate location; Consistent with its pro-poor orientation, PACAP’s motivation in supporting enterprises is
business home or nearby home more sophisti- not only found in the latter’s projected profitability but, equally important, in the potential
cated building benefits it can generate for its target beneficiaries. Apart from employment and income,
other expected benefits are enhanced gender equity, community participation, environ-
Production Simple Simple but More sophisti- Complex produc- mental protection and regeneration and peace-building.
process slightly more cated, several dif- tion process; may ƒƒ Enhanced gender equity means women have equal opportunities as men to
advanced, more ferent steps with be more capital realise their individual potential and to benefit equally from their participation in
steps specialization of intensive society.
labor ƒƒ Community participation means working with all members of the community
Financial system Cash flow Basic accounting Accounting Accounting sys- and attending to the different needs, interests, priorities and roles of women, men,
accounting, system system and tems and financial boys and girls, and the relations between them.
no formal records in place records main- ƒƒ Environmental protection and regeneration means understanding that the
documentation and payroll or tained, planning prevention of environmental degradation will make poverty reduction and devel-
personnel system and management opment more sustainable in the longer term.
reports also in ƒƒ Peace-building means growth and poverty reduction in conflict-affected areas.
evidence
Put another way, an enterprise is eligible for PACAP support to the extent that it is com-
Credit sources Informal sources Informal sources; Informal sources; Some access to mitted to a triple bottom line, that is, it seeks to accomplish objectives that are social and
at higher interest need for working formal credit formal credit, but environmental as well as financial. In this sense, PACAP’s view of an enterprise is con-
rates. No access to capital for sup- could be acces- these sources op- sistent with the notion of “social enterprise.”
formal credit due plies and equip- sible but remains erate slowly and
to lack of busi- ment financing difficult to obtain are inflexible in
ness records and meeting pressing The Concept of “Social Enterprise”
collateral. needs
Markets Local market Local market with Local and national Regional or According to Social Enterprise London, social enterprises share a number of common char-
some expansion market, competi- national markets. acteristics, including:
tion apparent, Export is possible. ƒƒ Enterprise orientation. They are directly involved in producing goods or pro-
larger quantities viding services to a market. They seek to be viable trading organisations with an
of raw materials operating surplus.
and supplies ƒƒ Social aims. They have explicit social aims, such as job creation, training or the
needed. Forward provision of local services. They have ethical values, including a commitment to
and backward local capacity building, and they are accountable to their members and the wider
linkages to community for their social environmental and economic impact.
national and com- ƒƒ Social ownership. They are autonomous organisations with governance and
munity economy. ownership structures based on participation by stakeholder groups (such as users
or clients, or local community groups) or by trustees. Profits are distributed as
Legality Unregistered. Op- Unregistered Registered Registered; abides profit sharing to stakeholders or used for the benefit of the community.
erate in informal by government
economy. policy and regula- The above concept of social enterprise is exemplified in the Business Center of the Tahanang
tion (i.e., tax and Walang Hagdanan (TWH), one of the enterprises reviewed for this Social Enterprise Devel-
labor regulations,
opment Kit (see Box 1-1).
import/export
licensing.

Adapted from Cotter, James, A Project Manager’s Guide to Small Enterprise Development. As quoted in Monitoring and
Evaluating Small Business Projects, A Step by Step Guide for Private Development Organizations. Private Agencies Collabo-
rating Together (PACT). 1987.

4  Social Enterprise Development: Community Businesses at Work Section 1 | What is an Enterprise?  5

 Box 1-1. Business Center for the Products & Services of Persons with Disabilities ƒƒ
  n Tahanang Walang Hagdanan
Context
Tahanang Walang Hagdanan (TWH) was founded in 1973 to respond to the needs of
Persons with Disability (PWD). One of its major, long-running programs has been
livelihood support for PWDs. Within the TWH compound in Cainta (Metro Manila) are
four workshops (Metalcraft, Woodcraft, Needlecraft and Business Center) that conduct
training to PWDs in employable skills, while providing them with actual employment
and income. The Metalcraft Department, which manufactures wheel chairs and all kinds
of mobility aids, is recognized throughout Asia as a center of excellence and is used as a
training facility by the disabled in other countries of the region. The main products of the
Woodcraft Department are didactic materials and educational toys for Montessori schools
and government daycare centers. It also makes company give-aways, kitchen ware and
other novelty items. Within the TWH compound are some 350 employees, workers,
students and staff. Seventy percent of these are PWDs, while the remaining 30 percent are
either relatives or immediate family members of the PWDs. Apart from funding a number
of TWH projects in the late 1980s and early 1990s, PACAP support is acknowledged as
having been instrumental in launching the TWH Woodcraft Department.
Beyond Training
Despite the large number of PWDs already employed in TWH center-based enterprises,
these represent only a very small fraction of the PWDs needing work and income. To address
the needs of community-based PWDs, TWH has been conducting production skills and
entrepreneurship development training to PWD groups and individuals for over 30 years.
As a result, many TWH graduates have actually gone on to establish microenterprises
and manufacture products to sell. Some of them, gifted with talents and skills, have
produced items whose quality is at par even in the international market. Unfortunately,
many of these micro-businesses have not been sustainable, mainly because of poor
access to markets. With this realization, TWH decided to expand its marketing activities
to include products made by community-based PWD entrepreneurs. The expansion of
marketing operations would be accomplished through the establishment of the TWH
Business Center.
The TWH Business Center
The Business Center project, a winner of the 2006 Panibagong Paraan competition, seeks
to maximize the economic potential of PWDs, which has been largely constrained by
limited market exposure. As a physical structure, the Business Center-cum-Gift Shop
showcases PWD products, facilitates access to local and international markets, and
provides the venue where marketing agreements can be negotiated. As a service unit,
the Business Center supports the economic activities of the PWDs as follows:
ƒƒ Promotions, through a website on the services of the center, production of brochures,
product catalogues, newsletter, and participation in bazaars, expos, and exhibits;
ƒƒ Matching and linking PWD product/services with interested clients/buyers
through a database on PWD groups and individuals, the goods and services
they produce, and possible customers/clients;
ƒƒ Formal training on product development, packaging and labeling and the
conduct of sales clinics and market consultations
6  Social Enterprise Development: Community Businesses at Work
Capacity to enhance the marketing skills of PWD entrepreneurs; and
ƒƒ Expansion of the TWH market and support system of companies and
government agencies to promote the products of PWD groups and
individuals.
Business Center Management
The Center is headed by the Chief Executive Officer of Tahanang Walang Hagdanan
and staffed by TWH managers with many years of experience in dealing with local
and export markets, both private and government. These managers are responsible
for the day-to-day operations of the Business Center, including: (a) advertising and
promotion of products through brochures, flyers, the internet, and so on.; (b) contract
work, sales calls and negotiations with national and local government entities and
private corporations; (c) coordination with PWD producer groups and individuals;
(d) mobilization of graphic artists for design work and technology transfer to PWD
entrepreneurs; and (e) research and development (R&D) to determine market trends,
conduct value analysis and identify cost-reduction measures.
PACAP Assistance
A PACAP grant of PhP1-million was provided to the Business Center in 2006. The
grant was utilized for: (a) Renovation of Existing Building for the Business Center
(PhP227,000), (b) Center Management and Systems Development (PhP413,000) and (c)
Capacity Building (PhP360,000). In general, the activities of the Business Center have
proceeded according to plan approved by PACAP. Since November 2006, the Business
Center has actively joined bazaars and exhibits and facilitated work contracts for PWDs
with identified buyers. Promotions strategies – printing of brochures, publication
of a newsletter and a website – have also been undertaken. Workshops have also
been conducted on (a) packaging and labelling, (b) team building and personality
development, (c) new technology on wood finishing, and (d) learning and experience
sharing in production. Twenty-seven new product designs have been developed: 15
designs for wood and metal crafts; six designs for needlecrafts and six designs for
recycled paper products. Finally, two market outlets have been established, a free-
standing stall on the ground floor of the “Market! Market!” complex in Taguig and
the Gift Shop inside the TWH compound. In addition, TWH is a regular supplier of the
National Book Store chain, Cash and Carry Supermarket and Abenson’s Home Plus (for
kitchen items and educational toys). TWH recently concluded an agreement with the
SM Malls to establish kiosks in all SM branches nationwide.
TWH Relations with Community-Based PWD Producers
TWH currently works with some 21 PWD entrepreneurs (groups and individuals). These
entrepreneurs, many of whom are graduates of TWH training, must be actual producers
(not merely traders). To avoid competition among PWD producers, TWH makes sure that
PWD products have a distinctive quality that differentiates them from similar items. To
be a member of the Business Center, a PWD entrepreneur must pay a membership fee
of PhP200 and PhP500 for individuals and group, respectively. To test the marketability
of members’ new products, these are displayed on the shelves of the two TWH outlets
and included in the products promoted through trade fairs. Members’ products
with demonstrated marketability are included in the TWH brochure, which uu
Section 1 | What is an Enterprise?  7
 is issued yearly and updated periodically through the insertion of flyers describing new
products. Because of funding constraints, TWH is unable to provide financial support for
the production activities of PWD entrepreneurs. However, it does provide limited advances
(PhP2,000–5,000) to producers whose products are displayed in the TWH outlets. TWH
adds a 10-percent margin to the selling price of the PWD items as its commission.
Marketing Strategy
The Business Center’s target customers are government agencies (including LGUs) and
private corporations. To identify possible contracts, TWH does research on government
budgets. One output of this research is the production of educational toys for
government day care centers, currently one of the largest revenue sources of TWH. The
approach to private corporations is slightly different but equally systematic. First, TWH
calls the potential client to identify the individuals responsible for the company’s CSR
(corporate social responsibility) strategy. TWH has found company receptionists to be
quite sympathetic and helpful in providing contact details of the employees responsible
and in giving information on potential opportunities. TWH attributes this positive
response to its good reputation and the universal concern for the disabled. TWH then
sends a letter to these individuals, telling them what TWH does, what it can offer and
requests for appointment. The first meeting – where the TWH marketing manager is
accompanied by the PWD producers themselves – is often a free-wheeling discussion
where company representatives sometimes propose possible PWD products that would
be in line with the corporation’s CSR objectives and programs. Eventually, decisions are
made, marketing agreements are finalized and orders are placed.
Support Strategies
Sometimes, the original PWD producer is unable to meet the volume requirements of
the corporation. When this happens, TWH augments the production capacity of the
community-based PWD producer through sub-contract agreements with other PWD
groups and/or its own workshops. The reverse is also true. During peak production periods,
the Business Center sub-contracts some job orders of its workshops (e.g., manufacture of
recyclable bags and educational toys) to community-based PWD producers. While TWH
serves as the “face” of PWDs in negotiating with clients, “back-room” production is in the
hands of producers who operate independently of TWH, a situation that is similar to a sub-
contracting arrangement. Maintaining its reputation with clients requires that TWH must
manage its “sub-contractors” carefully. One important measure is constant monitoring to
determine the capacity of the PWD producers to deliver on orders. TWH makes sure that
job orders never exceed producer capacity; PWD producers are issued bigger orders only
if they performed well on previous jobs. The TWH workshops also perform useful roles
as back-up facilities to meet production shortfalls. The R&D group within TWH serves
a critical function in this regard: it is tasked with developing the production methods
needed by the TWH workshops to manufacture the required items.
Financial Performance
For the year ended September 30, 2007, TWH as a whole (including the four workshops,
Main Office and General Services) had total revenues in excess of PhP24-million and a
net income of PhP807,000. During the nine month period ended June 30, 2008, total
revenues amounted to PhP16.3-million, while net income was PhP653,000. On a year-
on-year basis, revenues in fiscal year 2008 are likely to be lower than 2007 but it is likely
8  Social Enterprise Development: Community Businesses at Work
that net income in 2008 will either be the same or marginally higher than 2007. The
financial performance of the Business Center, which is segregated in the TWH income
statement, improved in 2008 compared to 2007. For the first nine months of fiscal year
2008, Business Center sales amounted to PhP2.2-million, up by PhP700,000 from the
PhP1.5-million sales in 2007. Business Center gross profit has increased as well, from
PhP608,000 in 2007 to PhP1.1-million in 2008.
Problems
Despite its good operational and financial performance, TWH is not without its
problems. For one, even if all of its profit centers are operating in the black, TWH is still
dependent on donations and grants for a sizeable portion of its social welfare activities
for PWDs. Its woodworking machines and equipment are old and need constant
repair. The biggest problem of the Business Center is the lack of working capital: TWH
customers pay on a credit basis but the Business Center must pay PWD producers in
cash upon delivery. Another formidable challenge is competition from China. Finally,
the ongoing economic slowdown has closed down the operations of many corporate
customers, thus forcing TWH to shift strategy and accept even small orders. In deciding
whether to accept an order, profit is less important to the objective of keeping TWH
workers employed. Small orders are accepted as long as direct costs are recovered and
the gross profit contributes to overhead costs.
Cost-Reduction Measures
Reducing cost of sales (materials and labor) is a constant concern of management in a
manufacturing concern. Towards this end, TWH is effecting a shift towards piece-rate
(as opposed to daily rate) modes of compensation because its experience shows that
piece-rate compensation results in more satisfied employees doing better quality work
in less time. In addition, TWH management has instituted the practice of “productivity
incentive bonuses”, which enable workers to receive a percentage of any savings on the
materials and labor budget allocation for individual job orders.
Plans
In the long-term, TWH will target foreign markets for its PWD products. An initial
strategy is to work with foreign businessmen who import products from the Philippines.
At some point, however, TWH hopes to sell directly in other countries, using Philippine
embassies abroad as their display centers. This long-term objective will require
systematic market research to determine the products preferred in target countries and
their quality standards. n
Because of the almost universal sympathy for persons with disability (PWDs), some may
say that government and private corporations will sometimes bend over backwards to place
an initial job order with PWD producers. Repeat orders, however, are based on the ability
of the PWD producers to meet on-time delivery schedules and adhere to quality standards.
In other words, TWH and its PWD producers are issued repeat orders because “they mean
business” – that is, they are prepared to operate effectively in the mainstream business
environment.
Section 1 | What is an Enterprise?  9
 Small entrepreneurs generally pay lip service to the importance of marketing. Very few, how-
ever, are prepared to make the necessary investments in marketing infrastructure. In TWH,
there are dedicated staff members whose main function is to identify potential government
contracts, make sales calls to potential corporate clients, and so on. These investments in
marketing have been largely responsible for the evolution of an entrepreneurial culture in
TWH where every staff member is constantly on the look-out for business opportunities.

While entrepreneurial, TWH is also prudent. This prudence was recently demonstrated in
its newest venture, a call center business. Recognizing that it had little knowledge of the call
center industry, TWH chose to joint venture with an accredited call center agent. Under the
arrangement, TWH provides the venue and employees, while its partner provides the cus-
tomer listings, telephones, computers and operations management. The call center, which
started in late October 2008, already employs about 20 PWDs.

The following table highlights the major differences between social enterprises and tradi-
tional businesses. It is drawn from the recent study of Dacanay (2004) on social enterprises
in Asia. n

Table 1-2. Differentiating Social Enterprise from Traditional Business

Enterprise Element Social Enterprise Traditional Business

Primary stakeholders/
beneficiaries
Primary objectives
A community or group, involving Stockholders, consisting of rich
marginalized sector(s) of society individuals and/or families who own
capital
Double or triple bottom line: Bottom line:
ƒƒ financial sustainability and ƒƒ profit
growth
ƒƒ improvement of quality of life
of a marginalized sector, group
or community
ƒƒ environmental sustainability
ƒƒ cultural integrity

Enterprise philosophy Distributive: Accumulative:

ƒƒ benefits accrue to a broader
segment of society/public at
large;
ƒƒ profits are generated with due
regard to social and environ-
mental costs
ƒƒ minimization of costs and max-
imization of profits towards
enrichment of the individuals
or families
ƒƒ social and environmental costs
externalized

Source: Dacanay, Marie Lisa M. (editor). Creating Space in the Market, Social Enterprises in Asia (pp. 6-8). Asian Institute of
Management and Conference of Asian Foundations and Organizations. 2004

10  Social Enterprise Development: Community Businesses at Work

Section 2

Section 2
Enterprise Planning
and Analysis:
Overview
Defining an Enterprise

The first step in enterprise planning is to define the enterprise. Typically, enterprises are
often defined either as manufacturing (single product and multiple products), trading
(wholesale and/or retail), service, banking, or farming (=agribusiness) concerns.

While the above typology is important, it is better way to define an enterprise in terms of its
target customers. In other words, an enterprise can be defined in terms of:
ƒƒ Customer needs, or what is being satisfied
ƒƒ Customer groups, or who is being satisfied
ƒƒ The technologies used and functions performed, or how customers’ needs are
being satisfied.

The Basic Question

Once an enterprise has been defined, further planning and analysis should focus on the
following basic question:

“Can the planned Enterprise produce a product(s) at a price that its target customers are
willing to buy and can it sell a sufficient number of these products to stay in business?”

Scope of Enterprise Planning and Analysis

There are four major areas – market, production and technology, organization and man-
agement and finance – in enterprise assessment. The following (see Table 2-1) lists the
objective and desired outputs of the analysis in these four areas.

12    13
 Table 2-1. Scope, Objectives and Outputs of Enterprise Planning and Analysis
The potential adverse impact of a sudden loss of needed raw materials would be a stoppage
Element Objective Output
in production activities and consequently, a reduction of products for sale.
Market To determine: 1. Product specifications
ƒƒ Whether the enterprise can sell 2. Demand and supply situation Clearly, the likelihood of occurrence of a particular risk – such as, the loss of raw material
ƒƒ How many it can sell 3. Sales projections
supply – will vary from one enterprise to another. Each enterprise must make a judgment
ƒƒ How it must sell 4. Marketing plan
whether the likelihood of occurrence is high, medium or low.
Production and To determine whether the enter- 1. Choice of technology/ manu-
Technology prise can produce its products at facturing process In the same way, an enterprise must make the judgment on the level of impact – once again,
the desired: 2. Land and infrastructure whether high, medium or low – that a risk will generate if it does occur.
ƒƒ Quality 3. Machinery & equipment
ƒƒ Cost 4. Labor requirements If the probability of occurrence and level of impact of an identified risk are both rated high,
ƒƒ Time required by its customers 5. Raw materials
a risk management strategy must be devised to address the risk and an individual or group
assigned to administer the strategy.
Organization and To determine: 1. Form of business
Management ƒƒ Appropriate organizational 2. Organizational structure In the SAFRA-ADAP Furniture-Making Enterprise cited in Section 4 (see Box 4-2), a key
structure 3. Staffing plantilla risk is the uncertain supply of Gmelina wood, the major raw material for the school chair
ƒƒ Management staffing product of the cooperative. To ensure a continuous supply of Gmelina, SAFRA-ADAP has
requirements
established and maintained good relations with “lumad” Community-Based Forest Man-
ƒƒ Earliest/latest start of normal
agement (CBFM) associations and individual tree planters in many parts of the Agusan del
business operations
Sur largely through its members who are themselves “lumad.” (Note: “Lumad” is the term
for the native peoples of Mindanao.) Equally important, SAFRA-ADAP deals fairly with the
Finance To determine: 1. Total project cost tree planters and this is recognized by the latter and serves as the basis for their continuing
ƒƒ How much initial capital is 2. Sources and uses of funds relationship.
required 3. Financial projections (cash flow
ƒƒ Where to source funds and profit/loss)
The following table is recommended as a way of organizing and presenting the results of a
ƒƒ Projected financial 4. Profitability (Return on Invest-
risk assessment exercise. n
performance ment and Payback Period)
ƒƒ Whether projected financial
performance is satisfactory Table 2-2. Risk Assessment Matrix
Types of Risks Potential Likelihood Level of Risk Person(s)
Risk Adverse of Impact Management Responsible
Impact Occurrence Strategy
Risk Assessment on the
Enterprise
Understanding potential risks is particularly important in the planning of an enterprise. Social
The S-T-E-E-P framework – with its comprehensive typology of risks – is a useful starting
Technical
point in the identification of possible enterprise risks.
Economic
The STEEP framework postulates that there are five categories of types of risks, as follows: Ecological
ƒƒ Social: socio-cultural norms that may inhibit participation in, or adoption of pro- Political
gram or enterprise initiatives
ƒƒ Technical: factors affecting the quality of resources required for success Notes:
ƒƒ Economic: factors affecting the quantity of resources required for success 1. Likelihood of Occurrence: H=High; M=Medium; L= Low
ƒƒ Ecological: environmental externalities that may affect program or enterprise 2. Level of Impact: H=High; M=Medium; L= Low
success
ƒƒ Political: relational factors between various stakeholders that may affect program
or enterprise performance.

To take one example, an economic risk common to many PACAP-supported enterprises is

the uncertain supply of needed raw materials.

14  Social Enterprise Development: Community Businesses at Work Section 2 | Enterprise Planning and Analysis: Overview  15
Section 3

Section 3
Product and Market
Considerations
The Key Questions

While NGOs have made significant contributions to society in terms of advocacy for human
rights, people’s participation and provision of social services to disadvantaged communi-
ties (particularly in health care), their efforts at economic development – that is, in raising
the incomes of their client poor – have been less successful. With the exception of micro-
finance programs, the performance of NGOs in community-based economic development,
and particularly in enterprise development, has not lived up to expectations.

More often than not, NGO-initiated enterprises fail because of a deficient analysis of the
markets in which they operate. NGOs rarely have a good understanding of their target
market, of the dynamics and rationality of monopolistic actors in established mar-
keting chains that are not easy to break because they are carefully built up and fiercely
defended.

Many PACAP partners are engaged in enterprise development. Their products are varied,
agricultural crops (such as, rice, vegetables, marine products, fruits, livestock and poultry
products, and so on), handicrafts (such as, rattan products, stuffed toys, garments, baskets,
furniture, and so on) and processed food products. Many of these enterprises are faced
with problems and issues related to the marketing of their products, which is crucial in the
profitability and sustainability of these business enterprises.

Clearly, there is the need for a strong market orientation, which is, simply stated, deter-
mining what your customers want and then giving it to them. Stated another way, it means
finding answers to the following four questions:
ƒƒ What is the product?
ƒƒ To whom will the enterprise sell its product(s)? (= target customers)
ƒƒ How many can it sell? (=target market share)
ƒƒ How shall it sell? (=market strategy)

Product Appraisal

Every product embodies a value(s) desired by its target customer. A customer will buy a
product if the latter contains the value s/he wants and if that value is greater than the cost
to be incurred by the customer in purchasing the product.

16    17
 In quasi-mathematical terms, the Total Customer Derived/Delivered Value (TCDDV) of
a product is the difference between its Total Customer Values (TCV) minus its Total Cus-
tomer Costs (TCC).
TCV is not only limited to the utility value of the product but also includes service, image
and personal values. Analogously, TCC is not only monetary but also involves convenience,
time/energy and psychic costs.
The inability to appreciate non-monetary costs is one reason often cited for the failure of
government rural credit programs (such as, the Masagana 99 of the Marcos era and other
more recent farm credit programs) to wean farmers away from private moneylenders. The
low interest rates on loans (=customer value) offered by government credit programs is not
enough to offset the convenience, time/energy and psychic costs required of farmers (=cus-
tomer cost) to obtain a government loan. As a result, farmers prefer the local “loan shark”
because of the latter’s lower costs overall. Put another way, microfinance programs have
been successful – despite their higher-than-bank interest rates – because of their adoption
of private moneylender practices, which have reduced the convenience, time and psychic
costs of their target borrowers.
It is important to describe a product by listing its physical properties, e.g., type, use, shape,
weight, packaging, and so on. Beyond this listing, however, it is important to identify those
qualities (or values) of the product (both current and emerging) that its customers look for.
All products – even those that are apparently “undifferentiated” – have qualities desired by
their customers. For example, until a few years ago, most of the rice sold in public markets
was still being labeled as “C-4” – because of the well-known good eating qualities of C-4 –
even if that particular rice variety had already been wiped out by rice pests in the 70s.
Identifying the desired qualities or values of a product also facilitates understanding of the
competition that the product may face, not only from similar products, but also from other
commodities that customers may opt to purchase to substitute for the original product. For
example, chicken has become the viand of choice for all but the poorest Filipino consumers,
substituting for beef and pork (and even fresh fish) because of latter’s increasing prices and
perceived health hazards.
Market and Customer Appraisal
There are three steps to identifying and understanding the needs of one’s potential cus-
tomers: segmentation, targeting and positioning.
1. S-egmentation involves breaking down one’s market and target customers into man-
ageable units. Specific questions include:
• Who are the different groups of potential customers of our product? Where can
they be found?
ƒƒ What is the size of the demand of these different groups for our product?
ƒƒ Who are our competitors and what are their respective shares of our potential customers?
ƒƒ What are the different levels of the distribution chain and what are the selling
prices of the product at these different levels?
ƒƒ Is there a seasonal pattern to product sales?
18  Social Enterprise Development: Community Businesses at Work
2. T-argeting is identifying the customer segment(s) that the enterprise wishes to serve.
Will these target customers be intermediary users (processors, assemblers, whole-
salers, retailers, and so on)? Or will they be end-users (that is, the ultimate consumers)?
What is the estimated demand of this customer segment(s), whether in daily, weekly or
monthly sales volume?
3. P-ositioning one’s product revolves around the “promise of more” – the message
and commitment of the enterprise to its customer that its product will deliver some-
thing different and better than other similar products. The “promise of more” usually
involves a trade-off between product quality and price (see below).
Quality
High quality / High quality /
Low price High price
Low quality / Low quality /
Low price High price
Price
Positioning the product of a planned enterprise in one of the above four quadrants answers
the important question of whether the selling price of its product will be higher or lower
than those currently prevailing in the market.
The product positioning strategy also determines the nature of the enterprise and its opera-
tions. A “high-quality/high price” product position implies high-value/low volume opera-
tions, where the bulk of enterprise revenues will be derived from the big difference (the
gross margin) between the product selling price and its production cost.
On the other hand, a “low-quality/low price” position implies high-volume/low value op-
erations, which means that enterprise revenues will be largely derived by increasing sales
of the product.
One PACAP partner that did its homework in product and customer appraisal is PAPASMA,
a community group of banana producers in Agusan del Sur (see Box 3-1).
Box 3-1. Enhancing Table Banana Production and Marketing in Angas n
Pinaghiusang Pondok Alang sa Malahutayong Agraryo (PAPASMA)
Background
To address the problem of low prices for their produce, 30 farmers of Barangay Angas
organized themselves into an association – the Panaghiusang Pundok Alang sa
Malahutayong Agraryo (PAPASMA) – in May 2000. Their initial plan was to transport
their produce to the Nasipit Port and sell directly to traders there. After assessing market
conditions at Nasipit, however, they found out that the costs of renting a truck would
make their planned venture unprofitable. uu
Section 3 | Product and Market Considerations  19
 Initial Efforts
This realization led the farmers to plan and undertake a more modest marketing scheme,
that of assembling their produce (e.g., minimum of 1,000 kilos) in one place, negotiating
as one with local traders and making a collective sale. For this purpose, they raised money
among themselves to buy a 1,200 square meter of land adjacent to the highway and
built a small buying station made of light materials. The PhP10,000 needed to buy the lot
came from members’ contributions (PhP174.00 each) and the commissions earned by the
association as the marketing agent (known locally as “dicer”) of its members’ produce.
Achieving Market Leadership
PAPASMA implemented this scheme for a number of years, over time, becoming the
biggest agent (=dicer) of bananas in Josefa town (the association estimates that it
currently controls 40% of the banana harvest in the area). Dicers organize the harvesting
process by arranging the schedule for the cutting of bananas and designating the
assembly points where the farmers will bring their produce. They also provide cash
advances to producers, which are repaid at the conclusion of the marketing transaction.
Without dicers, traders would have to negotiate and collect the produce of banana
planters on an individual basis, an extremely expensive proposition given the bad road
conditions and poor access to most farms.
Formal Supply Contracts with Traders
While, for the most part, the association’s dealings with the local traders were mutually
beneficial, there were some bad experiences. In one instance, the trader simply did not pay
for the bananas he had bought on consignment. More commonly, trader buying prices
were often volatile, fluctuating downwards to the detriment of the banana producers. To
address the situation, PAPASMA invited the local traders to a bidding conference in 2006.
Four traders came to the bidding conference, a testimony to the bargaining power of
PAPASMA as a marketing agent. The bidding conference resulted in the selection of one
buyer with whom PAPASMA negotiated a formal supply agreement that remains in force
up to the present time. The main features of the supply agreement are as follows: (a) the
trader must pay PAPASMA a premium of PhP0.50 per kilo for the latter’s role as collection
agent; (b) the trader must not buy directly from the farmers (note: farmers are likewise
not allowed to sell their bananas directly to traders. A farmer who violates this provision
three times will be expelled from PAPASMA and will no longer be able to sell his/her
products to the association.); (c) the trader must pay for the bananas either in cash or
check before leaving the buying station; (d) the trader must not be overly strict about
product quality, e.g., in terms of size and the number of bananas per bunch; (d) the trader
must pay for the entire volume of bananas that has been negotiated with PAPASMA (e.g.,
4,000 kilos) even if s/he decides not to load a portion of the shipment onto the truck.
PACAP Assistance
To expand its banana trading operations, PAPASMA received a PACAP grant of PhP835,039
that was applied to: (a) construction of a more permanent building for the buying
station; (b) additional working capital for the banana trading operations; (c) loans to
members to engage in banana production on an additional 24 hectares; (d) training; and
(e) administration costs. PAPASMA and its members provided counterpart contributions
in the following items: (a) building construction, (b) banana production, and (c) project
management and administration.
20  Social Enterprise Development: Community Businesses at Work
Current Operations
PAPASMA’s banana trading operation is proceeding smoothly. The association’s building
has been expanded to include a kitchen, a communal toilet is being constructed and
the conference area is earning some income by being rented out for meetings and
workshops. In March 2008, the association started a new trading venture, the buy-and-sell
of its members’ de-husked coconuts. It has also constructed a copra dryer in anticipation
of a copra production and trading venture in the future. The operations of the coconut
trading business are similar to its banana operations. PAPASMA assembles the de-husked
nuts of its members in the buying station and re-sells this at a premium of PhP0.20-0.50
per kilo to a trader who had been selected prior to the start of operations.
Financial Performance
The latest balance sheet of PAPASMA (June 30, 2008) shows a total asset base of
PhP782,000. Current assets are valued at PhP344,000, while fixed assets have a value of
PhP468,000. The association has no outstanding liabilities. From January 1 to June 30,
2008, banana trading had total sales of PhP523,256 and a net income of PhP26,675. On
the other hand, the four-month old (March to June 2008) coconut trading business had
sales of PhP159,248 and a net income of PhP7,529.
Utilization of Net Income
Net incomes from the two trading operations are utilized in four ways as follows:
Association General Fund (60%), Dividends (15%), Patronage Refund (10%) and
Development Fund (10%). The General Fund is used for the general and administrative
expenses of the association. Dividends are issued to members in proportion to their
capital build-up (CBU) contributions, while patronage -refunds are based on the volume
of bananas (and now coconuts) sold by the individual member to the association during
the course of the year. The Association declares dividends and patronage refunds every
year since it was established in 2000. Finally, the Development Fund is used for the
maintenance and expansion of the Buying Station Building, e.g., construction of kitchen,
copra dryer, among others. n
The success of PAPASMA’s banana trading enterprise underscores the importance of market
research, in particular, an understanding of the “value chain” – the prices and margins that
are captured by different players along the chain. Understanding the position of its trading
business in relation to other players in the value chain enabled PAPASMA to “buy high”
(from its members) and “sell higher” (to traders).
A strong market orientation enabled PAPASMA to: (a) identify its customers (the traders),
(b) identify the key needs of its customers (a sufficient volume of bananas within certain
quality specifications assembled in one place at specific times agreed beforehand), and
(c) align its competitive advantage (its access to members’ produce) and operations (the
strategic location of its buying station near the main highway) to satisfy these needs. Over
time, as PAPASMA became the biggest assembler (“dicer”) of bananas in the locality, its
bargaining position with traders was greatly enhanced, thus enabling it to exact better trade
conditions from its members. These same market-oriented principles are now being used
by PAPASMA in its new coconut trading venture.
Section 3 | Product and Market Considerations  21
 Conversely, this same market orientation resulted in PAPASMA’s rejection of an opportu-
nity to serve as buying agent for Cotabato-based rice traders-cum-retailers (known locally
as “strikers”). The PAPASMA chair, the moving spirit of the association, justified PAPAS-
MA’s rejection of the rice trading as follows: (a) PAPASMA does not have its own truck, (b)
only few of the association’s members are into palay production, and (c) PAPASMA does
not have a good understanding of the palay trading business.
The Marketing Plan
The results of product and customer/market analysis are inputs towards the preparation of
the marketing plan. The marketing plan – which answers the question, “how will our cus-
tomers buy our product?” – addresses such concerns as: (a) product transport to point of
sale; (b) terms of sale, that is, whether cash, credit or consignment; and (c) advertising and
promotions, such as linking with government and private support agencies, participation in
trade fairs and preparation of promotional materials.
To be effective, marketing plans need to be dynamic, changing constantly to meet new situ-
ations. The continued survival of its Arts and Crafts Enterprise is testimony to Uswag De-
velopment Foundation’s unceasing efforts to understand market conditions and adjust its
plans accordingly (see Box 3-2).
Box 3-2. Making Handicrafts for the Tourist Market n Uswag Arts and Crafts /
Uswag Development Foundation
Background
The Uswag Arts and Crafts enterprise involves the production of high-end novelty
items – bags, cushions, and table top items made of locally made fabrics and materials
(raffia, abaca, nito) – to be sold to tourists in Kalibo and Boracay and Manila’s vast
export market. Production of the materials is done by members of Buylog Akeanon, an
association of craft producers, while USWAG Arts and Crafts (UAC) is responsible for the
finishing touches to the products and in marketing them. What differentiates the UAC
from other, more conventional buyers in Aklan is its adherence to fair trade principles
and its commitment to give community producers a more equitable share in the sales
revenues of their products. From a conventional business perspective, this commitment
to fair trade increases the labor costs of the enterprise and ultimately, its product selling
prices.
Uswag Arts and Crafts
Uswag Development Foundation manages UAC, the marketing entity, as a project with
separate staff and resources. Its financial systems have been installed and are overseen
by the Foundation’s Finance Department. Profits generated by UAC are used to fund its
marketing activities.
PACAP Assistance
PACAP assistance to the enterprise was provided over three years, from 2001 until
October 2007. The total PACAP grant, which was in excess of PhP5-million, was utilized
22  Social Enterprise Development: Community Businesses at Work
for: (a) marketing and promotions (participation in both local, Manila and international
trade fairs); (b) working capital for raw materials and finished products; (c) capability-
building; and (d) project management.
Marketing Strategy
UAC targets the high-end market – whether in Aklan, Manila or the international market
– for handcrafted, contemporary designed bags and cushions made using locally
produced materials. UAC bags, which are contemporary in design and of the highest
quality, are distinctly different from most native handcrafted bags available locally or
in the international market. Their selling prices can go as high as PhP900.00 per bag.
The enterprise also markets high-quality table top items (runners, placemats) made of
natural materials (raffia, abaca, nito, piña). In the past, its participation in exhibits and
trade fairs enabled UAC to sell extensively to the export market, especially European
Union countries (e.g., Italy). In 2006, however, negative publicity about the Philippines
discouraged foreign buyers from attending CITEM fairs, the chief source of overseas
contacts for UAC. UAC’s marketing efforts are now concentrated on a crafts shop at
D’Mall, the premier mall on Boracay Island.
Net Income
The UAC income statements show healthy net incomes in 2007 (PhP857,000) and in the
first ten months of 2008 (PhP522,000). Based on monthly averages, it is likely that sales
in 2008 will be equal to those in 2007 (PhP1.27-million). This is no mean feat, considering
the global economic slowdown and the likelihood of a drop in tourist arrivals in 2008.
Increasing Production Costs and Mitigating Measures
As a percentage of sales, UAC’s cost of goods sold in 2008 (42%) doubled compared to
2007 (21%), resulting in corresponding reductions in 2008 gross profit (down 58% from
78% in 2007) and net income (down 49% from 67% in 2007). At the same time, there is
a slight reduction in total operating expenses – again as a percentage of sales – down to
8.7% in 2008 from 11.4% in 2007. The above changes reflect the measures adopted by
UAC to reduce both product selling prices and operating costs in an effort to increase
sales in the local market. One such measure is the application of different mark-ups on
raw materials depending on their accessibility (in the past, UAC had adopted a uniform
60 percent mark-up on all materials and labor costs). At the same time, UAC is conducting
value analysis to replace more expensive materials (e.g., plastic for wood in bag handles).
While these measures may compromise with the Foundation’s long-held position that its
products must be 95 percent made of materials available in Aklan, they are considered
necessary to achieve an overall reduction in selling prices, thus making UAC products
more accessible to local tourists.
Keeping in Step with Fashion Trends
UAC’s most important problem, given the constantly changing tastes and fashions within
the industry, is how to identify and keep in step with emerging trends and designs. For
example, there is now an emerging trend toward bigger ladies’ bags. Also, different
tourists prefer different designs. Korean tourists prefer bold colors, while Europeans
prefer more subtle tones. Given the nature of its market (ultimately, international
because of the tourist trade), keeping abreast of fashion trends is crucial for long-term
business success, a task made difficult because of the relative isolation of Aklan. uu
Section 3 | Product and Market Considerations  23
 Connecting with Foreign Buyers
A second problem is connecting with the right foreign buyer(s). UAC no longer considers
participation in trade fairs to be worthwhile because foreign buyers have stopped
attending Philippine trade fairs. In many instances, UAC has not even been able to recoup
its expenses in participating at trade fairs. Instead, UAC is currently looking for a locally
based representative in the United States to sell its products. n
As the success of the Boracay retail outlet has demonstrated, location is the key to effective
marketing and sales. Branding also adds value to your product. The UAC logo (a “sar-
imanok”) has created product recognition and loyalty among its customers.
The UAC experience suggests, contrary to conventional wisdom, trade fairs are no longer
effective means to connect with buyers. Alternative mechanisms must be tried to connect
buyers with community producers and suppliers. For example, UAC is considering the use
of Philippine embassies abroad as its display centers-cum-outlets, a measure that is also
being considered by the Tahanang Walang Hagdanan. UAC has also suggested that PACAP
and other NGO donors invest in setting up a sales outlet in a Manila mall to sell products
of community producers.
Handicrafts enterprises operate in extremely difficult environments characterized by abrupt
changes in taste and demand strong competition from many players because of the indus-
try’s low entry barriers). Foresight (which requires an understanding of emerging market
trends), flexibility (i.e., the ability to shift production to a new product) and reliability (in
meeting customer specifications) are essential for long-term survival. The HAMPCO Co-
operative, a PACAP partner also based in Aklan, is showing some success in meeting the
challenge of flexibility in its Hand Loom Weaving Enterprise (see Box 3-3).
Box 3-3. Further Development of Markets and Services for the Traditional
Textile Producers of Aklan n Handicraft of Aklan Multi-Purpose Cooperative
(HAMPCO)
Background
The Handicraft of Aklan Multi-Purpose Cooperative (HAMPCO) was organized in December
1989 by the USWAG Development Foundation and registered with the Cooperative
Development Authority (CDA) in January 15, 1993. Among its 385 members are 60 active
weavers who participate regularly in HAMPCO’s handloom weaving enterprise. Aside from
the handloom weaving enterprise, HAMPCO also operates a consumers’ store, a health
service scheme for members and a re-lending program. The weaving enterprise involves
the production of barongs, shawls, bags, placemats/runners, gowns and different kinds
of cloth using indigenous natural fibers such as raffia, abaca and piña as the major raw
materials. HAMPCO products are sold in both domestic and export markets.
Technology
The hand looms used for weaving are traditional to Aklan. They have been used for many
24  Social Enterprise Development: Community Businesses at Work
centuries and, despite efforts at mechanization, still remain the equipment best-suited
for weaving these natural fibers. The looms are made of wood with metal reeds to ensure
that the cloth is woven with standard fiber density. The metal reeds are treated with
candle wax to prevent the fibers from snagging and breaking. The processing of fibers
before weaving – extraction, washing, knotting and warping – is done by hand by other
coop members. Both piña and abaca are grown by Aklan farmers and supply is readily
available.
Coop Birth Pains
After its registration with the CDA, the growth of the cooperative was very fast – in the
opinion of its current leadership, too fast. The cooperative was quick to seize opportunities
as they came, even without sufficient planning and preparation. For example, an attempt
at raffia production was eventually discontinued because the output failed to meet
buyer specifications. The cooperative had to pay a PhP500,000 “tuition fee” for the raffia
lesson, which came in the form of a PhP500.000 working capital loan from Land Bank that
was never recovered from the members and customers who had received advances from
the loan proceeds (this loan has already been repaid by HAMPCO to the Land Bank). A
serious organizational crisis occurred in 2002, when the cooperative suffered a net loss of
PhP400,000, due mainly to its decision to concentrate on the production of piña cloth for
the domestic market. Unfortunately, market demand and the price of piña cloth declined
due to stiff competition from other producers in Aklan. Because of the crisis, many
member-weavers were disappointed and became inactive in the cooperative; a few even
resigned and took back their capital. Record-keeping – particularly of remittances of
sales receipts – was poor and a number of customers refused to admit that they still had
outstanding accounts to settle with the cooperative. The leadership of the cooperative
was also to blame for its lack of transparency. Lack of transparency was also due to lack
of (or non-compliance with) operating and financial procedures.
PACAP Assistance
To this day, the officials of the cooperative are thankful that, despite their many
organizational deficiencies and financial difficulties, their funding application to PACAP
was approved in December 2002. PACAP assistance to HAMPCO, originally a three-year
grant, actually covered the five-and-a-half year period from December 2002 to May
2008. The “three” years of PACAP assistance actually represented different stages of
organizational growth and enterprise development. The Year 1 PACAP grant supported:
(a) basic skills training in weaving plain abaca and piña; (b) purchase of manual sewing
machines and loom reeds; (c) participation in trade fairs; and (d) revolving fund for raw
materials and labor. The Year 2 PACAP grant was used mainly for: (a) advanced training
(pili weaving with design); (b) purchases of high-speed sewing machines and additional
loom reeds; and (c) revolving fund. Finally, the Year 3 PACAP grant funded: (a) leadership
and membership education (b) purchase of computers; (c) advanced training on hand
embroidery; (d) renovation of weaving house-cum-coop office; (e) product development
and marketing and promotions); and (f ) management and administration.
Current Operations
Because of the infusion of PACAP funds, business operations were able to continue with
minimal disruption despite the net losses suffered by the cooperative. HAMPCO reduced
piña cloth production, experimented with different products and materials, and uu
Section 3 | Product and Market Considerations  25
 finally settled on the production of abaca silk cloth as its main product. At present,
HAMPCO is the supplier of abaca silk cloth to an exporter who sends the product to
Japan where it is further processed into wallpaper. The exporter, who came to know of
HAMPCO through a DTI directory, has been dealing with the cooperative since mid-2005.
Relations with the exporter have been generally good, sometimes even going beyond the
parameters of business. Payments have been delayed at times, especially in the first half
of 2008, but these have not exceeded a month. As in its export market, abaca silk cloth is
also HAMPCO’s major product in the local market. Apart from abaca cloth, HAMPCO also
produces bags, shawls, placemats and table runners. The cooperative maintains a small
showroom at its office in Kalibo and shares a stall at D’Mall in Boracay with HUGOD, an
association of handicrafts producers in Aklan. It also consigns its products to stallholders
at the Trinoma Mall in Quezon City and the Ayala Center in Cebu.

Balance Sheet Performance

As of December 31, 2007, HAMPCO had total assets of PhP4.98-million; current assets
– consisting mainly of receivables (PhP1.39-million) and inventories (PhP1.77-million)
accounted for 64% of total assets. On the other hand, total liabilities amounted to
PhP2.05-million, with long-term liabilities (loans payable of PhP475,000 and provision
for Cooperative Guarantee Fund of PhP601,000) accounting for 53% of total liabilities.

HAMPCO’S comparative income statements for 2006, 2007 and 2008 (January to October)
indicate that financial performance in 2006 was better than 2007. Deducting the PACAP
subsidy, the enterprise earned almost PhP200,000 in 2006, compared to a net loss in
2007 of PhP228,000. HAMPCO’s financial performance in 2008 could have been better
than 2007 had typhoon Frank not hit the province, destroyed some PhP250,000 worth
of inventory and disrupted production operations for about two months (because the
weavers had to rehabilitate their houses). Minus these extraordinary losses, the enterprise
would have registered a modest but positive net income of about PhP8,000 over the 10-
month period from January to October 2008. Because of the disruption, HAMPCO will be
hard-pressed to hit PhP4-million sales in 2008, its sales level in the two previous years.
n

The HAMPCO experience also demonstrates that problems – if faced squarely – represent
opportunities for the positive growth of an organization and its enterprise. It also shows
that an organization in crisis is still worthy of external support if it is clearly operating on a
good-faith basis to resolve its problems. n

26  Social Enterprise Development: Community Businesses at Work

Section 4

Section 4
Production
and Technology
Considerations
The Key Question

Understanding the production process of the planned enterprise is important because this
serves as the basis for the financial analysis. Assessment of the production process is meant
to answer the following key question:

“Can the enterprise consistently produce its product(s) at the desired quality, quan-
tity, cost and time required by its target customers?”

An adequate response to this question requires data-gathering to address a number of prior

issues, including:
ƒƒ The key characteristics and physical qualities of the product (which were identified
during product appraisal)
ƒƒ The steps involved in manufacturing the product
ƒƒ The number of units of the product that will be made
ƒƒ The raw materials required and their quantities
ƒƒ The amount of time needed to manufacture the product
ƒƒ The number of workers involved in the production process
ƒƒ The machinery and equipment needed in the production process.

Understanding the Production Process

The production process consists of the steps involved in the manufacture of a product. As
shown below, it is the transformation of inputs (raw materials, labor, energy, and so on)
into a finished output or product for sale.

  Diagram 4-1. Schematic Presentation of Production Process

INPUTS PRODUCTION OUTPUT SALE

Raw materials PROCESS FLOW Finished
Labor Product(s)
Energy

In some cases, a manufacturing process may result in more than one marketable product.
In these instances, it is important to recognize the existence of different products and their

28    29
 Diagram 4-2. Sample Production Process Flow Chart
status, e.g., as the “main product” or “byproducts.” The sub-processes involved in the man- Manufacture of Fermented Copra Meal-Based (FCM) Non-Conventional Feeds
ufacture of these different products should be described separately.
Chicken
Once the different manufacturing steps have been identified, these can be presented in Manure Raw materials
graphic form using a Production Process Flow chart. The sample Production Process Flow 8 kgs.
chart shown on the next page (see Diagram 4-2), describes the different steps in the pro- Process
duction process, the raw materials (and intermediate products) required at each step and
the resulting output(s). Cook for 15 mins. Finished product

Once the production process flow chart is completed, it can be used to determine the Copra Meal
following: Stir until cooked 11.5 kgs.

1. The production cycle (= time required to manufacture the product)

ƒƒ The number of production cycles per day. Per week. Per month. Per year. Cooked Chicken Mix Dissolve molasses
Manure in enough water
2. Land, Infrastructure, Machinery and Equipment Required 0.5 kg.
ƒƒ Listing and specifications Let the mixture cool off
ƒƒ Mode of acquisition (whether purchase, rent, lease?)
ƒƒ Sources (local, national or international?) Poultry Manure and Copra Sprinkle twice a day
Meal Mixture for 5 days
3. Workers
ƒƒ Number, job descriptions and skills/experience required
ƒƒ Mode of recruitment Fermentation
ƒƒ Additional training required
ƒƒ Compensation
Expose the mixture to flies
4. Raw Materials and molds
ƒƒ Quantity required – per cycle/month/year
ƒƒ Sources
ƒƒ Terms of procurement (selling prices, terms of trade) Turn the mixture daily
ƒƒ Competitors
ƒƒ Proposed measures to ensure a stable supply of raw materials
Harvest after 5 days
The above information can be compiled through the following table, which summarizes the Corn Soybeans
projected Year 1 operations of the enterprise, on a monthly basis, in terms of its raw mate- 15 kgs. 5 kgs.
rials purchases, production outputs and sales.
Fermented Copra Meal
Rice Bran and Chicken Manure Cassava
Table 4-1. Projected Schedule of Enterprise Operations 5 kgs. 20 kgs. 5 kgs.
Volume/Month
1 2 3 4 5 6 7 8 9 10 11 12
Mix
Preparatory Activities
Raw Material Purchases
Production Outputs Air-Dry
Products Sold

Fermented Copra Meal-Based Non-Conventional Feeds

50 kgs.

30  Social Enterprise Development: Community Businesses at Work Section 4 | Production and Technology Considerations   31
 Assessment of Technology and Production Process
Assessment of the technology/production process to be utilized for an enterprise involves
the examination of a number of critical factors, among them: history of technology use,
maximization of labor resources, quality assurance and repair and maintenance of ma-
chinery and equipment.
In most enterprises submitted for PACAP funding, the proposed production process or
technology will be quite familiar to the key stakeholders of the enterprise because of its long
history of use. In some instances, however, it is possible that innovations will be introduced
in one or two components of an otherwise traditional production process. And on rare oc-
casions, the enterprise may plan to use an altogether new (at least from the point of view of
enterprise staff) production process.
Determining the history of use of a technology or production process is important since a
new production component or technology package requires a “learning curve” for the staff
and workers of the enterprise. To manage this learning curve effectively, enterprise man-
agement must be prepared to provide training, create a learning atmosphere that tolerates
mistakes and learns from them and recognize that longer start-up times may be needed
before the enterprise is able to achieve normal operations and full production capacity.
A case in point is the Mud Crab Production and Fattening Enterprise in Northern Samar,
which is slowly emerging from its learning curve (see Box 5). All enterprises go through a
start-up phase, and this is particularly true of pioneering enterprises like mud crab produc-
tion and fattening. Problems must be expected during this start-up phase and confronted
vigorously to draw lessons for future action. In some instances, mitigating measures to
address operational problems may require the infusion of additional financing into the
enterprise.
Box 4-1. Mud Crab Production n Aspiring for Community Empowerment
through Livelihood Loans and Trainings (ACELT)
Production Scheme
The Mud Crab Production and Fattening Enterprise is being implemented in Lavezares,
Northern Samar. While the area is known as a spawning ground of mud crabs, the
enterprise is the first systematic attempt at the commercial culture of mud crabs in the
municipality. The one-year old enterprise involves the growing of mud crabs in 350
square meter pens, with each pen operated and maintained by an individual beneficiary-
household. In the first year, 15 pens were constructed and operated for a first batch of
15 beneficiary-households. An additional 15 pens for the second batch of 15 beneficiary-
households have been constructed and are currently being stocked with crablets. Two
communal support structures were envisioned for the enterprise. The first was a sanctuary
area that would serve as nursery to ensure a stable supply of crabs and crablets for the
growing pens. The second was a pond for tilapia production that would provide feeds
for the growing crabs. Neither structure had been established at the time of the field
visit, although there was a short-lived attempt by the PACAP partner and the community
association to establish a nursery in collaboration with other entities.
32  Social Enterprise Development: Community Businesses at Work
Marketing Scheme
There is a big market for mud-crab in the province, as well as in other places in the country
and abroad. However, mud crab production in the province is limited and existing supply
is not even enough to meet local demand. The enterprise planned to sell the crabs to
market outlets in Allen and Catarman (Northern Samar) and to exporters in Manila. The
business plan estimated a production volume of 4.68 tons in the first two production
cycles, to increase by 100% in the second year. At PhP170-200 per kilo, local crab prices
are significantly lower than exporter prices, which range from PhP450-500 (for female
crabs) to PhP600 (for males). Revenues, resulting from the sale of 90% of crabs produced
to local and export buyers, were estimated at PhP1.36-million.
Management Scheme
One adult male and one adult female from each beneficiary-household is involved in
mud crab production – clearing the area, construction of pen structures, stocking,
feeding, maintenance of structures, harvesting and marketing. Generally, men take care
of clearing the area, construction and maintenance of the pen structures and harvesting,
while women are responsible for feeding management. Both men and women participate
in stocking the pen and in sorting and grading the harvested crabs. The entire enterprise
will eventually be owned and managed by the San Miguel Mud Crab Association
(SMMA), the beneficiary-organization organized by ACELT, the PACAP NGO partner. At
the moment, however, critical management functions (including financial management
and key production decisions) are still made by ACELT, in consultation with SMMA. A
consultant from a nearby State University was recruited by ACELT to provide technical
assistance to the beneficiary-households in their mud crab production efforts.
PACAP Assistance
PACAP has provided a grant of PhP1-million (Year 1) for the mud crab project through
the ACELT NGO. Apart from administration and project management, the PACAP grant
finances the establishment of pen structures and the cost of seed stocks (crablets and
feeds). Construction labor is provided by the beneficiary-households who repay the
advances received for crablets and feeds upon the harvest and sale of the grown crabs.
Initial Production Cycle
The initial production cycle – which involved the first batch of 15 beneficiary-households
– encountered many problems and has provided many lessons for the future. First, rats
gnawed through the pen netting, creating holes through which the growing crabs
were able to escape. This resulted in major production and income losses for most of
the beneficiary-households, particularly for grow-out production because the crabs are
smaller. (Note: This problem has now been solved through the reinforcement of the pen
netting with bamboo fencing.) A second problem was the unavailability of feeds for
the growing crabs. Since the tilapia fishpond was not established, a number of grower-
families resorted to buying trash fish to feed the crabs. This was not a viable solution
because trash fish were either too expensive or unavailable. A few of the grower-families
decided to use golden snails (“kuhol”), a farm pest, apparently with good results. This has
partly alleviated the feeds problem. uu
Section 4 | Production and Technology Considerations   33
 Plans
As a result of their experience in the first cycle, the beneficiaries are considering the
following modifications in enterprise operations:
ƒƒ Hire one of the members to serve as fulltime caretaker of all the pens, in effect,
shifting production from a decentralized to a centralized mode of operations.
Even if a fulltime caretaker is hired, however, individual members will still be
encouraged to conduct periodic monitoring visits.
ƒƒ Increase the budget for feeds from PhP30 to PhP60 per kilo so that grower-
households will be able to buy trash fish to feed the crabs.
ƒƒ Establish a nursery to ensure a stable supply of crablets and grown crabs for the
grow-out and fattening operations.
ƒƒ Consider the establishment of a growing area for golden snails to ensure a stable
supply of feeds for the crabs. This is in addition to the gathering of golden snails
from the farms.
The plan to establish a nursery and the proposed use of golden snail as feeds for the
growing crabs are steps in the right direction. Increasing the budget for feeds, however,
has clear implications on net income and should be subjected to cost analysis. The net
benefits of a shift from decentralized to centralized production need to be examined
carefully. More reflection is required to assess the effects of such a shift on the participation
of beneficiary-households and their access to the benefits of the enterprise. n
In conventional businesses, labor is considered as simply another factor of production. This
is not the case in social enterprises supported by PACAP where the provision of employ-
ment to a particular group of disadvantaged individuals is central to the nature of the enter-
prise. It is therefore important to plan the production process in consideration of the skills
and limitations of the individuals targeted as the workers of the enterprise.
The provision of workers’ training is important but insufficient. Equally important is the
design of the workplace to maximize workers’ effectiveness. The production layout of the
furniture factory of SAFRA-ADAP, a PACAP partner in Agusan del Sur, is a good case in
point (see Box 6). There are no steps/stairs in the production workshop so that all areas
are accessible to PWDs. PWD-workers who are immobile are assigned to operate the wood-
working machines, and are assisted by PWDs who are mobile. Finally, machines and equip-
ment are modified so that these can be operated by workers in a seated position (wheel-
chairs) and retrofitted with additional safety features and measurement controls. Since it
was founded almost a decade ago, SAFRA-ADAP has steadily built up its reputation as a
reliable school chair and furniture manufacturer and supplier. This recognition is due, in
large part, to the organization of its manufacturing process and production area to maxi-
mize the unique capabilities of PWD-workers. This achievement must be credited to its
manager who is a civil engineer with PERT-CPM and time-and-motion analysis skills.
34  Social Enterprise Development: Community Businesses at Work
Box 4-2. Sustaining Differently-Abled People’s Initiative for Self-Reliance and
Development n San Francisco Association of Differently-Abled Persons Multi-
Purpose Cooperative (SAFRA-ADAPMPC)
Beginnings
The San Francisco Association of Differently-Abled Persons Multi-Purpose Cooperative
(SAFRA-ADAPMPC) in Agusan del Sur is a 43-member primary cooperative that is affiliated
with the National Federation of Cooperatives for Persons with Disability (NFCPWD)
based in Manila. The organization recently celebrated its ninth founding anniversary on
October 22, 2008. SAFRA-ADAP started as an association of differently-abled persons
who had banded together in the common goal of becoming productive members in
mainstream Philippine society. Initial plans for economic activities (e.g., tocino-making,
trisikad, and the like) were still being finalized when, by chance, leaders of SAFRA-ADAP
and the Manila-based NFCPWD met in Davao in 1997. This chance meeting eventually
resulted in the re-organization of the SAFRA-ADAP into a cooperative, its membership
in the NFCPWD and its participation in the NFCPWD contract with the Department
of Education (DepEd) for the manufacture of school tablet and chair (STAC). STAC
chairs, which are used by elementary and secondary students, are made of wood (and
sometimes steel) and built with tablet board for writing and a book rack at the bottom
where students can place their books and notebooks. STACS are usually colored brown
with a final touch of varnish.
Birth Pains
SAFRA-ADAP received its first purchase order (P.O.) from NFCPWD was in 2001 for the
manufacture of the 1,800 chairs with a sub-contractor’s price of PhP550 per chair. SAFRA-
ADAP began manufacturing operations in an interim sheltered workshop funded by a
soft loan from the town mayor with 10 differently-abled workers and a manager (who
remains as the moving spirit of the association to this day). All of them had no direct
experience in STAC production, although the manager was a civil engineer. Completing
this first P.O. took five months, way longer than the original two-month contract period.
All kinds of production problems arose, not the least being the workers’ inability to take
the necessary precautions in dealing with paint, which led to widespread coughing and
temporary lung diseases.
Internal Crisis
After the first purchase order had been completed, SAFRA-ADAP received no new orders
from NFCPWD. As a result, the workshop operated intermittently and the members had to
seek employment on their own. Worse, an internal crisis hit the cooperative in 2003 when
the Vice-Chair, who acted as marketing-cum-liaison officer, used the income generated
from the first NFCPWD sub-contract (PhP80,000) for his personal gain. After thorough
investigations had established his guilt, the Vice-Chair was expelled from SAFRA-ADAP
but the funds were never recovered. This traumatic experience motivated SAFRA-ADAP
to correct its organizational deficiencies. With training and technical assistance from
NFCPWD, the cooperative was able to gradually install appropriate organizational and
financial management systems.
Enterprise Take-Off
In 2004, NFCPWD secured its second DepEd contract and again sub-contracted uu
Section 4 | Production and Technology Considerations   35
 SAFRA-ADAP to produce STACs. SAFRA-ADAP sought and received assistance from the
provincial government in the delivery of the chairs using provincial government trucks
fueled by gasoline that had been provided by the governor. This initial assistance from
the provincial government led to further (and more fruitful) collaboration the following
year. In May 2005, the provincial governor contracted the cooperative to make 2,000
school chairs using confiscated logs (under the “Silya ni Gloria Para sa Eskwela” Program
with DENR). The cooperative had barely a month to complete the 2,000 chairs but they
were able to finish in time for the Naliagan festival (which celebrates the founding of
Agusan del Sur) and the visit of President Arroyo. Its success with the Naliagan school
chairs established the reputation of SAFRA-ADAP as a reliable manufacturer of school
chairs and mass-produced wood furniture in Agusan del Sur. Other local orders followed,
among them: (a) the Secondary Education Development Improvement Project (SEDIP) for
PhP5-million worth of school furniture, and (b) the Agusan del Sur Electric Cooperative
(ASELCO) to supply 380 units of steel electric meter boxes monthly.
Expansion
Increasing demand from DepEd and other walk-in clients indicated the need to expand
operation. Expansion was constrained, however because of the absence of permanent
location for the sheltered production workshop and other facilities, insufficient working
capital and additional machineries, particularly a kiln dryer. SAFRA-ADAP requested the
municipal government for the permanent use of a five-hectare area within a 10-hectare
estate owned by the municipal LGU. The Sangguniang Bayan initially allocated a one-
hectare area to the cooperative on condition that the latter is able to utilize it within
a year. As a result of SAFRA-ADAP representations with the Department of Labor and
Employment (DOLE), the cooperative received PhP1-million (for working capital and
machines to be used in livelihood projects) from the department’s Poverty-Free Zone
Program.
PACAP Assistance
SAFRA-ADAP also submitted a funding request to the PACAP FOCAS Program and
subsequently received a PhP2-million grant for the following: (a) construction of a
permanent production center; (b) additional production machinery and equipment,
including a kiln dryer and delivery truck; and (c) capacity building of the cooperative in
management and in the production of other wood-based products.
Current Operations
SAFRA-ADAP’s main line of business (75 percent of operations) continues to be its sub-
contracting arrangement with NFCPWD in the production of STACs for DepEd. NFCPWD’s
current contract with DepEd amounts to PhP90-million, of which 50 percent has already
been sub-contracted to its member-cooperatives. SAFRA-ADAP has been awarded some
PhP10-million of this sub-contracted amount (about 25 percent), a testimony to its good
track record as a reliable supplier. In addition to the NFCPWD sub-contract, SAFRA-ADAP
continues to receive and fill orders (mainly for school chairs) from local customers, such
as: (a) the Mindanao Sustainable Settlement Area Development (MINSAD) program
of DAR (PhP2.3millon); and (b) the Secondary Education Development Improvement
Project (SEDIP), a special project of DepEd for the poorest provinces of Philippine
(PhP1.9-million). Manufacturing operations are being carried out on the new permanent
sheltered workshop that has been constructed on the lot provided by the municipal LGU.
36  Social Enterprise Development: Community Businesses at Work
SAFRA-ADAP members have constructed their houses on the areas immediately adjacent
to the permanent workshop. The kiln dryer financed by the PACAP grant has also been
completed and is now functional.
Kiln Dryer
The kiln dryer was proposed because Gmelina, the wood species used by SAFRA-ADAP
in STAC manufacture, has high moisture content. Because of inadequate drying of the
Gmelina, SAFRA-ADAP often experienced cracking and warping of the STAC tablet,
resulting in high rejection rates and production costs. Installation of the kiln dryer
encountered some minor problems with the electrical motor and wirings, but these
were easily remedied. The initial test runs, however, involved overly-long drying time
because, in large part, wood of different species and sizes were being dried at the same
time. An abbreviated orientation on proper kiln drying operations, provided by a DOST
Resource Person who was at SAFRA-ADAP to give a seminar on wood-bending, clarified
many issues and the kiln is now operating smoothly. At present, the kiln dryer is being
used only for the in-house needs of SAFRA-ADAP. However, the cooperative has received
inquiries from a number of wood businesses in the province regarding the cost of its
kiln drying services and/or to purchase kiln-dried wood. One businessman has even
approached the cooperative for a possible joint venture to process and transport kiln-
dried wood for low-cost housing projects in Manila.
Financial Performance
The latest balance sheet of SAFRA-ADAP (September 22, 2008) shows total assets of
PhP10.06-million, liabilities of PhP5.26-million and members’ equity of PhP4.8-million.
The cooperative has no past-due accounts; all loans have been repaid on schedule.
Grants and donations account for over 90 percent of equity, a testimony to the resource
mobilization efforts of the cooperative. From January 1 to September 22, 2008, SAFRA-
ADAP had total sales of PhP7.2-million and a net income of PhP660,000. n
Assurance of consistent-quality products is another major concern in production. The UAC
enterprise of the Uswag Development Foundation mentioned earlier (see Box 3-2) has ad-
dressed this problem through repeated orientation sessions to producers on quality as-
surance and by taking responsibility for the critical end-tasks of dyeing, cutting and final
assembly of the bags and its other high-quality items.
Quality assurance of its products is also a major concern of the BUHAI Buri Handicraft En-
terprise (see Box 4-3) in Antique. Since production is decentralized (i.e., the weavers work
in their own houses), the BUHAI Project Manager visits each weaver periodically to monitor
the progress of her work. Production monitoring focused on quality control and the Project
Manager tells the individual weaver to repair any work deficiencies. If a weaver is incapable
of meeting her production output, part of her work load is shifted to another weaver who is
advanced in her output. This system also rewards the more efficient weavers.
In the worst case scenario where the goods have already been delivered to the Association’s
office and need to be shipped out to waiting buyers, the Project Manager does minor repair
work herself. If time allows, the products are returned to the weaver concerned for repair
work. Rejects are not included in the delivery to the buyer. The weaver has the option to
Section 4 | Production and Technology Considerations   37
 take back the rejects and re-sell them on her own, or sell them to the association at dis-
counted prices. If sold to the Association, the rejects are displayed at the Association’s office
and (eventually) bought by walk-in customers or sold at trade fairs at discounted prices.
Box 4-3. Rural Enterprise Development for Buri Handicraft Producers n Antique
Development Foundation (ADF), Inc. and Buri Handicraft Association (BUHAI)
Background
The Buri Handicraft Association (BUHAI) – an association of 60 weavers from the four
adjacent barangays of Paciencia, Igdalaquit, Diclum and Fatima of the municipality of
Tobias Fornier – is involved in the production and marketing of hand-woven products
made of buri strips in combination with other materials. Its main product lines – hats,
bags, placemats, coasters, boxes and gift bags – are customized based on designs
specified by customers. Bulk production and marketing is managed by the association
but individual weavers are encouraged to produce and market on their own.
Technology
Manual technologies and simple tools are used in buri weaving, a centuries-old industry
in Antique. Raw materials are prepared by cutting the unopened buri leaves from the
stalk and letting these stand in cool shaded place for several days. Leaves are then opened
and segments (buri leaf ) are separated from the midrib with a sharp knife. The segments
are boiled until they are soft enough to be folded without creasing. Cooked leaves are
dried in the sun, washed in running water and dried again. For convenient storage, the
buri are rolled into coils. Buri is dyed to enhance its aesthetic function. Simple dyeing
involves the weighing of the materials and preparation of the dyes using the chosen
recipe. Water is put in the dyeing vat, the dyeing agent is added, the solution is stirred
and the buri materials are immersed. After boiling for the required number of minutes,
the dyed materials are removed, rinsed with running water and allowed to dry.
Target Customers and Marketing Strategy
Prior to and during the period of PACAP assistance, the Antique Development Foundation
(ADF) served as the marketing arm of BUHAI, selling almost 90 percent of the buri
products to buyers in Manila and other regions. Bags were the saleable items in the
local market, while gift bags, placemats and coasters were the main items demanded by
exporters and buyers in Manila. Products were displayed at the BUHAI “livelihood center”
at Diclum (Tobias Fornier) and the ADF Marketing Center at San Jose de Buenavista, the
capital town of Antique. All products delivered to ADF are paid immediately, with the
foundation adding a 20-percent mark-up to cover marketing costs.
PACAP Assistance
In October 2005, PACAP provided a grant of PhP1.55-million to the BUHAI enterprise
with the ADF acting as formal intermediary. The major cost items subsidized by the
grant were: Enterprise Development (PhP432,300), Marketing (PhP210,000), Research
and Development (PhP50,000), Direct Support to BUHAI (PhP165,600) and Program
Management and Administration (PhP692,000).
38  Social Enterprise Development: Community Businesses at Work
Results of PACAP Assistance
As a result of PACAP assistance, BUHAI and ADF were able to conduct promotions
activities and streamline marketing operations. Specific activities included: (a) review
of costs for competitive pricing; participation in local, national and international trade
fairs to meet and negotiate with buyers; preparation of marketing materials (such as
brochures, product profiles and website), linkages with potential local customers (e.g.,
LGUs, public and private agencies) and institutions (e.g., PhilExport, European Chamber
of Commerce, business councils, and others). As a result of these various exposures,
BUHAI gained direct customers and gradually took over the marketing function handled
previously by ADF. When PACAP assistance ended in early 2007, BUHAI was negotiating
with buyers directly and responsible for meeting customers’ orders, with ADF becoming
one of its buyers (a relationship that continues to this day).
Current Customers
The association has one regular Manila buyer (a handicrafts seller), with whom it has
had a regular business relationship since 2006. Orders and negotiations are conducted
through text messages, a testimony to the trust that has developed between the two
parties through their long association. The products are shipped to Manila through RORO
(roll-on, roll-off ) shipping, and delivered by association’s agent in Manila (the relative of
an association member) to the buyer. The buyer pays in cash, and the agent remits the
payment to the association through ATM transfer. To date, the largest order from this
buyer has been PhP10,000. Orders are usually for gift bags, hats and placemats. Within
the province, local buyers include ADF, various offices within the provincial government,
LGUs and DTI. Local buyers sometimes provide a down payment on orders but, more
usually, sales are handled on the basis of either cash on delivery (COD) or consignment.
The peak season for orders is from October to May (dry season), while the offseason is
during the rainy months.
Payments to Individual Weavers
Individual weavers delivering their contracted items to the Association’s office are paid in
cash. Fifteen percent is deducted from the selling price for the member’s capital build up
(CBU) (5 percent) and the sales commission of the Association (10 percent). The accumulated
CBU is used by the Association to pay weavers in cash, while the sales commission is spent
mainly on product delivery costs and participation in training seminars. n
A final important issue production is the sourcing, repair and maintenance of the ma-
chinery and equipment to be utilized in the enterprise. Obviously, the ideal situation is
for the equipment to be manufactured and maintained locally, a competitive advantage
currently enjoyed by the Loom Weaving Enterprise of the Tubigon Loom Weavers Multi-
Purpose Cooperative (see Box 4-4). Maintenance of machinery and equipment is crucial
if production downtimes are to be minimized and deliveries made on time. While owned
by the cooperative, the looms are permanently assigned to individual weavers. A loom
weaver is then responsible for the maintenance of her assigned loom. The looms were fab-
ricated by local carpenters, some of them husbands of the women weavers, thus allowing
the women weavers to input their particular design needs and requirements during the
fabrication process. The local fabrication of the looms has also facilitated their repair and
maintenance. n
Section 4 | Production and Technology Considerations   39
 Box 4-4. Loom Weaving Industry Upscaling for Economic Development (LOUD)
Project n Visayas Cooperative Development Center (VICTO-Bohol) and the
Tubigon Loomweavers Multi-Purpose Cooperative
The Buri Loom Weaving Industry in Tubigon
The loom weaving industry in Tubigon town started in 1989 and has been a significant
source of income for many residents of the town. The products of the industry – placemats,
raffia rolls, table runners, tea mats – are made from buri strips and warped fiber, which
are extracted from the leaves of buri palm plants. Production of raffia products is done
individually: a weaver can finish eight placemats in a day and one-and-a-half rolls of raffia
(36” x 10 meters) in a week.
The Market for Buri Products
Almost all of the loom woven products of the region are sold to the export market. Buri
products are bought from weavers by middlemen who sell these, in turn, to exporters,
marketing agents and buyers; the bulk of orders coming from Manila-based exporters.
In recent years, more than 80 percent of total provincial production was exported to the
USA, Japan and Europe.
The Tubigon Loom Weavers Multi-Purpose Cooperative (TLMPC)
In 1993, some 60 weaver-households formed the Tubigon Loom Weavers Multi-Purpose
Cooperative (TLMPC) to coordinate their individual weaving efforts. After a few years in
operations, however, the cooperative encountered a serious cash flow problem: many
weavers and suppliers of raw materials failed to repay the cash advances they had
received from the cooperative. Despite the crisis, the cooperative managed to continue
operations, although at a greatly reduced level, using a 25-loom production facility made
of non-permanent materials located in an interior barangay of Tubigon.
PACAP Assistance
In 2007, the TLMPC received PACAP funding with VICTO serving as the intermediary
proponent. The objectives of the grant included: (a) diversification of the product lines
of the weavers; and (b) more aggressive marketing and product promotions through
participation in trade fairs. Specific items funded by the grant included: (a) Construction
of a Common Production and Display Center-cum-Raw Materials Shed (PhP843,000);
b) Warp Mill (PhP7,500); (c) Working Capital (PhP150,000); (d) Purchase of a Multi-Cab
Transport Facility (PhP125,000); (e) Procurement of Seedlings and Planting Materials
(PhP10,000); and (f ) Promotions Materials and Marketing Support (PhP139,000).
Also in 2007, TLMPC received a grant amounting to P200,000.00 from Fundacion Santiago
for the purchase of handlooms.
At the time of the PACAP grant, the TLMPC had an existing production facility in the
interior part of Tubigon that was inaccessible to buyers. The PACAP grant enabled the
cooperative to construct a concrete production facility and display center on a lot along
the highway that was much more accessible to potential buyers. The grant also enabled
the cooperative to diversify its products. Traditionally, the weavers had been limited
to a few products, mainly, plain placemats and raffia rolls. The grant enabled them to
diversify into, among others, colored placemats with various designs, bags and slippers.
40  Social Enterprise Development: Community Businesses at Work
PACAP assistance also enabled the cooperative to conduct a more aggressive marketing
strategy to reach out to Manila, Cebu and Bohol buyers through participation in regional
and national trade fairs to establish contacts with traders. Finally, the PACAP grant
enabled the cooperative to streamline its production operations and institute quality
assurance measures, including: a product quality controller (to determine the quality and
acceptability of finished products), a purchaser (for the procurement of raw materials)
and a raw material dyer/bleacher (for the processing of raw materials from buri palm leaf
sheath to buri fibers).
Current Operations
In general, activities have proceeded as planned with little deviation from the activities
listed in the proposal approved by PACAP. The weavers have diversified their product
lines. Participation in local and national trade fairs has resulted in a network of regular
customers consisting of 10 Manila-based buyers and five local buyers (mostly beach
resorts). The strategic location of the new display center has increased the number of
walk-in buyers. And financial recording has been systematized, thus providing the
cooperative with up-to-date information on its receivables.
Quality Assurance
To ensure on-time deliveries, production must be managed effectively. The cooperative
has opted for centralized production (the looms are located in one facility and the weavers
work in sight of each other) as this makes quality control of the work much easier than if
the weavers worked in their individual houses. Working in plain sight of each other also
creates peer pressure among the weavers. The production manager sets work quotas
and completion dates for individual weavers and monitors output on a daily basis. When
the manager determines that a weaver will not be able to complete her work quota, part
of her work is re-assigned to another weaver.
Financial Performance
As of October 2008, current year sales of raffia and sinamay totaled PhP2.14-million, while
gross profit exceeded PhP476,000. Compared to 2007, the net income of the cooperative
has increased by almost 200 percent (PhP68,000 in 2007 vs. PhP203,000 in 2008)), total
assets have increased by 64% (PhP1.48-million in 2007 vs. PhP2.43-million in 2008) and
members’ fixed deposits have increased by 48 percent (PhP49,000 in 2007 vs. PhP73,000
in 2008). n
Section 4 | Production and Technology Considerations   41
Section 5

Section 5
Organization
and Management
Considerations
Assessment of the organization and management structure of an enterprise should focus
on three critical aspects – the form of the business enterprise, management structure and
internal control systems.

Form of Business Enterprise

The proposed organizational form of an enterprise – whether single proprietor/ family en-
terprise, corporation or cooperative – must address the critical concerns of planning and
forecasting, control, quick-response to the business environment, equity, ownership and
sustainability.

There is no finality in the life of an enterprise: each day brings new challenges. Because of
its inherent fragility, enterprise survival (and success) of an enterprise is highly dependent
on the capability and performance of its board of directors and management.

A case in point is the Village Level Integrated Coconut Processing Enterprise of the Capiz
Small Farmers Marketing Cooperative (CASCOFAMCO) (see Box 5-1). The CASCOFAMCO
experience demonstrates the important role of the Board of Trustees in taking decisive ac-
tion to address major problems that, if unchecked, could lead to the demise of the enter-
prise (and perhaps, even the organization). The precedent of Board action in dealing with
the 2002 management crisis established a tradition of Board participation in the coconut
enterprise that persists to this day. Even without monetary compensation, Board members
are at the processing plant regularly, a demonstration of their continuing passion and com-
mitment to the goals and operations of the enterprise.

Box 5-1. Village Level Integrated Coconut Processing Project n Capiz Small
Coconut Farmers Marketing Cooperative (CASCOFAMCO)

Coconut Production in Capiz

Capiz is one of the coconut producing provinces in Western Visayas with a total
coconut area of 20,017 hectares and 24,448 coconut farmers (average landholding of
half a hectare) in 16 municipalities and one city. It has a total of 2,001,772 coconut uu

42    43
 trees of which 1,428,188 are fruit-bearing, 464,181 are non-bearing and 109,403 are
senile. Coconut is the major crop in 269 of the 473 barangays in the province.
Beginnings of CASCOFAMCO
Organized in the late 90s, the Capiz Small Coconut Farmers Marketing Cooperative
(CASCOFAMCO) is a 1,844-member cooperative whose principal activity is the operation
of a village-level coconut oil mill, the first of its kind in the province. The oil mill is situated
in Ondoy, Ivisan, Capiz – 12 kilometers away from Roxas City and 98 kilometers from Iloilo
City – on a 3,000-square meter lot that is along the national road. The purchase of the lot
and the initial building, amounting to PhP1.06-million, came from the paid-up capital
of the members and symbolize their strong spirit of cooperation. The oil mill opened in
January 1998 with operations focused on the production of refined cooking oil, crude
coconut oil and copra cake.
Birth Pains and Crisis Management
The first set of employees did not operate the mill successfully. As a result, the mill suffered
continuing losses and operations had to be stopped in 2002 and 2003. The Board was
forced to terminate the incumbent manager and installed a staff member of the PCA
(Philippine Coconut Authority) as head of an interim crisis management team. The new
management entered into a toll crushing contract with an Iloilo Feed mill that earned
the cooperative a fee of PhP5.00 per kilo of oil pressed and allowed it to survive during
the crisis period of 2004-2005. In the second half of 2005, the cooperative submitted
a proposal to PACAP, outlining its new business model. The proposal was approved in
March 2006 and funds were released the following June. The new strategic direction was
implemented shortly thereafter with a new fulltime manager.
Re-defined Business Model
The new business model proposed the transition of the mill from a single-product
enterprise to an integrated operation that would utilize most parts of the coconut fruit in
the production of the following products – refined cooking oil (for sale to households),
crude oil and copra cake (as ingredients for hog feeds), virgin coconut oil (for the health-
conscious market in Roxas City and other urban centers in Panay) and coconut coir fiber
and dust (as as soil conditioner and erosion control material).
PACAP Assistance
The PACAP grant of PhP1.079-million was utilized over an 18-month period (June
2006 to December 2007) and applied to the following items: (a) raw materials and
packaging, (PhP258,000), (b) production facilities for virgin coconut oil (VCO) production
(PhP300,000), and additional plant equipment and tools (PhP419,000).
Other Assistance
Apart from PACAP, the cooperative has also received assistance from the provincial
and local government (for buildings and equipment), the European Union (PhP70,000
for copra dryer) and the President’s Social Fund (PhP500,000 for delivery truck). These
various forms of assistance were provided to the cooperative through the intermediation
of the provincial office of the PCA.
44  Social Enterprise Development: Community Businesses at Work
Major Product Lines
As planned, the oil mill is currently involved in the production and sale of six products:
refined cooking oil, crude oil, copra cake, virgin coconut oil, and coconut coir fiber and
coir dust. Refined cooking oil represents 50 percent of the sales, followed by crude oil
at 30 percent. Sales are usually on a 15-day credit term. Apart from the manufacture
of these six products, the cooperative is also heavily engaged in copra processing and
trading.
Crude Coconut Oil, Copra Cake and Refined Cooking Oil
Customers for crude coconut oil and copra cake are three commercial hog farms who mix
their own feeds. Refined cooking oil is a mass consumer product that is bought by walk-
in customers (including members of the cooperative) for re-sale in the barangays. The
cooperative also sells refined cooking oil in bulk (40 gallons per month) to a vegetarian
community in Quezon City.
Other Products
The market strategy for virgin coconut oil, coir dust and coco fiber is still evolving. Virgin
Coconut Oil is sold mainly to walk-in customers. The main customer for coir dust is the
Capiz Multi-Purpose Cooperative (another PACAP partner) whose members use it as
plant medium. Finally, there are ongoing negotiations to sell coco fiber to Cocotech (a
Filipino company manufacturing coco-fiber-based soil erosion nets and ropes for the
export market) and a Korean landscaping firm in Manila.
Copra Trading
Initially, the copra trading activities of the cooperative were limited to selling its excess
copra to an oil mill in Iloilo. In time, however, the cooperative became the buying agent
of the Visayan Coconut Corporation (maker of the Kings’ cooking oil brand), when the
latter provided CASCOFAMCO with an initial buying fund of PhP300,000. CASCOFAMCO
uses the fund to purchase copra from farmers (and local traders), dries the copra down
to three-percent moisture content (thereby adding value) and delivers the re-dried
copra to the Visayan Coconut Corporation. Copra trading has become a major source of
revenue for the cooperative, generating total sales of PhP8.9-million and a gross profit of
PhP589,000 from January to October 2008.
Alternative Market for Copra
By providing an alternative market for the coconut products of the farmers of Ivisan, the
oil mill has had a stabilizing effect on prices. Prior to the operations of the oil mill, the
prices of coconut and copra in Ivisan (a major coconut producer in Capiz) had been lower
compared to other areas. Today, the prices of coconut in Ivisan are on par (if not higher)
than those of other areas in Capiz.
Financial Performance
The latest balance sheet of CASCOFAMCO (August 2008) shows total assets of PhP6.7-
million, with fixed assets accounting for 70 percent. Current liabilities amount to PhP1.6-
million, of which two-thirds are loans payable (PhP600,000) and advances from customers
(PhP500,000). The cooperative earned the monthly income of PhP54,000 (five percent of
sales) in August 2008 with copra trading constituting the bulk of sales and net income. uu
Section 5 | Organization and Management Considerations   45
 The Importance of Business “Opportunism”
Enterprises operate within dynamic, constantly-changing environments. To prosper (or, in
difficult times, even to survive), enterprises must be opportunistic, seizing opportunities
that present themselves. CASCOFAMCO has demonstrated this capacity in a number
of situations, e.g., the toll crushing contract of 2004-2005 and more recently, the copra
trading project.
Identifying Priorities
Enterprises need to distinguish which of its products are “yesterday’s breadwinners,
today’s breadwinners and tomorrow’s breadwinners” and concentrate their efforts
accordingly. The current product lines of CASCOFAMCO reflect an appreciation of this
important business principle. Coconut oil (refined and crude) are yesterday’s (and
perhaps, still today’s) breadwinners. Copra trading is clearly today’s breadwinner.
Tomorrow’s breadwinner remains a toss-up between virgin coconut oil, coir dust and
fiber, bath soap, coconut water vinegar or (even) a product still unknown at this time. n
CASCOFAMCO also highlights the important role of the external support agency, in this
instance, the provincial office of the Philippine Coconut Authority. Throughout the life of
the cooperative and in response to its various problems, the PCA has served in various
capacities – as a source of technical expertise, as resource mobilizer and (even) as interim
management of the enterprise.
Enterprise management is an extremely difficult task. Since NGOs and their partner-
communities lack of business management expertise, assistance is required from external
agents, such as, government agencies and/or sympathetic individuals from the business
world. Identifying these external agents/social entrepreneurs and formulating the appro-
priate terms of their partnership with the community are formidable challenges.
One promising partnership model is the “big-brother/small brother” scheme that has been
employed in the Cut Foliage Enterprise of the Capiz Multi-Purpose Cooperative (see Box
5-2). The scheme enables the better-off members of the cooperative to support their less-
endowed colleagues with on-farm visits, technical information and advice and marketing
opportunities. The scheme provides a venue for continuous training on new technologies in
horticulture and the sharing of knowledge and information among the members of the co-
operative. In addition, it is also a good marketing strategy. The “big-brother/small brother”
scheme removes the burden of selling on the small growers who would otherwise find dif-
ficulty gaining access to markets. All participants benefit since they each receive the same
price for their cut foliage.
Box 5-2. Comprehensive Marketing Program for the Horticulture Industry of
Capiz n Capiz Multi-Purpose Cooperative (CMPC)
The Capiz Multi-Purpose Cooperative
The Capiz Multi-Purpose Cooperative is a primary cooperative of 28 women plant-growers,
of which five are large commercial cut foliage growers with “greenhouses” ranging from
46  Social Enterprise Development: Community Businesses at Work
one-half to four hectares in size while the rest are small growers whose gardens are
usually limited to their backyards. The cooperative was started in 1989 by a core group
of enterprising women to spearhead the development and growth of the ornamental
plants industry in the province. The current reputation of Capiz as the “Garden Center of
Western Visayas” is a testimony to the success of their efforts.
The Local Market
The growers first targeted the local market. It set up a display center – strategically located
in the center of Roxas City near the provincial capitol building – to sell ornamental plants
(orchids, cut flowers, potted plants) to various walk-in customers, including landscapers,
flower designers, students for school projects, interior decorators for indoor plants,
housewives. Participation in trade fairs, both within and outside the province, led to
the opening of external markets in Iloilo City and Manila, while giving participating
members the opportunity to acquire new planting materials, learn new technologies
and disseminate these to the other members.
The Japanese Market
In 2005, the cooperative finally succeeded, after many unsuccessful attempts, to
penetrate the Japanese market. In October of that year, the cooperative sent its first
shipment (1,000 kilograms) of cut foliage to Japan. Since then, the cooperative has been
selling regularly to the Japanese market.
PACAP Assistance
In July 2006, PACAP provided an 18-month grant of PhP1.5-million to the cooperative. The
grant, which ended in December 2007, had three objectives: (a) maintain and expand the
domestic and foreign markets of the cooperative; (b) operationalize the common service
facilities (refrigerated van and packing center) of the cooperative in order to make its
products globally competitive; and (c) computerize the operations of the cooperative in
order to better serve its members and clients.
Current Operations
In general, enterprise operations have proceeded according to the plan of action
described in the proposal submitted to PACAP. The cooperative continues to service
its existing domestic and Japanese markets and participate regularly in trade fairs and
garden shows to sell its members’ products and find new customers.
Marketing Strategy
Individual members are responsible for separate sales transactions in the domestic
market. For example, one of the members of the cooperative is responsible for all sales
to the Dangwa Bagsakan Center in Manila. The member determines the volume of cut
foliage material to be shipped, determines who among the members will supply the
volume shipment, arranges for shipment and communicates with her agent in Manila.
The agent in Manila picks up the cut foliage from the airport, delivers the shipment to
the Dangwa Bagsakan Center, collects payment and remits the funds to the member in
Capiz. The member then gives each member-supplier her share of the sales proceeds.
The same sales arrangement is practiced for the Iloilo and Cebu markets. Different selling
arrangements are employed in dealing with Japanese market where the cooperative itself
acts as the marketing agent. The “collective” marketing strategy of the cooperative uu
Section 5 | Organization and Management Considerations   47
 removes the burden of selling on the small growers who would otherwise find difficulty
gaining access to markets. It is also beneficial for all participants as they all receive
the same price for their produce.
Social Equity Impacts
The most significant impact is the income and employment derived by the members from
the enterprise. Income and employment benefits also spill-over to two other groups: (a)
nearby households who become sub-contractors/planters of cut foliage during periods
of peak demand when the members’ produce is insufficient to meet demand; and (b)
processors who are employed as casuals in the processing of cut foliage for the Japanese
export market. A secondary benefit is the feeling of pride shared by the members of the
cooperative because of their status as pioneers of the ornamental plant industry in Capiz.
The cooperative has been the recipient of many awards in recognition of this pioneering
role, the most recent being the “Masigasig Globe Award for 2008.” n
Management Structure and Personnel
There is no such thing as collective management of an enterprise. Ultimately, management
falls on the shoulders of one or a few key individuals. The current infatuation with the
“science” of management has de-emphasized the role of the leader, the (oftentimes charis-
matic) individual who mobilizes his/her peers to support the enterprise. Yet these leaders-
cum-managers perform important, if not crucial, roles in the birthing of an enterprise.
Strong leadership is a sine qua non feature of all successful enterprises. In the case of PA-
PASMA (see Box 2), exceptional leadership has been provided by its long-standing chair
whose leadership has translated into: (a) a culture of strict organizational discipline, where
members have internalized the rules and procedures of the organization; and (b) a suc-
cessful enterprise whose activities – including financial management – are carried out ef-
fectively by knowledgeable and highly-motivated employees.
The same is true of the SIUFMULCO, a PACAP partner in Agusan del Norte who is now
operating an extremely profitable Abaca Fiber Trading and Production Enterprise (see
Box 11). Every new enterprise, especially one that involves many equity holders, requires
a champion who will mobilize people and resources for the enterprise during its start-up
period over the objections of skeptics. In SIUFMULCO, this role was performed by the chair
of the cooperative whose passion and commitment overcame the initial doubts of many and
kept the cooperative focused on the enterprise until its viability had been demonstrated.
Oftentimes, PACAP project officers are guided by the “heart and passion” of the leaders of
the proponent organization in conduct of their appraisal and monitoring functions.
48  Social Enterprise Development: Community Businesses at Work
Box 5-3. Enhancing and Protecting an Agro-Forestry Area through Abaca
Fiber Production n San Isidro Upland Farmers Multi-Purpose Cooperative
(SIUFMULCO)
Background
The San Isidro Upland Farmers Multi-Purpose Cooperative (SIUFMULCO) was organized
and registered with the Cooperative Development Authority in January 1998. It has a
current membership of 89 cooperators, all residents and farmers of Barangay San Isidro,
Santiago, Agusan Del Norte. San Isidro, which has a population of 300 households, is
an upland and forest area whose main agricultural crops are coconut, banana, camote
and corn. Farmers have also planted abaca under falcata trees in agro-forestry areas for
supplementary income.
Abaca and Abaca Fiber
Abaca, which is also known internationally as Manila hemp, is native to the Philippines
and achieved importance as a source of cordage fiber in the 19th century. Abaca fiber
is valued for its exceptional strength, flexibility, buoyancy, and resistance to damage in
saltwater. These qualities make the fiber very suitable for marine cordage, such as, ship’s
rope, hawser, and cables for fishing lines, hoisting and power transmission ropes, well-
drilling cables, and fishing nets. Abaca fiber is used as raw material for a wide variety of
products, including: carpets, tablemats, fiber crafts, cordage, textiles/fibers, non-woven
and disposable, pulp and specialty papers (such as, currency notes, cigarette paper,
meat and sausage casings, teabags, stencil paper, high-tech capacitor paper, and so
on) requiring high porosity, excellent tear, bursting and tensile strength. Abaca, which
resembles the banana plant, is not a seasonal plant and its production is year-round. Two
years after planting, mature abaca stems can be harvested quarterly, processed into fiber,
dried and sold.
The Market for Abaca Fiber
The Philippines supplies almost 85 percent of the world’s abaca requirement with Ecuador
as its only competitor. During the past ten years, raw abaca fiber exports averaged over
17,000 metric tons annually with over 90 percent going to the US and Japan. According
to the Philippine Fiber Industry Development Authority (FIDA), there is almost unlimited
demand for abaca fibers, both for local consumption and for export. While unlimited
demand may appear to give producers greater bargaining power (a “sellers’ market”),
traders wield great influence through the abaca fiber grading system. There are two basic
grades of abaca – high and low – with a number of sub-grades within each basic grade.
Abaca fiber is classified in a particular sub-grade on the basis of color (the whiter the
fiber, the higher the grade) and fineness of the strands (the finer the strand, the higher
the grade). Price differences are significant: the highest sub-grade of abaca fiber is
double the price of the lowest sub-grade. The market for abaca fiber is dominated by
traders who are licensed by the Fiber Industry Development Authority (FIDA). FIDA issues
four types of licenses – A to D – depending on the volume of business transacted by
the trader. The elite traders (license A) are also called Grading and Baling Establishments
(GBE) who usually dispatch provincial buyers to make sure they are able to capture most
of the abaca fiber supply. There are two GBEs in Cagayan de Oro City and large traders
in Davao City, Cebu and other major urban centers. In addition, there are many smaller
traders operating in the different towns of Agusan Del Norte and Agusan Del Sur. uu
Section 5 | Organization and Management Considerations   49
 SIUFMULCO Abaca Fiber Production and Marketing Enterprise
Prior to its entry in the abaca fiber industry, SIUFMULCO was already engaged in three
other enterprises – a consumer store, a credit program for members and copra trading. It
continues to be engaged in its consumers’ store and lending program but has temporarily
suspended copra trading operations to concentrate on its abaca fiber operations.
The abaca fiber enterprise began in 2006 and was championed by the cooperative’s
current chair who had a brother having previous experience in abaca fiber trading and
was convinced of its profitability. With funding of PhP176,000 from the Department of
Labor and Employment (DOLE), the cooperative began buying abaca fiber from farmers
in Santiago and nearby areas. The cooperative took the risk of buying at higher-than-
prevailing prices (PhP40/kilo) because it had heard that buyers in Prosperidad (Agusan
Del Sur) were buying abaca at even higher prices (PhP45/kilo). When the cooperative
had already assembled three tons of abaca fiber, it approached FIDA who put them in
touch with Prosperidad buyers who did buy the abaca fiber at PhP45 per kilo, thus giving
the cooperative a net profit of PhP5.00 per kilo. Encouraged by this initial success, the
cooperative continued its buying operations, acquired an abaca fiber traders’ license
from FIDA and began negotiations with PACAP for additional capital.
PACAP Assistance
PACAP assistance to SIUFMULCO started in March 2007 and will extend for 27 months. Of
the PhP3.2-million grant, PhP2,017,000 has already been released to date in two tranches.
The amounts released have been applied to: (a) establishment of 60 hectares of abaca
farms (land clearing, provision of seedlings and inputs, and purchase of sprayers); and (b)
purchase of a six-wheeler truck for hauling abaca fiber.
Current Operations
At the moment, the two main activities of SIUFMULCO’s Abaca Fiber enterprise are buying
and selling of abaca fiber. The 60 hectares of abaca farms proposed to PACAP have been
established and the first harvests are expected in February 2009. The cooperative is
already doing some fiber extraction (using the stripping machine purchased with DOLE
funds) but on a limited scale. It expects to do more when the PACAP funds for stripping
machines (four units) have been released.
Buying Operations
The abaca fiber currently being traded by SIUFMULCO are sourced from existing farms in
Santiago (around 64 hectares of which about one-fourth are owned by members of the
cooperative) and other towns of Agusan Del Norte. The cooperative has established nine
buying stations (=agents) for abaca fiber. Each buying station receives an advance (known
as “standing capital”) from the cooperative to buy abaca fiber. At the outset, SIUFMULCO
sets the price that it will buy from its agent. Using this price parameter, the buying station
negotiates with abaca producers and arrives at an acceptable price (usually a PhP1-2.00
per kilo mark-up from the SIUFMULCO). Once the buying station has used up its advance
in buying abaca fiber, it will inform the cooperative. The cooperative will then decide
whether to give the agent more funds or pick up the abaca fiber. If it decides on a pick-
up, the cooperative’s truck will go to the area, weigh the abaca using the scale of the
buying station, and then load the abaca into the truck and bring it to the warehouse
of the cooperative. The buying station and cooperative will then liquidate the advance
and start anew. The buying system works reasonably well and no major problems have
50  Social Enterprise Development: Community Businesses at Work
been encountered. The success of the buying operation is anchored on the fact that the
cooperative’s buying prices are generally higher than those of other traders. SIUFMULCO
buying prices are higher, however, because the cooperative puts a premium on quality.
This premium on quality is also helped by the popular perception that the abaca fiber
in Santiago (and other areas on the route to Surigao City) is of better quality than those
found in the opposite direction (towards Butuan City).
Selling Operations
The cooperative’s relationship with its first buyers was short-lived but its experience with
a second buyer, an Iloilo trader with a branch office in Butuan City, proved more fruitful
and continues to this day. Its third buyer, with whom SIUFMULCO has only had one
transaction (in July 2008), came from Cebu. Its fourth buyer is Ching Bee Trading from
Davao City. While the relationship with Ching Bee is fairly new (started in October 2008),
the latter is the biggest buyer to date of the cooperative. Thus far, no major problems
have been encountered with the cooperative’s current buyers. Payments are sometimes
delayed but eventually completed. There have been no serious disagreements over price,
quantity and quality. For much of 2008, total sales volume of the cooperative has been
four to five tons per week.
Financial Performance
In 2007, the cooperative’s total sales and net income amounted to PhP2.14-million
and PhP165,000, respectively. This revenue performance has already been surpassed
significantly in the current year. In the nine-month period from January to September
2008, the abaca trading enterprise alone had achieved sales of PhP4.48-million (up
by 53%) and net income of PhP681,000 (a 300% increase). Officials of the cooperative
expect even higher increases by year-end as abaca fiber sales in the last three months of
2008 are expected to maintain the same levels as previous periods. (Note: As of December
30, 2008 the abaca enterprise had achieved sales of PhP6.370-million and net income of
PhP1.084-million.) n
The experience of SIUFMULCO also demonstrates that, to a significant extent, business
skills are transferable. The application of the business skills developed by the cooperative
in managing its consumers’ store and copra trading operations were instrumental in the
current success of the abaca fiber enterprise.
Leadership and competence are both important for the effective management of an en-
terprise. While debate continues whether leadership is inborn or developed, there is little
doubt that management competence can be taught and learned. The teaching of manage-
ment is important because, in the majority of cases, the individuals who will are responsible
for the operations of PACAP-supported enterprises have not had much formal schooling.
Assessment of the management structure of an enterprise should not be limited to a review
of the management and personnel requirements for the marketing, production, finance and
administration functions of the enterprise. Equally important is the review of the qualifica-
tions of the individuals who will manage their enterprise and the capacity-building program
that will build the staff competence required for effective enterprise management.
Section 5 | Organization and Management Considerations   51
 Internal Controls

The internal control system is the third and final item to consider in the organization of an
enterprise organization. There are two important aspects of internal control: (a) account-
ability and reporting and (b) financial management.

Accountability and reporting

Reporting facilitates accountability: it is a means to hold individuals accountable for their

actions. Reporting relationships – between and among the general membership, board of
trustees, management, production workers and staff – need to be clearly defined and fol-
lowed by all concerned.

Because of its previous negative experiences, the Tubigon Cooperative cited earlier (see Box
4-4) recognizes the importance of transparent reporting in building trust and cooperation.
The cooperative makes a regular report of financial transactions at the monthly meeting of
the women weavers. Awareness and understanding of the financial condition of their enter-
prise motivates the women weavers to work harder. The monthly meeting is also the venue
to air grievances and resolve issues, e.g., from a weaver who may feel resentful that part of
her work quota has been is taken away from her.

Financial management

The financial management system of an enterprise consists of the following components:

ƒƒ Accounting and bookkeeping, which include: (a) chart of accounts, (b) vouchers
and other bookkeeping forms, (c) books of accounts and (d) periodic financial
reports.
ƒƒ Financial controls, which include: (a) basic checks and balances (i.e., segregation
of functions) and (b) control procedures for key transactions related to cash (re-
ceipts, disbursements and advances), purchases, inventory (raw materials, goods
in process and finished goods) and payroll.
ƒƒ Staff involved in financial management, including: (a) their employment status
(fulltime or part-time), (b) qualifications and (c) experience.

The majority of PACAP-supported enterprises reviewed for this Enterprise Kit have ad-
equate financial management systems, a reflection of the efforts of both PACAP and its
partners in improving this particularly important aspect of enterprise operations.

The motivation to install adequate financial management systems has likely come from
previous negative experiences of the PACAP partners, many of whom have had problems in
the handling of funds at some point of their history. n

52  Social Enterprise Development: Community Businesses at Work

Section 6

Section 6
Financial
Considerations
The Key Questions

Assessment of the financial component of an enterprise revolves around the following two
key questions:

a) How much external funding is required to capitalize the enterprise until it can
generate sufficient inflows to meet its outflows? Where will these external funds be
sourced?

b) What is the projected financial performance of the enterprise? Is this projected

financial performance satisfactory?

Answering these two questions requires the preparation of projected (=pro-forma) cash
flow and income statements, break-even analysis and calculation of a number of profit-
ability ratios. Before these financial statements and profitability measures can be prepared,
however, the financial assumptions of the enterprise regarding revenues and costs must be
spelled out.

Revenues

Projected Selling Price(s)

What is the selling price of the product? What is the basis for this selling price? The selling
price can either be based on the market or on production costs. Market-based pricing simply
means that the enterprise will adopt the prices prevailing in the market for its product(s).

Cost-based pricing means that the selling price of the product will be based on its produc-
tion cost plus a reasonable margin to cover fixed costs and generate some profit for the
enterprise. This can be determined using the following formula:

Price = (Fixed Costs/50% of full capacity) + Unit Variable Cost.

54    55
 Terms of Sale Costs

Where and how will the product be sold? Will the terms of sale be in cash, credit, or con- The typical enterprise has three types of costs: Capital and Start-Up Costs, Fixed Costs and
signment, for instance? Will the enterprise offer volume discounts? Variable Costs.

a) Capital and Start-Up Costs. Capital costs include all costs to acquire, build and
Sales Volume install all elements of the production unit (including land, machinery, equipment,
and so on). Start-up costs are one-time costs associated with getting started in the
At full capacity, how many units of the product will be sold per week? Per month? Per business, e.g., legal, engineering studies, feasibility studies, licenses, and the like.
year?
b) Fixed Costs (Per Month). Fixed costs are incurred to operate the production
unit regardless of the level of production. Fixed costs include management and ad-
ministrative salaries, rent, depreciation, repair and maintenance, and so on. Fixed
costs are normally expressed on a monthly basis.
Table 6-1. Summary Presentation of Variable Costs/Unit of One Unit of Product
to be Produced c) Variable Costs. Variable costs are related directly to the level of production;
Unit Description Unit Cost Total Amount these consist mainly of raw materials and production labor. Variable costs can be
expressed on a per unit basis (Unit Variable Cost) and on a weekly, monthly, and
Materials
yearly basis. Variable costs per unit may be summarized using Table 6-1.
1 x x x xx
2 x x x xx
3 x x x xx
Projected Cash Flow Statement
4 x x x xx Cash flow analysis is critical for any business. A cash flow statement matches cash in-
5 x x x xx flows (=receipts) against cash outflows (=disbursements) on a periodic basis to determine
6 Other (Petty) Materials x x x xx whether an enterprise has sufficient cash inflows to cover its outflows.

Subtotal - xx xx xx xxx Cash flow analysis is particularly important during enterprise start-up. No business achieves
100 percent production capacity on the day it begins operations. It may take some months
Labor x x x xx before all production problems are straightened out. Or, the enterprise may encounter dif-
ficulties in its initial marketing efforts.
1 x x x xx
2 x x x xx A Projected Cash Flow Statement can be used to determine when an enterprise can gen-
3 x x x xx erate enough cash to cover all its costs and, therefore, will no longer have to depend on
external funds. Once this is determined, the amount of external funds required for the en-
4 Etc. x x x xx
terprise and, more important, the timing for the infusion of these external funds would also
Subtotal - xx xx xx xxx have been determined.

Preparation of a realistic Projected Cash Flow Statement requires answers to the following
Other Variable Costs
three questions:
1 x x x xx ƒƒ What are the different activities that must be completed before the enterprise can
2 x x x xx actually begin production?
ƒƒ What is the length of time required to put together all the different elements so that
3 x x x xx
an enterprise can actually begin production? Will this take a month? Two months?
4 x x x xx Three months? Half a year?
Subtotal - xx xx xx xxx ƒƒ Once an enterprise begins actual operations, how long will it take before it achieves
Variable Costs Per Unit of Product its planned 100 percent production capacity?
to be Produced …….. xxxx
A number of preparatory activities need to be completed before an enterprise can actually
begin production. These would include, among others: (a) finalizing agreements to acquire

56  Social Enterprise Development: Community Businesses at Work Section 6 | Financial Considerations  57
 a lot where the physical facilities will be constructed (including the resolution of any right-
of-way issues); (b) actual construction of the production facility; (c) testing of machinery a) Cash Inflows. In completing this category, one should not equate goods pro-
and equipment; (d) securing the necessary business permits and licenses; (e) training of duced with goods sold. The schedule of production is an internal decision made
workers and staff; (f) finalizing marketing agreements with identified customers; (g) pro- by the management of an enterprise. The actual selling of products is based on
duction test runs; and (h) pilot marketing activities. The timing of these activities must external market forces and therefore, is subject to seasonal fluctuations.
be reflected in the financial planning of the enterprise and particularly, in the cash flow
projections. Not all sales are done on a cash basis; oftentimes, goods are sold on credit. The
cash received from the collections of sales on credit should be listed during the pe-
Following is a sample Projected Cash Flow statement for a typical agricultural manufac- riod when it is actually received, not during the period when the sales transaction
turing enterprise supported by PACAP. It is done on a monthly basis for very specific rea- was made.
sons related to effective enterprise management. Good management requires very careful
control of expenses and knowing where the enterprise stands with respect to plans. Moni- b) Cash Outflows. In completing this category, it is important to remember that
toring this performance once every six months or once every three months is insufficient only transactions involving the disbursement of cash should be listed. Deprecia-
for good control. tion, which is a non-cash cost, is not listed in the cash flow. Loan amortization
payments (both principal and interest), on the other hand, are listed in the Cash
Table 6-2. Sample Projected Cash Flow Statement Flow as they involve the disbursement of cash. (Conversely, only the payment of
Integrated Rice Marketing Project of the Rural Women’s Marketing Cooperative, Inc. interest income, not the payment of principal, is included in the Profit and Loss
(12 Months, Monthly Basis) Statement.)

MONTH I II III IV V VI VII VIII IX X XI XII TOTALS
Costs are listed in the periods when cash is actually disbursed to pay for them.
Cash Inflows Capital and Start-up costs are listed during the pre-operating periods when the
different elements of the enterprise are still being assembled prior to the start of
Cash Sales 0 0 x x x xx xx xxx xxx xxx xxx xxx 22x
production. Fixed and variable costs (also known as operating costs) are incurred
Collection of when the enterprise has actually begun production.
Credit Sales 0 0 0 xx xx xx xxx xxx xxx xxx xxx xxx 24x
Other Inflows 0 0 0 0 x 0 x 0 x 0 x 0 4x c) Net Inflows (Outflows). This is the difference between Cash Inflows and Cash
Outflows.
Sub-total 0 0 1x 3x 4x 4x 6x 6x 7x 6x 7x 6x 50x
Less: Cash d) External Funds. During periods when cash outflows exceed the combined total
Outflows of the cash inflows and the beginning cash balance, external funds must be infused
into the enterprise to cover the cash shortfall. External Funds may be drawn either
Capital Costs xxxx xx 0 0 0 0 0 0 0 0 0 0 6x
from the proponent NGO, the beneficiaries of the project, sympathetic individuals
Start-Up Costs x x 0 0 0 0 0 0 0 0 0 0 2x and groups, PACAP or any combination of the four parties. The amount of external
funds to be infused into the project should be exactly equal to the cash deficit to
Fixed Costs 0 0 x x x x x x x x x x 10x
avoid possible over-funding of the enterprise.
Variable Costs 0 0 xx xxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx 37x
e) Net Cash Flow. This is the sum of the net inflows (outflows) and external funds.
Sub-total 5x 3x 3x 4x 5x 5x 5x 5x 5x 5x 5x 5x 55x
During periods when external funds are infused into the enterprise, this sum
Net Inflows should be equal to zero, again to avoid over-funding of the enterprise.
(Outflows) (5x) (3x) (2x) (1x) (1x) (1x) 1x 1x 2x 1x 2x 1x (5x)
Add: External f) Cash Balance, Beginning. This is the amount of cash available to the enter-
Funds 5x 3x 2x 1x 1x 1x 0 0 0 0 0 0 13x prise at the beginning of a particular period. At project start-up, this is usually
equal to zero.
Net Cash Flow 0 0 0 0 0 0 1x 1x 2x 1x 2x 1x 8x
Add: Beginning g) Cash Balance, Ending. This is the amount of cash left available for the enter-
Cash Balance 0 0 0 0 0 0 1x 1x 2x 4x 5x 7x prise at the end of a particular period. It becomes the beginning cash balance for
Ending Cash the next period.
Balance 0 0 0 0 0 0 1x 2x 4x 5x 7x 8x
Projected Cash Flow Statements are relatively easy to construct but quite difficult to follow
in practice. All enterprise managers recognize that cash flow management is actually gov-

58  Social Enterprise Development: Community Businesses at Work Section 6 | Financial Considerations  59
 erned by Murphy’s Law, which states, “If anything can go wrong, it will. And it will go
wrong at the worst possible time!” Prudent enterprise managers therefore develop fallback
positions to ensure that there is adequate cash for enterprise operations.
The HAMPCO Hand Loom Weaving Enterprise cited earlier (see Box 3-3) has learned to
cope with limited working capital. The main source of the cooperative’s working capital
is the PACAP grant. When this is not enough, it borrows materials from suppliers (usu-
ally payable in two weeks at no interest). HAMPCO also resorts to small cash loans (e.g.,
PhP10,000) from friends, issuing post-dated checks as repayment guarantees. The coop-
erative also actively seeks grant funding from donors. In 2008, it received a PhP200,000
grant from the Peace and Equity Foundation as additional working capital for abaca silk
production.
The Dao Garments and Bags Enterprise (see Box 6-1) employs an extremely prudent cash
flow management strategy based on the following principles: (a) no production without
an order from a customer; (b) minimal inventory of raw materials; and (c) cash liquidity
(the enterprise maintains a buffer fund of about PhP700,000 to cover bulk transactions
and for eventual expansion). In addition, the members of the management team took a
voluntary cut in their salaries beginning March 2008 to reduce the financial burden of the
enterprise.1
Box 6-1. Dao Garments and Bags Industry n Dao Federation of Small Farmers
Multi-Purpose Cooperative
Background
The enterprise is owned and managed by the Dao Federation of Small Farmers Multi-
Purpose Cooperative, a secondary cooperative with nine member-primaries, operating
in the municipality of Dao, Capiz. The enterprise has two main products – Garments and
Bags. Initially, the garment product line was limited to T-shirts, which are widely used
as uniforms in public schools and also as inner cloth for school and office uniforms.
T-shirts are also used during intramurals, fiestas and other community affair, company
souvenirs and giveaways during political campaigns. Over time, however, the enterprise
has diversified into other garment product lines. On the other hand, the bag products
include backpacks, traveling bags, convention bags, which are very saleable to the
market, schools, institutions and individual customers. These are made of poly canvass,
taffeta, poly nylon, leatherette and other synthetic materials.
Target Markets
The Dao Federation began its T-shirt and bags enterprise in 2003, catering to both
institutional and individual customers within Capiz. Historically, institutional markets
have accounted for 70 percent of sales, with individual customers accounting for the
remaining 30 percent. PACAP assistance, which was provided in September 2006, was
intended to strengthen existing markets and enable the enterprise to expand beyond
Capiz to other markets in Panay Island, including the provinces of Iloilo, Aklan and
Antique.
60  Social Enterprise Development: Community Businesses at Work
Production Technology
The T-shirt and Bags enterprise requires the use of industrial sewing machines (piping
machines, edging machines, high-speed sewing machines, gartering machines and
ordinary sewing machines. Fifteen units of industrialized sewing machines were acquired
by Dao Federation through the grant of Department of Labor and Employment (DOLE),
Provincial Government of Capiz and Direct Aid Program (DAP) of Australian Embassy
The production center of the enterprise is located in the Dao Agricultural Storage and
Marketing Center, a facility that was established with funding from the Department of
Agriculture: the T-shirts are made on the second floor of the building, while the bags are
manufactured on the ground floor.
PACAP Assistance
PACAP assistance to the enterprise was provided over the 18-month period from
September 2006 to February 2008. The PACAP grant of PhP1.3-million was applied to
the following items: Working Capital and additional equipment (PhP500,000); Product
development and improvement (PhP100,000), Networking and marketing (PhP100,000);
Management support (PhP331,5000) and Administrative Expenses/M&E (PhP172,000).
Current Operations
In general, operations have been carried out according to the plan outlined in the
proposal approved by PACAP. Production targets of the T-shirts and bags have been met.
The enterprise continues to serve the needs of regular costumers, while establishing
market linkages with potential institutional and individual clients. At the same time,
the enterprise conducts market research regularly to identify fashion styles that are in
demand and conceptualizes innovative designs of various garments and bags products.
A major reason for the continued operation of the Dao enterprise is its “the customer is
always right” policy. Even if it sometimes considers its customers’ demands to border
on the unreasonable, the Dao enterprise will still do its best to deliver on the customers’
orders, even if it means having to work overtime for long periods. If its products are
rejected by a customer (for whatever reason), the enterprise accepts the rejects (thankfully
few) as inventory, transforms these into other products and re-sells the “new” products
at discounted prices.
Marketing Activities
The PACAP grant enabled the Federation to conduct marketing activities, specifically,
participation in trade fairs, production of flyers and a brochure and making sales call.
A major marketing activity was held in December 2007 when the models of a fashion
show of P.J. Aranador, an international designer, showcased the T-shirts made by the
Dao Federation. The fashion show was a major factor in providing the Dao brand name
with much-needed exposure. With the end of PACAP funding, marketing activities have
been reduced significantly, and the Federation relies largely on informal word-of-mouth
campaigns by its customers. The enterprise is also promoted by the SME Center and the
provincial Department of Trade and Industry.
Customers
At present, the enterprise has about 19 institutional clients and 33 individual clients.
While most of these are in Roxas City and Capiz, a few are also based in Iloilo City. In
the past, a major institutional client was an Iloilo ads printer who bought accented uu
Section 6 | Financial Considerations  61
 Table 6-3. Sample Projected Income Statement
Ondoy’s Mini-Restaurant and Fast food Enterprise
T-shirts from the Dao enterprise, put prints on the T-shirts and sold these to its customers. For the Six-Month Period ending December 31, 2009
At one point, the Iloilo ads printer accounted for almost 70 percent of the Federation’s
total garment sales (this has now been reduced to 20 percent). The enterprise is hoping M1 M2 M3 M4 M5 M6 Totals
to find other similar customers (in effect, wholesalers) who would, in effect, act as its Gross Revenues
marketing agents. ƒƒ Sales xx xxxx xxxx xxxx xxxx xxxx 22x
ƒƒ Other Income 0 x 0 x 0 x 3x
Compensation for Workers Subtotal xx xxxxx xxxx xxxxx xxxx xxxxx 25x
Workers are paid on a piece-rate basis, depending on the activity/operation performed.
Operations vary according to the garment produced. For example, the making of a T-shirt Less: Variable Costs x xx xx xx xx xx 11x
involves the following separate operations, each with its own piece-rate compensation: Gross Margin x xxx xx xxx xx xxx 14x
cutting/body and sleeves (PhP2.60), cutting/ribbing (PhP0.30), join shoulder (front and
back, left and right) – PhP.60, attach sleeves (PhP1.25), side close (PhP1.25), sleeve fold Less: Fixed Costs x x x x x x 6x
(PhP1.25), hemline fold (PhP1.25), prepare ribbing (PhP0.30) ,attach ribbing (PhP1.50), Net Income 0 xx x xx x xx 8x
piping ribbing (PhP1.50), attach label PhP0.50, trimming (PhP0.75), ironing (PhP1.25),
quality control (PhP0.50), and packing (PhP0.50).

Financial Performance When prepared periodically during the actual operations of an enterprise, Income State-
The latest income statement of the Dao enterprise (1 March to 30 September 2008) ments can be used evaluate financial performance in a variety of ways, such as:
shows total sales of PhP1.17-million. The enterprise generated a modest net income for ƒƒ Have profits increased over time?
the period (3.4 percent of sales). However, its financial condition remains fragile, mainly ƒƒ Have sales increased over time?
because of high labor costs (25 percent of sales) and management salaries and wages ƒƒ Have costs of production been reduced?
(13 percent of sales). During the period of PACAP assistance, the salaries of the Project ƒƒ How does this business compare with other business?
Officer and Bookkeeper were paid from the PACAP grant, while the Manager and Cashier ƒƒ How does this business compare with other industry averages?
were paid by the municipal LGU. When the PACAP grant ended, the salaries of the Project ƒƒ How does this product compare with one in a completely different line of
Officer, Bookkeeper and Manager had to be absorbed by the enterprise (the cashier production?
continues to be paid by the LGU). To reduce the financial burden on the enterprise, the
members of the management team have voluntarily reduced their salaries since March
2008. Break-Even Analysis

The Problem of Pricing Competitiveness

The major problem faced by the enterprise continues to be pricing competitiveness.
Its products are simply more expensive than the RTW garments imported from Manila
because, after all, its raw materials come from Manila. Labor costs are also higher because
of the Federation’s social objectives. For these reasons, the enterprise cannot compete
head-on against the RTW market. Instead, it has carved a niche for itself in the personalized
design, made-to-order local market of schools, private companies and (especially) local
government units within Capiz and surrounding provinces. n
There are two components to break-even analysis. The first – break-even selling price –
is the price that the enterprise needs to charge for its product in order to cover all fixed
and variable costs. The second – break-even sales volume – is the number of units of the
product that the enterprise must sell in order to cover all fixed and variable costs.
Break-even selling price

The break-even selling price is calculated using the following formula:

Total Fixed Costs + Total Variable Costs

Projected Income Statement No. of units to be produced

An income (or profit-and-loss) statement shows the financial results of a business over a
given period of time. Pro-forma (= Projected) Income Statements summarizes the expected
financial performance of a business and is often a major factor in determining whether or
not to undertake the business. Following is a sample Projected Income Statement.
Gross Margin per Unit
Before break-even sales volume can be determined, the gross margin per unit must first
be computed. The gross margin is the difference between the selling price and the variable

62  Social Enterprise Development: Community Businesses at Work Section 6 | Financial Considerations  63
 cost per unit (VCU). The variable cost per unit can be determined by dividing the Total
Variable Costs by the number of units to be produced when the enterprise is operating at
full capacity.
Break-even production level
The break-even production level is calculated using the following formula:
Total Fixed Costs\Gross Margin.
The break-even point is one good indication of the risk at which the enterprise is operating.
If the target number of products to be sold is close to the break-even sales volume, the busi-
ness is operating at a high level of risk. On the other hand, if the target number of products
to be sold are substantially above the break-even point (and the enterprise is confident
about its market assumptions), then the business is probably operating at a low risk.
Break-even analysis is best applied before an enterprise is started, as it can provide good
insight into its commercial feasibility. The information can be used to determine the level
of production where the business will be able to cover all its expenses. It can also help to
determine the minimum product selling price that is needed for the business to be viable at
different levels of production. Financial assumptions about costs and prices can be manipu-
lated to predict best, worst and probable scenarios for the business.
Break-even analysis for a multiple-product enterprise
The above procedures are applicable to single-product enterprises. The following steps are
used to calculate break-even production and sales levels for multi-product enterprises:
a) Calculate the percentage of sales (based on value) of each product in relation to the
estimated total sales of the enterprise at full capacity.
b) Multiply the total fixed costs (TFC) by the percentages derived from Step 1. This
will determine the proportional share that each product should contribute to cover
the fixed costs.
c) Compute the gross margin of each product.
d) Compute the break-even units per product.
e) Compute the break-even percentage per product.
Profitability Ratios
Profitability ratios are used to measure whether the projected financial performance of
an enterprise is sufficiently satisfactory to justify the entry of potential investors. PACAP
measures financial performance using two ratios – Return on Investment and Payback
Period.
64  Social Enterprise Development: Community Businesses at Work
Return on Investment (ROI)
The concept of return on investment is analogous to depositing one’s money in a bank and
earning interest income from the deposit. It is calculated using the following formula:
ROI = Net Income/Total Investment.
Net income is the bottom-line figure at the end of an income statement, while total invest-
ment is the sum of the external funds required until the enterprise is able to generate suf-
ficient inflows to cover its outflows.
Payback Period (PPP)
Payback period is the length of time that the enterprise will operate until its net income will
be equal to the amount invested. It is calculated using the following formula:
PP = Total Investment/Net Income.
The numbers resulting from the use of the above two formulas are meaningless unless these
can be compared against certain standards. For example, should the projected Return on
Investment of a proposed enterprise be compared against the interest that would be gen-
erated if the same amount of money will be deposited in a time deposit in a commercial
bank? Or invested with a lending investor? Or placed in the commercial money market? Or
should the hurdle rate of 15 percent Internal Rate of Return2 used by NEDA in its economic
analysis of development projects be adopted?
Notes
1. Ultimately, enterprise success is all about the competence and, more important, the com-
mitment and willingness to sacrifice of the people who run the enterprise. In these days of
bloated CEO salaries, finding a management team that will voluntarily reduce its salaries
for the sake of the business and its stakeholders – as the Dao management did –will be ex-
tremely difficult.
2. The internal rate of return (IRR) – also known as the discounted cash flow rate of return
(DCFROR) or rate of return (ROR) – is the yield on invested capital or, put another way,
the interest rate (consisting of payments and income that occur at regular periods) received
for an investment. A project is a good investment proposition if its IRR is greater than the
rate of return that could be earned by alternate investments of equal risk (investing in other
projects, buying bonds, even putting the money in a bank account). In the context of savings
and loans the IRR is also called effective interest rate.
Section 6 | Financial Considerations  65
 Enterprise Appraisal
at a Glance:
The Key Questions
Box 6-2. Enterprise Appraisal at a Glance

Marketing Production
ƒƒ What is the product? Can the enterprise
ƒƒ What essential qualities or values ƒƒ consistently produce its product(s) at
should the product possess in the desired
order to be bought by its target ƒƒ quality
customers? ƒƒ quantity
ƒƒ Who are the target customers? ƒƒ cost and
ƒƒ What is the sales volume of the ƒƒ time
enterprise? Is this realistic? Is this required by its target customers?
on par with expectations?
ƒƒ Is the market strategy effective
in reaching out to its target
customers?
Finance Management
ƒƒ How much external funding is re- ƒƒ How effective is the Board of Trustees
quired to capitalize the enterprise and management in taking decisive
until it can generate sufficient action to address problems that could
inflows to meet its outflows? lead to the demise of the enterprise?
ƒƒ What is the source of these ƒƒ How well has the enterprise mobilized
external funds? technical and material assistance from
ƒƒ What is the financial performance external agents?
of the enterprise? ƒƒ Is there an effective capacity-building
ƒƒ Is the financial performance of the program that will build the staff
enterprise satisfactory? competence needed for effective
management?
ƒƒ How effective is the internal control
system in exacting accountability and
managing the financial resources of the
enterprise?
The Basic Question
“Is the Enterprise producing its product(s) at a price that its target customers
are willing to buy, and is it selling a sufficient number of these products
to stay in business?”

66    67
The Business Plan should

indicate the counterpart

contributions to be provided

by the PACAP partner and

beneficiaries in financing the

enterprise, as a demonstration

of their participation in

the enterprise and their

commitment to its long-term

success. n
Section 7

Section 7
Enterprise-Related
Philippine Rules
and Regulations
Registration Procedures for Starting a Business in the Philippines
Table 7-1. Procedures for Starting a Business in the Philippines
Time to
Step Cost Remarks
Complete
1. Obtain bank cer- 1 day No charge Fees vary from bank to bank. Some banks
tificate of deposit of in Manila do not charge any fee, but others
paid-in capital. charge up to PhP105 for each certificate.
2. Verify availability of 1 day PhP40 The uniqueness of the company name can be
the company name searched online at no charge. However, the
with the Securities Securities and Exchange Commission charges
and Exchange Com- PhP40 for approving and reserving the com-
mission (SEC). pany name.
3. Register incorpora- 3 days ƒƒ Filing fee for To register an incorporated company with the
tion with the Securi- articles of incor- Securities and Exchange Commission (SEC),
ties and Exchange poration is one- the promoters must file the following docu-
Commission. fifth of 1% of ments: (a) the corporate name verification slip;
the authorized (b) the articles of incorporation and bylaws; (c)
capital stock the treasurer’s affidavit; (d) the statement of
(but not less assets and liabilities; (e) the bank certificate of
than PhP1,000) deposit; (f ) the authority to verify the bank ac-
ƒƒ Legal research count; (g) the incorporator’s tax identification
fee of 1% of the number; (h) the registration data sheet with
filing fee (but particulars on directors, officers, stockholders,
not less than and so forth; and (i) a written undertaking to
PhP10. comply with SEC reporting requirements.
ƒƒ PhP210 bylaws
fee Through SEC i-Register, the SEC provides a
ƒƒ PhP150 for Web-based, online company registration
the stock and system and the option to reserve a company
transfer book name. While registration forms may be down-
ƒƒ PhP7 registra- loaded from the SEC Web site, promoters must
tion fee. pay onsite at the SEC. Same-day payment is
not offered.

70    71
 Time to
Step Cost Remarks Step
Complete
Unlike the past where an applicant company 5. Apply for a
needed to obtain a temporary identification Barangay (district)
number from the Bureau of Internal Rev- clearance.
enue (BIR) Revenue District Office, SEC now
issues a Tax Identificatin Number (TIN) to the
applicant-company.
To obtain the TIN, the company requires a
Barangay (district) clearance, a mayor’s permit,
and a copy of the SEC-issued registration
certificate (issued as part of this procedure).
Other documents may also be required, such
as homeowner’s clearance, lease contract, and
so on.
6. Obtain mayor’s
As authorized by the BIR, the SEC will issue permit/municipal li-
the pre-generated TIN only if a company’s ap- cense to operate from
plication for registration or incorporation has the Licensing Section
been approved. Although the SEC issues the of the Mayor’s Office.
TIN, the company must still register with the
BIR for the following purposes: (a) to identify
applicable tax types, (b) to pay an annual
registration fee, (c) to register and stamp the
books of accounts, and (d) to obtain sales
invoices and receipts.
4. Obtain community 1 day PhP500 To obtain a Barangay clearance, a company
tax certificate (CTC). must first obtain a community tax certificate,
which includes a basic and an additional com-
munity tax. The basic community tax rate de-
pends on the legal form of the company, that
is, a corporation, partnership, or association
(PhP500 or lower). The additional community
tax (not to exceed PhP 10,000) depends on: (a)
the assessed value of the real property owned
by the company in the Philippines (PhP2 for
every PhP5,000); and (b) its gross receipts, 7. Receive inspec-
including dividends or earnings, derived from tion from the Mayor’s
business activities in the Philippines during Office.
the preceding year (PhP9 for every PhP5,000).
To secure the community tax certificate, ap-
plicants must supply their name and other
personal circumstances.
8. Buy special books of
accounts at bookstore.
72  Social Enterprise Development: Community Businesses at Work
Time to
Cost Remarks
Complete
2 days PhP800 No city or municipality may issue any license
or permit for any business or activity unless a
clearance is first obtained from the Barangay
(district) where the business or activity is
located or conducted. Some Barangays collect
a fee to issue a Barangay clearance. The fee
is based on the location and the area (size in
square meters) of the place of business.
Usually, the fee charged by the Barangay
depends on the company’s paid-up capital
and the land area it occupies – a minimum of
PhP500 plus PhP300 for the Barangay clear-
ance plate.
11 days Fees vary de- To obtain a mayor’s permit or municipal
pending on the license to operate, the promoters must file
local government the following required documents at the
unit (city/ munici- Licensing Section of the Mayor’s Office: a com-
pality) issuing the pleted application for business permits and
mayor’s permit. licenses (duplicate copies), with a sketch of
the location of the building at the back; a cer-
Normal fees would tification, issued by the corporate secretary,
include: that the company has been duly authorized
ƒƒ PhP900 sanitary to engaged in the business; the amount of
permit fee paid-up capital; the certificate of registration;
ƒƒ 0.2% of busi- receipts of fee payment; lease contract(s); the
ness capital for Barangay clearance; comprehensive general
license fee; liability insurance (usually based on the area
ƒƒ PhP2,000 size of the office space); and the community
permit fee for tax certificate (usually based on the paid-up
businesses en- capital).
gaged in retail
ƒƒ PhP2,500 gar-
bage collection
fee.
5 days No charge The Mayor’s Office conducts an inspection
to verify that the company will conduct the
activity stated in the application for business
permit. There is no need to set an appoint-
ment for this inspection. The inspection
generally occurs within the first 5 days of filing
the application for the operating permit.
1 day PhP 400 To register for the Value-Added Tax (VAT),
promoters must purchase special books of
accounts, which are available at bookstores
nationwide. One set of four books (cash re-
ceipts journal, disbursements journal, ledger,
and general journal) costs about PhP 400.
Section 7 | Enterprise-Related Philippine Rules and Regulations  73
 Time to Time to
Step Cost Remarks Step Cost Remarks
Complete Complete
9. Register for Value- 2 days ƒƒ PhP500 registra- After obtaining the TIN, the company must 11. Obtain the 1 day Fees included in The authority to print receipts or invoices
Added Tax (VAT). tion fee pay the annual registration fee of PhP500 at authority to print Step 9. must be secured by the printer before the
ƒƒ PhP15 certifica- any duly accredited bank, using payment form receipts and invoices sales invoices or receipts may be printed.
tion fee BIR Form 0605. from the Bureau of Philippine law does not require a company to
Internal Revenue (BIR). print its official invoice forms at designated
print shops. If a company has secured the
ƒƒ PhP15 docu- In the Philippines, companies may be as- authority to print receipts and invoices, it
mentary stamp sessed various taxes: VAT, a community tax, a can ask any authorized printing company to
tax ( in loose local tax, and income tax. When a company print its official invoice forms. However, if a
form to be registers as a taxpayer, it must indicate in its company wants to print its own invoice forms
attached to BIR application the types of taxes it expects to be (as discussed in Step 9), the company must
Form 2303) liable for, including VAT. first obtain a special permit from the Bureau of
Internal Revenue.
A printer must obtain the necessary authority
before printing receipts or invoices. Philippine According to requirements stipulated by the
law does not require a company to have its of- Large Taxpayer Service, new taxpayers must
ficial invoice forms printed at designated print submit the following documents to the Rev-
shops. If a company has secured an “authority enue District Office or the office with jurisdic-
to print receipts and invoices,” it can ask any tion over the taxpayer’s head office:
authorized printing company to print its ƒƒ Duly completed application for authority to
official invoice forms. However, the company print receipts and invoices (BIR Form 1906)
must obtain a special BIR permit for in-house ƒƒ Job order
printing of invoice forms or for the use of a ƒƒ Final and clear sample of receipts and
computerized accounting system or loose-leaf invoices (machine-printed)
books of accounts. ƒƒ Application for registration (BIR Forms 1901
10. Payment of docu- 1 day PhP1 for every Section 174 of the National Internal Revenue or 1903)
mentary stamp taxes. PhP200 of busi- Code, as amended, requires the payment of ƒƒ TRU form or photocopy of TIN card
ness capital. documentary stamp taxes on the original ƒƒ Proof of payment of annual registration fee
issuance of shares of stock at the rate of PhP1 (BIR Form 0605).
on each PhP200 (or a fractional part thereof ) 12. Print receipts and 14 days PhP4,000 The minimum print number is 25 booklets.
of the par value of the shares of stock. This invoices at the print (between PHP
payment must be made within 5 days of the shops accredited by 3,000 and PHP
close of the month in which the SEC issues the BIR 5,000)
the registration certificate or the corporation 13. Submit receipts 1 day No charge In practice, the books of accounts are
issues the shares. and invoices to the presented for stamping upon filing the ap-
BIR for approval, have plication. These books can be obtained from
receipts/invoices and Bureau of Internal Revenue (BIR).
books of accounts
stamped by BIR To register books of account and invoices,
founders must present the following docu-
ments: (a) all required books of accounts, (b)
VAT registration certificate, (c) SEC registration
certificate and (d) BIR Form W-5.

74  Social Enterprise Development: Community Businesses at Work Section 7 | Enterprise-Related Philippine Rules and Regulations  75
 Time to
Step Cost Remarks
Complete
14. Register with the 1 week No charge To enrol for membership with the Social Se-
Social Security System curity System (SSS), the founders must submit
(SSS). the following:
ƒƒ SSS Forms R-1(Employer Registration) and
R-1A (Employment Report) signed by its
President or any of the corporate officers
ƒƒ original copy of the Articles of Incorpora-
tion for authentication purposes
ƒƒ company bylaws
ƒƒ certificate of registration with either the Se-
curities and Exchange Commission (SEC) or
the Department of Trade and Industry (DTI)
ƒƒ list of employees, specifying their birth
dates, positions, monthly salary, and date of
employment.
Upon submission of the requisite documents,
the employees must attend a seminar, which
must be scheduled within a week. At the end
of the seminar, the certificate of membership
of the company will be released.
Although it is not mandatory to enrol for
housing security with the Pag-Ibig Fund, Fund
members may make use of a housing loan
offered by this agency.
76  Social Enterprise Development: Community Businesses at Work
Government Agencies and Needed Clearances
Board of Investments (BOI)
Website: http://www.boi.gov.ph/
Businesses may register to avail of investment incentives (e.g., tax holiday, tax credits, tax
exemptions, and the like.) under Executive Order 226 or the Book 1 of the Omnibus Invest-
ment Code of 1987. Guidelines in the filing of application for registration are described in
the agency’s website. Forms are also available for downloading.
Filing of application can be done online through the above mentioned website or
manually by submitting all filled out application forms and required documents at:
Project Evaluation and Registration Department
Board of Investments
385 Sen. Gil Puyat Ave.
Makati City
Tel. (+632) 890-9326/890-1332.
The documents required for the registration are the following:
1) Copy of Applicant’s Articles of Incorporation/Partnership and By-Laws, SEC Cer-
tificate of Registration;
ƒƒ For new projects, this may be submitted as part of pre-registration
requirements.
ƒƒ For existing projects already registered with the Board, this requirement is
waived.
2) Copy of company Audited Financial Statements (AFS) and Income Tax Return
(ITR) for the past three (3) years or for the period the applicant has been in opera-
tion if less than three (3) years.
ƒƒ For domestic existing and expansion projects that are not registered with the
Board, this must be submitted, unless waived by the Board.
3) Copy of the company’s Board Resolution authorizing an officer to sign in behalf of
the applicant-enterprise. All applicants are required to submit this.
4) Project Reports
ƒƒ For activities listed in the IPP (New)
ƒƒ For activities listed in the IPP (Expansion, Different Product Line)
ƒƒ For activities listed in the IPP (Expansion, same Product Line)
ƒƒ Existing Projects Projection required may vary from one industry to another.
Inquiries should be made with the concerned industry group.
Proof of financial capacity (Sworn Statement of Assets and Liabilities and latest Income
Tax Return) of the principal stockholder may be required only for new projects and on a
case-to-case basis.
Section 7 | Enterprise-Related Philippine Rules and Regulations  77
 Bureau of Animal Industry (BAI) The cost of Application of Commercial Fishing Vessel License (CFVL) and Registration of
Fishing Gear (FGR) shall be P400.00 and P200.00, respectively, payable to the Bureau.
Website: http://www.bai.ph These are non-transferable and non-refundable.

A Livestock and Poultry Handlers License is required for traders engaged in inter-provin- Additional information is available from licensing officers at the BFAR regional offices.
cial and regional shipment or transportation of livestock, poultry, eggs, milk, hides and
skin, and manure/dung.
Bureau of Food and Drugs (BFAD)
For more details, visit: http://www.bai.ph/services/licensing.html.
Forms may be downloaded at http://www.bai.ph/download.html. Website: http://www.bfad.gov.ph/

A permit for the shipment of animals, animal products and animal effects within the Philip- Applicants should visit the website and click on the Services Menu to access the following:
pines must also be obtained from the BAI. For procedures in obtaining such permits, visit: ƒƒ Checklist of requirements;
http://www.bai.ph/services/permit_issuance.html. ƒƒ Flowcharts;
ƒƒ Forms;
ƒƒ Fees; and
Bureau of Fisheries and Aquatic Resources (BFAR) ƒƒ Laws and Regulations.

Website: http://www.bfar.da.gov.ph/ Information is organized as follows:

The BFAR Regional Offices (http://www.bfar.da.gov.ph/links/bfarrfo.htm) are responsible 1) Licensing of Establishment

for issuing licenses for commercial fishing vessels and gears as well as for forging fishpond a. Manufacturer / Trader / Repacker / Packer
lease agreements. ƒƒ Food
ƒƒ Iron Rice Premix
The website of the Region 1 Office outlines the procedure for licensing (http://region1.bfar. ƒƒ Drug / Medical Device / Cosmetic
da.gov.ph/services/licensing_serv.htm) and procedures for applying for a fishpond lease ƒƒ Household Hazardous Substances
agreement (http://region1.bfar.da.gov.ph/services/leasing_serv.htm). ƒƒ Renewal of Licencse to Operate (LTO) of Manufacturer / Trader /
Repacker / Packer
Requirements for the issuance of a new commercial fishing vessel are as follows: ƒƒ Changes In Circumstances
1. Duly accomplished BFAR application for fishing vessel license; b. Importer / Exporter / Distributor / Drug Outlets
2. Two (2) copies of 8”x10” vessel picture showing the port, starboard and name of ƒƒ Food
the vessel; ƒƒ Iodized Salt
3. Grid map indicating the proposed fishing ground/s; ƒƒ Iron Rice Premix
4. Original or authenticated photocopy of the following: ƒƒ Drug / Diagnostic Reagent
ƒƒ Certificate of Vessel Registry (CVR) ƒƒ Medical Device & Cosmetic
ƒƒ Certificate of ownership (CO) ƒƒ Household Hazardous Substances
ƒƒ Current Certificate of Inspection (CI). ƒƒ Drugstore / Hospital Pharmacy/Retail Outlet for Non Prescription Drugs
5. Approved Articles of Incorporation and By-Laws for corporation, the primary or ƒƒ Botika ng Barangay      
secondary purpose of which is to engage in fishing, or business name registration, ƒƒ Changes in Circumstances
certificate for single proprietorship or partnership to accompany the first vessel of ƒƒ Notice of Change/Additional Pharmacist
the applicant to be licensed; and ƒƒ Renewal of LTO of Drug Outlets and Distributors
6. Fishing logbook for catcher vessel for registration and approval by BFAR upon
payment of registration fee of fifty pesos (PhP50.00) 2) Product Registration
ƒƒ Locally Manufactured Food Products
Following are the requirements for the issuance of a gear license: ƒƒ Imported Food Products
1. Duly accomplished BFAR registration forms for gear license (2 copies); ƒƒ Food Supplement
2. Drawing of gear design and its specifications, showing the mouth, body and bunt/ ƒƒ Virgin Coconut Oil         
bag of the fishing gear; ƒƒ Pharmaceutical Products (For Human Use)
3. Official Receipt of CFVL fee; and ƒƒ Pharmaceutical Products (For Veterinary Use)
4. Official Receipt of Fishing Gear Registration (FGR) fee. ƒƒ Vaccines / Biological Products

78  Social Enterprise Development: Community Businesses at Work Section 7 | Enterprise-Related Philippine Rules and Regulations  79
 ƒƒ Traditionally-Used Herbal Products Application procedures are as follows:
ƒƒ Herbal Medicines ƒƒ Accomplish BIR Form 1903 and submit the same together with the required at-
ƒƒ Medical Devices            tachments to the Revenue District Office (RDO) having jurisdiction over the regis-
ƒƒ In Vitro Diagnostic Reagents          tered address of the business establishment.
ƒƒ Cosmetics ƒƒ Pay the Annual Registration Fee (PhP500) at the Authorized Agent Banks of the
ƒƒ Household Hazardous Substances       RDO.
ƒƒ Pay PhP15 for the Certification Fee and PhP15 for the Documentary Stamp Tax (in
3) Laboratory Services Division   loose form to be attached to Form 2303).
ƒƒ Batch Certification And Batch Certification Exemption   ƒƒ The RDO shall issue the Certificate of Registration (Form 2303).
ƒƒ Batch Certification Exemption: Local   ƒƒ Taxpayer must pay the Documentary Stamp Tax on the Articles of Incorporation
ƒƒ Batch Certification : PITC   as prescribed under Section 175 of the NIRC, on the 5th of the month following the
ƒƒ Food Export / Commodity Clearance   date of issuance of said article (per RR 4-2000).
ƒƒ Laboratory Analysis of Government Procured / Collected Samples
Note: Corporations/partnerships/joint ventures shall accomplish and file the application
4) Legal Information and Compliance Division before the commencement of the business operation.
ƒƒ Ad Monitoring (Company)          
ƒƒ Clearance of Ads Upon Request A prospective business entity must also register its books and accounts, apply for authority
ƒƒ Investigations Procedure on Consumer Complaints           to print receipts and invoices, apply for permit to adopt Computerized Accounting System
ƒƒ Workflow on Cases Involving Counterfeit Drugs (CAS), apply for permit to use Cash Register Machine (CRM) and/or Point of Sales Machine
ƒƒ Motu Propio Cases Flowchart (Report of Violation) (POS). All related information can be found at http://www.bir.gov.ph/reginfo/regtin.htm.
ƒƒ Motu Propio Cases Flowchart (Report of Analysis)
ƒƒ Requirements for Sales Promo Permits Application BIR Forms can be downloaded from http://www.bir.gov.ph/birforms/birforms.htm.
ƒƒ Clearance to Advertise
ƒƒ Application for Permit to Conduct Promo (Applicant) For more information, applicants can visit the BIR office at:
ƒƒ Application for Permit to Conduct Promo (Company/Ad-Agency) BIR National Office Building
Agham Road, Diliman, Quezon City
For more details, visit or call BFAD office at: Trunk line: 929-7676 | 927-2511
Civic Drive, Filinvest Corporate City    
Alabang, Muntinlupa City 1781 Philippines
Tel: +632-8070751/ +632-8425606 Bureau of Plant Industry (BPI)
Trunk line: +632-8094390
Email: bfad@bfad.gov.ph Website: http://www.bpi.da.gov.ph/

Following are the procedures for acquiring a domestic quarantine permit:

Bureau of Internal Revenue (BIR)
Website: http://www.bir.gov.ph/
The Tax Identification Number (TIN) of a prospective enterprise entity is secured from the
BIR. The TIN may be obtained online through the Bureau’s website.
1. Bring plant/s and/or plant product/s to the nearest Plant Quarantine Service for
Inspection.
2. Fill up application form as required for the issuance of your Permit for Domestic
Transport.
3. Take note that there are prohibited commodities even for domestic movement. The
list of prohibited materials is available from the nearest Plant Quarantine Service.

Requirements for corporations and partnerships (taxable /non-taxable) include:
ƒƒ Tax Form
ƒƒ BIR Form 1903 - Application for Registration for Corporations/Partnerships (Tax-
able/Non Taxable), including GAIs and LGUs
ƒƒ SEC “Certificate of Registration” (Certificate of Incorporation/Certificate of Co-
Partnership) or “License To Do Business in the Philippines” in case of resident
foreign corporation
ƒƒ Mayor’s Permit or application for Mayor’s Permit – to be submitted prior to the
issuance of the BIR Certificate of Registration.
The flowchart for acquiring the permit may be downloaded from: http://www.bpi.da.gov.
ph/Forms/procedures_sl/Issuance%20of%20Domestic%20Permit.pdf.
Forms for the permit for domestic transport of plants are available at: http://www.bpi.
da.gov.ph/Forms/Permit%204%20Domestic%20Transport.pdf.
For more details on BPI services, applicants should go to: http://www.bpi.da.gov.ph/Serv-
ices/Services.html.

80  Social Enterprise Development: Community Businesses at Work Section 7 | Enterprise-Related Philippine Rules and Regulations  81
 Department of Environment and Natural Resources (DENR) b. Accommodation Facilities
ƒƒ Hotels
Website: http://www.denr.gov.ph/ ƒƒ Resorts
ƒƒ Apartels
Required documents and the step-by-step process of applying for DENR permits, licenses ƒƒ Tourist Inns
and requirements may be found on the website’s “Process Flow” menu or through the fol- ƒƒ Motels
lowing link: http://www.denr.gov.ph/section-process-flow. ƒƒ Pension Houses
ƒƒ Restaurants
Available information covers the following: ƒƒ Shops/Department Stores
ƒƒ Community Based Forest Management Agreement (CBFMA) Process Flow Chart ƒƒ Sports & Recreational Centers
ƒƒ Ang Pagkuha ng CBFMA ƒƒ Training Centers
ƒƒ Certificate of Non-Coverage (CNC) Application – This is to certify that a project ƒƒ Training Programs
does not require an environment clearance certificate. ƒƒ Trainers
ƒƒ Environmental Compliance Certificate (ECC) Application for Environmentally ƒƒ Rest Areas in Gasoline Stations
Critical Project ƒƒ Spa
ƒƒ ECC Application for Non-Environmentally Critical Project (located in Environ- ƒƒ Museums/Galleries
mentally Critical Areas) ƒƒ Foreign Exchange Dealers
ƒƒ Free Patent Application ƒƒ Calesas
ƒƒ Free Patent Application Flowchart. ƒƒ Home stay Sites

The website provides information on the procedures for accreditation, general require-
Department of Health (DOH) ments, fees and incentives. Forms can also be downloaded from the site.

Website: http://www.doh.gov.ph/
Department of Trade and Industry (DTI)
Information on procurement, licensing, regulation and accreditation is available under the
website’s “Doing Business” menu: http://www.doh.gov.ph/doing_business. Website: http://www.dti.gov.ph/

Under “Licensing”, there is a list of health facilities and services that the DOH regulates as A company’s business name can be registered online through the DTI’s Business Name
well as the requirements for licensing these facilities. Health facilities and services include (BN) Registration website at http://www.bnrs.dti.gov.ph/web/guest/home.
blood service facility, clinical laboratory, drug testing laboratory, drug abuse treatment and
rehabilitation center, and so on. Following are the contact numbers for BN Registration:
ƒƒ For concerns regarding Business Name policies, clarification on requirements:
(632) 751-3330
Department of Tourism (DOT) ƒƒ For technical concerns such as page cannot be displayed, problem in viewing
look-up table, etc.: (632) 729-8681
Website: http://www.wowphilippines.com.ph/dot/ ƒƒ For inquiries on application status: (Metro Manila numbers)
Trafalgar Building: (632) 811-83 67 or (632) 811-8231
Tourism projects have to be accredited by the DOT. Accreditation means that a certifica- Hi-way 54:  (632) 706-1767
tion has been issued by the Department that the holder has complied with its minimum QC Satellite Office: (632) 928-6124
standards in the operation of the establishment concerned. Park and Ride: (near Manila City Hall) (632) 536-7153
Caloocan City: (632) 332-0829
The following may apply for DOT accreditation:
a. Travel and Tour Services Inquiries may also be sent via email to bnrshelpdesk@dti.gov.ph.
ƒƒ Tour Operators
ƒƒ Tourist Transport Operators (Land, Water and Air Transport)
ƒƒ Tour Guides
ƒƒ Mountain/Cave Guides
ƒƒ Professional Congress Organizers

82  Social Enterprise Development: Community Businesses at Work Section 7 | Enterprise-Related Philippine Rules and Regulations  83
 Intellectual Property Office (IPO) Philippine Health Insurance Corporation (PhilHealth)

Website: http://www.ipophil.gov.ph/ Website: http://www.philhealth.gov.ph/

Access to the government health care benefits system can be secured through membership
The IPO is in charge of the registration of Intellectual Property Rights including: in PhilHealth. Information for employers is available at: http://www.philhealth.gov.ph/
employers/index.htm.
1.  Grant of Letters Patent for Invention. The Letter Patent is a grant given to
an invention that embodies a technical solution to a problem. The solution offered Forms can also be downloaded from the website.
must be new, involves an inventive step and possesses industrial applicability. The
term of Letters Patent is twenty (20) years from the filing date of the application Registration procedures and documentary requirements are as follows:
with no renewal.
1. Submit the following at any PhilHealth Office:
2.  Registration of Utility Models. A certificate of registration for a utility model ƒƒ Employer Data Record or ER1 Form (in duplicate)
is granted when the technical feature of the technology is new and industrially ƒƒ Business permit/license to operate and/or any of the following as applicable:
applicable. The term of registration is seven (7) years from the date of filing of the
application with no renewal.
Nature of Entity Additional Documents Required
3.  Registration of Industrial Designs. A certificate of registration for an indus- Single proprietorships Department of Trade and Industry (DTI)
trial design is granted to a composition of lines or colors or any three-dimensional Registration
form of an article of manufacture that is new or original. The term of registration Partnerships and corporations Securities and Exchange Commission (SEC)
is five (5) years from the filing date of the application and renewable for two (2) Registration
consecutive five (5) year periods.
Foundations and non-profit Securities and Exchange Commission (SEC)
organizations Registration
4.  Registration of Integrated Circuits. A certificate of registration is a grant af-
forded to the topography of an integrated circuit, in its final form, in which the Cooperatives Cooperative Development Authority (CDA)
elements, at least one of which is an active element, and some or all of interconnec- Registration
tions are integrally formed in and/or on a piece of material, and which is intended Backyard industries/ ventures and micro- Barangay Certification and/or Mayor’s Permit
to perform an electronic function. The term of registration is ten (10) years from business enterprises
the date of filing of the application with no renewal.

5.  Registration of Trademarks. “Marks” are visible signs capable of distin-
guishing the goods (trademarks) or services (service marks) of an enterprise.
Marked or stamped containers are considered also “marks”. The registration is for
a period of ten (10) years, renewable for subsequent ten (10) periods as long as the
mark is being used in trade and commerce.
The website provides data on the following: (a) procedures for manual filing of application
for patent and trademark; (b) schedule of fees; and (c) request forms (for downloading).
2. After processing, the employer will be issued the following:
ƒƒ PhilHealth Employer Number (PEN) and the Certificate of Registration
ƒƒ PhilHealth Identification Number (PIN) and Member Data Record (MDR) for
concerned employees
3. Employers shall be asked to display the Certificate of Registration in their offices
as proof of registration with PhilHealth.

The website also has a database of patents and trademarks that allows applicants to con- Protected Areas and Wildlife Bureau (PAWB)
duct electronic searches on various fields of endeavor.
Website: http://www.pawb.gov.ph/

Information on procedures in obtaining permits for the local transport of exotic and endan-
gered plants and animals is available through the following link:
http://www.pawb.gov.ph/permits/ltp_penro_cenro_red.pdf.

Applicants can also contact the PAWB directly at the following address:
Protected Areas and Wildlife Bureau

84  Social Enterprise Development: Community Businesses at Work Section 7 | Enterprise-Related Philippine Rules and Regulations  85
 Department of Environment and Natural Resources ƒƒ Book Three on Conditions of Employment including Working Conditions and Rest
Ninoy Aquino Parks and Wildlife Nature Center Periods, Wages and Working Conditions for Special Groups of Employees such as
Diliman, 1100 Quezon City Women, Minors, House helpers and Home workers;
Tel: + (63 2) 9246031-35 ƒƒ Book Four on Health, Safety and Social Welfare Benefits such as Medical, Dental
Fax: +(63 2) 9240109 and Occupational Safety, Employees’ Compensation and State Insurance Fund,
Email: planning@pawb.gov.ph Medicare and Adult Education; and,
ƒƒ Book Six on Post Employment, which includes Termination of Employment and
Retirement from the Service.
Securities and Exchange Commission (SEC)
Labor advisories regarding the observance of certain days that have been declared as holi-
Website: http://www.sec.gov.ph/ days are also posted on the DOLE website.

Corporations and partnerships can be registered online through the SEC website. The FAQs menu contains answers to questions related to the following topics:
ƒƒ Research and Policy for Employment Generation
Applicants can also go to the SEC Office at: ƒƒ Capacity Building for Specific Sectors
Company Registration and Monitoring Department ƒƒ Rural and Emergency Employment
2nd Floor SEC Bldg., EDSA, Greenhills, Mandaluyong City ƒƒ Local Employment
Telephone Number: (632) 584-0923 ƒƒ Overseas Employment
Fax Number: (632) 584-5293 ƒƒ Dispute Prevention and Settlement
E-mail address: mis@sec.gov.ph ƒƒ Workers Organization, Tripartism and Empowerment
ƒƒ Technical Education and Skills Training
ƒƒ Labor Standards
Social Security System (SSS) ƒƒ Productivity and Wage
ƒƒ Social Protection and Welfare
Website: http://www.sss.gov.ph/ ƒƒ Miscellaneous

Each employer must secure an SSS number. Forms can be downloaded from the agency’s
website at http://www.sss.gov.ph/sss/forms.html.
Applicants can opt to go directly to the nearest SSS office. The SSS branch directory is
available at the website.
DOLE has a call center that can be reached at telephone number (02) 527-8000 Monday
thru Friday from 7:00 a.m. to 7:00 p.m. Correspondence can be sent by mail to its office at:
Department of Labor and Employment, Muralla St. cor. Gen. Luna St., Intramuros, 1002
Manila.

Labor Laws
The mandate of the Department of Labor and Employment (DOLE) is “to promote gainful
employment opportunities, develop human resources, protect workers and promote their
welfare, and maintain industrial peace.”
Local Ordinances
Because of the Local Government Code, local government units – provincial, municipal
and barangay – have been empowered to enact various local laws and ordinances that bear
upon the conduct of businesses in specific localities. PACAP partners are enjoined to famil-
iarize themselves with these local ordinances for proper compliance. n

Its website at http://www.dole.gov.ph/ is rich with relevant information and resources.

The Labor Code of the Philippines can be viewed per section from the DOLE website at:
http://www.dole.gov.ph/laborcode/default.asp. A full PDF version can also be down-
loaded from the same link. The most relevant chapters for a small private enterprise are
the following:
ƒƒ Book One, Chapter 11 on Regulation of Recruitment and Placement Activities;
ƒƒ Book Two, Title II on Training and Employment of Special Workers such as Ap-
prentices, Learners (Trainees) and Handicapped Workers;

86  Social Enterprise Development: Community Businesses at Work Section 7 | Enterprise-Related Philippine Rules and Regulations  87
Section 8

Section 8
Directory
of Selected Resources
Department of Labor and Employment (DOLE)

Website: http://www.dole.gov.ph/

One of the strategies of DOLE is Employment Enhancement. Through this strategy, DOLE
aims to provide greater access to human resource development programs and protective
and welfare services to safeguard workers, both in-country and overseas, particularly the
most vulnerable groups, from hazardous and unhealthy working conditions.

The major programs under the strategy include:

ƒƒ Technical Education and Skills Training Program
ƒƒ Standard Setting and Enforcement Program
ƒƒ Productivity and Wage Setting Program
ƒƒ Social Protection and Welfare Program

The operating units of this strategy are the following:

ƒƒ Technical Education and Skills Development Authority (TESDA) and their re-
gional units
ƒƒ National Maritime Polytechnic (NMP)
ƒƒ Maritime Training Council (MTC)
ƒƒ Bureau of Working Conditions (BWC)
ƒƒ Bureau of Rural Workers (BRW)
ƒƒ Bureau of Women and Young Workers (BWYW)
ƒƒ Philippine Overseas Labor Officers (POLOs)
ƒƒ Labor Standards Enforcement Divisions (LSED), and the Workers Amelioration
and Welfare Divisions (WAWD) of the Regional Offices
ƒƒ Occupational Safety and Health Center (OSHC)
ƒƒ Employees Compensation Commission (ECC)
ƒƒ National Wages and Productivity Commission (NWPC) and its Regional Wages
and Productivity Boards and
ƒƒ Overseas Workers Welfare Administration (OWWA).

Key projects and activities include the following:

ƒƒ Human Resource Development (TESDA)
ƒƒ Maritime Training (NMP, MTC)
ƒƒ Labor Standards Enforcement (BWC, ROs)
ƒƒ Occupational Safety and Health (OSHC)

88    89
 ƒƒ Wage Setting and Productivity Awareness (NWPC, RTWPBs) Fiber Industry Development Authority (FIDA)
ƒƒ Employees Compensation (ECC)
ƒƒ Social Amelioration Program (SAP) (BRW, ROs) Website: http://fida.da.gov.ph/
ƒƒ Working Youth Centers (WYC) (BWYW, ROs)
ƒƒ National Program Against Child Labor (BWYW, ROs) FIDA services include:
ƒƒ Labor Attaché Services, including Verification Fee Project (ILAS, POLOs) ƒƒ Technical assistance to farmers on the proper culture, management and protection
ƒƒ Welfare Program for Overseas Filipino Workers (OWWA) of fiber crops;
ƒƒ Reintegration Program for OFWs ƒƒ Assistance to farmers in the establishment and rehabilitation of fiber crop
ƒƒ Women Workers Employment and Entrepreneurship Development (WEED) plantations;
(BWYW, ROs) ƒƒ Assistance in the organization and strengthening of farmers’ cooperatives and
ƒƒ Gender and Development (GAD) (BWYW, All Offices) packaging of proposals to avail of production loans from the Land Bank and other
financing institutions;
Details can be obtained from the DOLE Call Center (Tel. No. 527 8000), which is open on ƒƒ Training on fiber production, fiber extraction, fiber grading and classification, fiber
Monday to Friday from 8:00 a.m. to 6:00 p.m. processing and handicraft making, such as, handmade papermaking, sinamay and
piña cloth weaving;
Applicants may also visit the DOLE Office at: ƒƒ Provision of disease-free planting materials to farmers;
Department of Labor and Employment ƒƒ Technical, information and testing services on fiber identification, characteriza-
Muralla St. cor. Gen. Luna St., Intramuros tion and fiber extraction, pulping and quality of pulp;
1002 Manila ƒƒ Marketing assistance, including the identification and development of markets
Philippines and the establishment of direct marketing tie-ups between fiber producers and
processors/manufacturers and other buyers;
ƒƒ Hosting, sponsoring and active participation in trade fairs and exhibits, both local
Department of Science and Technology (DOST) and foreign, to promote Philippine fiber-based products;
ƒƒ Provision of fiber industry statistics and other market-related information, such
Website: http://www.dost.gov.ph/ as, trade opportunities and market updates; and
ƒƒ Program or project development preparation for local and foreign-funding.
The website has a wealth of information concerning the following general fields of science
and technology: The directory of FIDA Officials and Regional Directors and their contact details is also
ƒƒ Agriculture, Forestry and Natural Resources (Agronomy, Animal Husbandry, Hor- available on the FIDA website under the About Us/Directory menu.
ticulture, Tree Plantations, Mining, Fishing, and so on)
ƒƒ Aquaculture (Alga culture, Fishing Farming, Fresh Water, Mari culture, and so
on) Intellectual Property Office (IPO)
ƒƒ Education (Scholarship, Teaching Aids, Internships, and so on)
ƒƒ Food and Nutrition (Health Eating, Food Labeling, Food Safety, Nutrition, and so Website: http://www.ipophil.gov.ph/
on)
ƒƒ General Information (Basic Facts, Fundamentals, and so on) IPO offers the following services:
ƒƒ Health/Medical Sciences (First Aid, Exercise and Fitness, Alternative Medicine,
Health Care, and so on) 1. Enterprise Development:
ƒƒ Industry and Business (Commercial Production, Sale of Goods, Manufacture and ƒƒ  Patent Search for the Public. Processing and organizing patent docu-
Trade, and so on) ments for classification and development of search retrieval tools; developing
ƒƒ Information and Communication Technology (Network, Hardware, Software, training modules for patent searches on Philippine patents; providing special-
Multimedia, Technical Communication, and so on) ized trainings on search retrieval tools.
ƒƒ Natural Disaster and Mitigation (Climate Change, Typhoon, Earthquake, Disaster ƒƒ Technology Transfer Agreement Registration. Evaluating compliance
and Preparedness) of Technology Transfer Agreements to the provisions of the IP Code and de-
ƒƒ Nuclear (Applied Physics, Radiation, Chemistry, Isotopes, and so on) veloping training modules for technology transfer.
ƒƒ Mediation. Settling disputes on issues involving technology transfer pay-
When a field is selected, the website will display the name and web link of the institute ments and author’s rights.
that specializes in the field as well as the services, products and programs offered by the ƒƒ External Training. Organizing training to increase public awareness,
institute. knowledge and utilization of intellectual property rights.

90  Social Enterprise Development: Community Businesses at Work Section 8 | Directory of Selected Resources  91
 ƒƒ Advisory Services. Providing advice in patenting, trademark registration,
copyright, technical and search.
2. Copyright Industries Development:
ƒƒ Accreditation System. Establishing and administering an accreditation
mechanism for collection societies.
ƒƒ Advisory Services. Assisting in the strengthening of collection societies.
ƒƒ Information, Training and Educational Support. Providing informa-
tion and education about IP rights for copyright industries.
Visit or call IPO at:
IPO Building
351 Sen. Gil Puyat Ave., Makati City
Telephone Nos. (632) 752-5450 to 65 Loc. 201 to 205,
Telefax No. (632) 897-1724
Email at dittb@ipophil.gov.ph or mail@ipophil.gov.ph.
Philippine Coconut Authority (PCA)
Website: http://pca.da.gov.ph/
The PCA is the sole government agency that is tasked to develop the coconut industry to
its full potential in line with the new vision of a united, globally competitive and efficient
coconut industry. It is mandated to oversee the development of the coconut and palm oil
industry in all its aspects and ensure that the coconut farmers become direct participants
in, and beneficiaries of, such development and growth.
The functions of PCA are as follows:
ƒƒ Formulate and promote a strategic and comprehensive development program for
the coconut and palm oil industry in all its aspects;
ƒƒ Implement and sustain nationwide coconut planting and replanting, fertilization
and rehabilitation, and other farm productivity programs;
ƒƒ Conduct research and extension on farm productivity and process development for
product quality and diversification;
ƒƒ Establish quality standards for coconut and palm products and by- products and
develop and expand the domestic and foreign markets; and
ƒƒ Enhance the capacities and ensure the socio-economic welfare of coconut and
palm farmers and farm workers.
Visit or contact PCA at:
Philippine Coconut Authority
Elliptical Road, Diliman, Quezon City
Telephone: (0632) 928-4501
Email: pca_cpo@yahoo.com.ph
92  Social Enterprise Development: Community Businesses at Work
Technical Education and Skills Development Authority (TESDA)
Website: http://www.tesda.gov.ph/
TESDA offers the following services:
1. Skills Training Programs. These include Automotive Servicing, Hotel and Res-
taurant Management Technology, Aquaculture, and so on. TESDA’s 2008 list
of training programs is available at the website (http://www.tesda.gov.ph/page.
asp?rootID=9&sID=108&pID=9). The list is organized into regions.
2. Foreign Scholarship Training Program for Non-Degree Courses. Details are avail-
able at http://121.1.0.5/foreign/. The Program is open to:
ƒƒ Officials and employees of government agencies with permanent employment
status.
ƒƒ Officials and employees of private and accredited non-government
organizations.
ƒƒ Candidates re-nominated to the same course/donor country. These will be re-
quired to submit an updated document and re-nomination letter. The previous
assessment sheet shall be used where the candidate was earlier assessed.
ƒƒ Government officials and employees with non-permanent employment status
can avail of the scholarship, provided a strong justification and guarantee from
the nominating agency of his/her continuity of service are submitted.
Procedures to avail of the grant and documentary requirements are available at
http://121.1.0.5/foreign/procedure.aspx.
3. Training Program for Women. The list of available TESDA training programs for
women – such as fiberglass craft, bar tendering, food processing, and silkscreen
printing – may be viewed at http://twc.tesda.gov.ph/programs_services/.
The TESDA Women Center (http://twc.tesda.gov.ph/) is located at:
37 East Service Road
South Superhighway, Taguig City, MM
Telefax: 818 8062
Trunk line: 817 4076 to 82 local 278
Email: tesdawomen@yahoo.com
Technology Resource Center (TRC)
Website: http://www.tlrc.gov.ph/
TRC offers the following services:
1. Hands-On Livelihood Training.      
ƒƒ In-house Courses: Standard training sessions that are open to the public and
held in cooperation with private business partners.      
ƒƒ Institutional Courses: Livelihood training sessions conducted for various pri-
vate institutions customized according to their needs.      
Section 8 | Directory of Selected Resources  93
 ƒƒ Socialized Training Programs: Livelihood empowerment programs conducted
in various depressed and displaced urban communities at minimal or no cost
to the participants.     nancial support to livelihood projects.
Contact Details:
Technology Resource Center
2nd Floor, TRC Building #103 J. Abad Santos cor. Lopez Jaena Sts.
Little Baguio, San Juan City
Tel. No.: (02) 727-6205 loc. 208, 209
The list of training courses and their schedule can be viewed at the following link:
http://www.tlrc.gov.ph/training.html.
2. Livelihood Publications. These are business guides for small manufacturing enter-
prises, such as, decorative candles, home bakeshop, embroidered products, and
the like. The booklets deal with various aspects of livelihood and business technol-
ogies that can be readily utilized in a rewarding enterprise. The list of technology
and livelihood materials can be viewed at http://www.tlrc.gov.ph/listmaterials.
html and purchased for the minimal price of PhP60 per piece. Payment must be
in Postal Money Order, payable to Technology Resource Center. An additional 40
percent for every title is to cover packaging and mailing costs.
Interested individuals may send their orders to this address:
Technology Resource Center
Marketing Division, Ground Floor, TRC Building
#103 J. Abad Santos cor. Lopez Jaena St., Little Baguio, San Juan City
Telephone: 727-6205 loc. 202, 203
3. Video Courses. To complement the TRC publications, business and livelihood
technology information is also packaged into video courses (DVD, VCD and VHS
formats) to teach step-by-step procedure of featured technologies. The list may
be viewed at http://www.tlrc.gov.ph/listvideocourses.html. A video costs PhP 715
each. Payment must be in Postal Money Order, payable to Technology Resource
Center. Buyers should add PhP 200 for every VCD/VHS title to cover packaging
and mailing costs.
Interested individuals may send their orders to this address:
Technology Resource Center
Print Video Production Ground Floor, TRC Building
#103 J. Abad Santos cor. Lopez Jaena St., Little Baguio, San Juan City
Telephone: 727-6205 loc. 202, 203
4. Funding Sources Database. TRC has compiled information on development pro-
grams and institutions that provide financial support to livelihood projects of pri-
vate individuals and organized groups. The database can be accessed at: http://
www.tlrc.gov.ph/ClientFundingSourcesSimpleSearchPage.jsp.
5. eTRC (e-Technobank). The eTRC is an Internet-based computerized system tool
to promote entrepreneurship by providing access to a wide range of technology,
business and livelihood information as well as other vital requirements in estab-
94  Social Enterprise Development: Community Businesses at Work
lishing a business. The features of eTRC include:
ƒƒ Development Funding – funding programs and institutions that provide fi-
ƒƒ Technology Library – interactive database of business and livelihood informa-
tion materials in print or multimedia format.
ƒƒ Provincial Socio-Economic Profile – a comprehensive investment information
service.
ƒƒ Business Registration Guide – A complete, step-by-step guide on business
registration process as well as regulatory requirements of different govern-
ment agencies.
ƒƒ Market Linkages – an interactive directory of potential buyers and sellers.
ƒƒ Priority Industry – baseline information on priority industries relevant to
countryside development.
ƒƒ Sectoral Consultants – a list of experts from different sectors. The list is made
up of TRC resource persons and experts from research and development
institutions.
eTRC can be accessed as follows:
a. Log on to www.tlrc.gov.ph.
b. Click eTechnobank button, and then Technology Library. You will be directed
to the log-in page.
c. Click sign up now to create your eTRC account. Fill in all the boxes and then
click the SUBMIT button. Take note of your eTechnobank ID and password
as this will be your permanent access to eTRC.
d. Upon successful registration, you are considered as a guest. As a guest, you
can browse the available materials but you cannot download them.
e. To download the full text, you have to secure a Kabuhayan PIN or Kabuhayan
Prepaid Card. A Kabuhayan Card can be purchased in the following denomi-
nations: PhP100/200 /300/500. Click the “Where to Buy” banner to view the
list of card distributors or dealers).
Contact details:
  TRC Hotline: 727 6205
    TRC Building (formerly ELT Center)
  103 J. Abad Santos cor. Lopez Jaena Sts.
  Little Baguio, San Juan City
Foundation for Sustainable Society, Inc. (FSSI)
Website: http://www.fssi.com.ph/
FSSI has five core programs:
1. Coconut Business Integration and Development Program (COCOBIND).
  The COCOBIND Program intends to contribute to the further development of
the coco-coir industry in the country and to the creation of business and employ-
ment opportunities for the coconut farmers through this program. Coco-coir is
derived from the coconut husk, which is underutilized and allowed to rot on stock-
piles in the coconut farms. Through efficient technologies, coco-coir is processed
into various products, such as fiber pads, geo-textiles and coco peat blocks which
Section 8 | Directory of Selected Resources  95
 are in demand in the local and world market because synthetic materials are ex-
pensive and found to have destructive effects in the environment.
2. Microfinance Eco-Enterprise Program (MEEP). pacity or poor access to capital; and (c) have higher project risk in terms of organi-
  The program for the microfinance (MF) sector seeks to facilitate the entry and
effective participation of the entrepreneurial poor and micro enterprises in eco-
enterprise ventures. The Foundation develops and delivers services that support
MF initiatives to give more accessible financing to eco-enterprises.
3. Sustainable Waste Management Eco-Enterprise Program (SWEEP).
  The SWEEP program provides technical and business development support and
financial services to stimulate and accelerate the development of viable and eco-
logically sound entrepreneurial activities in the waste management sector.
4. Sustainable Partnership for Eco-Enterprise Development (SPEED).
  SPEED intends to harness the entrepreneurial capacities of the marginalized
sector through direct and effective delivery of financial and enterprise develop-
ment services that are appropriate to community-based enterprises, development
organizations and individual private social entrepreneurs. It intends to provide
assistance to those emerging enterprises that promote eco-enterprise principles
and at present not covered by services within the Foundation’s sub-sector-specific
programs.
5. Fund for Sustainable Civil Society (FSCS) Grants Facility.
  The FSCS provides grants mainly to help meet the needs of civil society organ-
izations that are actively concerned with poverty reduction and socio-economic
justice promotion for the poor and marginalized sectors. Its mission is to generate
and mobilize resources:
ƒƒ towards enabling CSOs to engage in sustainable livelihood and eco-enterprise
development projects or activities with the active participation/and for the
benefit, of the poor and marginalized sectors in rural and urban communities;
and
ƒƒ to support building the capacity initiative of poor communities and consolidate
the infrastructure of CSOs (sectoral or multi-sectoral) based on solidarity that
would lead to planned actions that could influence policies or larger events
focused on asset reform, development financing, environment protection and
promotion of gender equity.
FSSI provides financial assistance in the following forms:
1. Developmental Deposits
  The Developmental Deposit is a proactive intervention of FSSI to leverage and
strengthen the capacity of Community Financial Institutions (CFIs) to generate
and mobilize savings within their local community. Developmental deposits are
placements made by FSSI only with Community Financial Institutions -- Coopera-
tive Banks and Rural Banks that have met international financial standards and
have demonstrated consistent financial discipline in their operations.
2. Grants
  Grants are either for non-revenue generating or for start-up revenue-gener-
96  Social Enterprise Development: Community Businesses at Work
ating activities. Grant assistance shall consider projects that: (a) involve activi-
ties that support or strengthen operation of eco-enterprises; (b) involve start-up
or emerging eco-enterprise/business implemented by organizations with low ca-
zational capacity, market or technology risk.
3. Guarantees
  FSSI collaborates with two or more partners to create a new business. All part-
ners agree to share profits, risks and expertise. FSSI enters into a joint venture
arrangement under the following conditions: (a) FSSI ownership of the business
is not more than 50%; (b) FSSI has active participation and control over the man-
agement of the business; and (c) there is a business plan that specifies targets and
conditions as to how and when FSSI can divest its ownership in favor of other
social entrepreneurs.
4. Equity Investments
  Equity Investments constitute the Foundation’s investments in identified eco-
enterprises with explicit ownership interest for income or capital appreciation.
FSSI actively participates in the management of the eco-enterprise undertaking
together with one or more parties, and shares in the expected returns and probable
risks of the business.
The considerations for Equity Investments are: (a) strategic and long-term de-
velopment interest; (b) long gestation period requirement of the enterprise; (c)
financial requirements are beyond the allowable amount provided in other FSSI
instruments; (d) involvement through active participation in management shall
add-value to the enterprise; and (e) considerable potential risk is beyond the sole
capacity of the participating organizations to bear and with expectation of higher
rewards.
5. Loans
  A loan is a contractual arrangement whereby the Foundation provides money
or property to a borrower and the borrower agrees to return the property or repay
the money, along with an interest, at specific future point(s) in time. In FSSI, loans
are designed for the purpose of harnessing socio-economic and ecological oppor-
tunities in enterprises which may be used for the following purposes: (a) to fund
permanent working or revolving capital of the eco-enterprise; (b) to fund seasonal
working capital of the eco-enterprise; (c) to purchase or acquisition of fixed asset
to be used directly for operations; and (d) to expand business operations.
Eligibility criteria for FSSI financing support is as follows:
1. Groups that qualify for support are those with the following characteristics:
ƒƒ Legal, juridical personality based on Philippine laws
ƒƒ Track record in development work
ƒƒ Demonstrate strong governance and management capability
ƒƒ Demonstrate strong financial health and condition; and have attained the re-
quired level of sufficiency and sustainability to implement projects effectively.
2. Projects eligible for support must embody the three basic features:
Section 8 | Directory of Selected Resources  97
 a.   Economically viable PEF supports the following specific activities:
ƒƒ Presence of clear and viable financial plan involving commercial viability
criteria 1. Livelihood and Employment/Financial Services
ƒƒ Strong market demand and/or prospects for expansion of the business/ ƒƒ Micro-finance
project ƒƒ Micro-lending
ƒƒ Appropriateness and effectiveness of management structure ƒƒ Micro-insurance
ƒƒ Effectiveness of technology employed. ƒƒ Micro-savings
2. Agricultural Development
b.   Ecologically sound ƒƒ Productivity (Enhancement/Improvement of Production Inputs)
ƒƒ At the very least, it is environmentally benign ƒƒ Processing/Marketing (Post Harvest)
ƒƒ Provides opportunity for (if not yet directly employing) cleaner and sus- ƒƒ Trading and Marketing
tainable production systems ƒƒ Livestock and Poultry
ƒƒ Provides for a safe, healthy and favorable work environment ƒƒ Aquaculture, Marine Fishing, and Marine culture
ƒƒ Enhances, protects or rehabilitates the environment. 3. Non-Agricultural Income Generation
ƒƒ Transport Service
c.   Community or socially oriented ƒƒ Handicrafts
ƒƒ Opportunities for strengthening governance, management capacity and ƒƒ Manufacturing
competence of community members to engage in productive enterprises ƒƒ Trading
ƒƒ Participation of locals in the actual project operation through sustainable ƒƒ Vending
gainful employment or access to capital or productive assets such as sav- 4. Basic Social Services
ings or capital build-up ƒƒ Provision of Potable Water
ƒƒ Opportunities for gaining control and ownership of productive enterprises ƒƒ Health (Primary Health Care and Alternative Health Delivery)
through equitable distribution and sharing of resources and earnings. ƒƒ Housing (Site Development, Land Acquisition, House Construction)
ƒƒ Education (Functional literacy, Day Care Center)
FSSI Policies and Guidelines on Financial Services may be viewed at the following website: 5. Social Capital
http://www.fssi.com.ph/index.php?option=com_content&task=view&id=22&Itemid=10 ƒƒ Partnership Building
4. A PDF version can also be downloaded. ƒƒ Multi-sector Partnership
6. Geo-Physical
The FSSI project proposal outline can be downloaded from the following website: http:// ƒƒ Infrastructure (Hanging foot bridges, Micro-hydro, Irrigation, Appropriate
www.fssi.com.ph/index.php?option=com_content&task=view&id=21&Itemid=109. technology)
ƒƒ Environment and Cultural Heritage Conservation (Rice Terraces Restoration,
Funding applicants may submit their proposals to FSSI office or by email to fssi@fssi.com. Historical Landmarks)
ph. The FSSI office is located at:
46-E Samar Ave. corner Eugenio Lopez St. PEF-supported projects should respond to the problems of poverty and marginalization,
South Triangle, Quezon City and bring tangible results to the poor families or community within three to six months of
Telephone: + (63-2) 9288671/4114702 implementation.
Fax: (+63-2) 4114703/9288422
The PEF Project Guidelines are available at: http://www.pef.ph/projects.php. The project
proposal format can be downloaded from: http://www.pef.ph/downloads2.php.
Peace and Equity Foundation (PEF)
PEF has five offices: two in Manila, one in Cebu, one in Davao and one in Zamboanga
Website: http://www.pef.ph/ (http://www.pef.ph/contact.php). The main office is at:
  #69 Esteban Abada Street, Loyola Heights, Quezon City
PEF is mandated to undertake the following:   Phone Number: (632) 4268402
ƒƒ Provide civil society organizations (such as, people’s organizations, non-govern-   Telefax Number: (632) 4268402 local 102 or (632) 4269785 to 86
ment organizations, cooperatives, faith-based groups, and similar entities) with   Email Address: pef@pef.ph
development financing and technical assistance;
ƒƒ Promote appropriate technology; and
ƒƒ Promote networking among its stakeholders.

98  Social Enterprise Development: Community Businesses at Work Section 8 | Directory of Selected Resources  99
Section 9

Section 9
Preparation
of a Business Plan
Background

To avail of PACAP assistance, an applicant-organization must accomplish an Expression of

Interest (EOI) form (copy available on the PACAP website http://www.pacap.org.ph/), in-
cluding an estimated budget for the proposed project. Upon PACAP’s approval of the EOI,
the applicant is asked to prepare a full project proposal (format available on the PACAP
website).

One of the documents required for an enterprise proposal seeking PACAP support is a Busi-
ness Plan. The Business Plan is expected to provide details on the market, production and
management aspects of the enterprise and its expected financial performance. The Plan is
also expected to address social equity considerations (e.g., gender enhancement, environ-
mental concerns, peace and others) and consider risks that the proposed enterprise may
encounter during operations. Finally, the Plan should indicate the counterpart contribu-
tions to be provided by the PACAP partner and beneficiaries in financing the enterprise,
as a demonstration of their participation in the enterprise and their commitment to its
long-term success.

The detailed format of the Business Plan is presented below (see Box 9-1). A sample Busi-
ness Plan – the Palay and Rice Trading Enterprise of the Aganan River Federation of Irriga-
tors’ Association, Inc. (ARFIA) – is presented in the next section.

Box 9-1. Detailed Format of the PACAP Business Plan

General Description of the Enterprise

Please describe briefly the proposed enterprise in terms of: (a) product, (b) market, (c)
technology to be utilized, (d) expected financial performance; (e) management and
ownership, (f ) social equity considerations, and (g) risks.

Market Considerations
1.  Target Market: Size, Competition and Trading Practices
ƒƒ What is the size of the target market?
ƒƒ Where is it located?
ƒƒ Who are the competitors (suppliers of the same product to the same uu

100    101
 customers) and what is their share of the target market? ƒƒ In what quantities (per cycle, per month, per year)?
ƒƒ What are the selling prices of the product at the different levels of the distribution ƒƒ Where are the sources of these raw materials?
chain? ƒƒ What are their selling prices and terms of trade?
ƒƒ Is there a seasonal pattern to the sales of the product? ƒƒ Who are the competitors of the enterprise for these raw materials?
2.  Estimated Market Share of the Proposed Enterprise: ƒƒ How can the enterprise assure itself of a stable and adequate supply of raw
ƒƒ What share of the target market does the proposed enterprise intend to materials?
capture? 7.  Projected Schedule of Enterprise Operations:
ƒƒ What is the projected sales volume per business cycle? (Per month? Per year?) ƒƒ What are the start-up activities that must be completed before the enterprise
3.  Proposed Marketing Scheme of the Enterprise: can go into operations?
ƒƒ What is the selling price of the product(s) of the enterprise? ƒƒ At full capacity, what is the volume of raw materials required per month and
ƒƒ How does this compare with prevailing market prices of this same product sold per year?
by other producers? ƒƒ At full capacity, how many units of the product will be produced and sold per
ƒƒ How will customers buy the product(s) of this enterprise? month and per year?
ƒƒ What is the point of sale? ƒƒ Using the table below, summarize the estimated volumes of raw materials
ƒƒ How will the products be brought to the point of sale? purchases, units of products produced and units of products sold on a monthly
ƒƒ What are the terms of sale (e.g., cash credit, consignment, etc.)? basis.
ƒƒ Will there be a promotions/advertising campaign?
Enterprise Operations Volume/Month
Production Considerations
1 2 3 4 5 6 7 8 9 10 11 12
1.  Technology Description:
ƒƒ Describe briefly the technology to be utilized by this enterprise. Preparatory Activities
ƒƒ What is its history of its use, e.g., is it commonly used in enterprises of this Raw Material Purchases
type? Production Outputs
ƒƒ Will the technology ensure a consistent quality product?
Products Sold
ƒƒ Does it have any potential adverse effects on the environment?
ƒƒ Is its use biased towards women? Towards men?
2.  Production Process Flow Diagram:
ƒƒ In diagram form, describe the steps involved in the production process. Financial Assumptions
ƒƒ List the inputs and outputs at each step. 1.  Capital and Start-Up Costs:
ƒƒ What is the length of the production cycle? (i.e., the time required to produce List all capital and start-up costs. Capital costs include all costs to acquire, build and
the product) install all elements of the production unit (including land, machinery, equipment,
ƒƒ How many production cycles will there be in a month? In a year? and so on.). Start-up costs are one-time costs associated with getting started in the
3.  Land, Infrastructure, Machinery and Equipment Requirements: business, e.g., legal, engineering studies, feasibility studies, licenses, and so on.
ƒƒ What are the land, infrastructure, machinery and equipment requirements? 2.  Fixed Costs (Per Month):
ƒƒ Can these be acquired, fabricated and maintained locally? List all fixed costs on a monthly basis. Fixed costs are incurred to operate the production
ƒƒ Will these be bought, rented or leased? unit regardless of the level of production. Fixed costs include management and
4.  Labor Requirements: administrative salaries, rent, depreciation, repair and maintenance, and so on.
ƒƒ How many production workers will be required? 3.  Variable Costs (Per Unit and/or Per Month):
ƒƒ How many of these will be men? List all variable costs on a monthly basis. Please derive the variable cost per unit of
ƒƒ Will be women? product. Variable costs are related directly to the level of production; these consist
ƒƒ What measures will be implemented to ensure the safety of the workers of the mainly of raw materials and production labor.
enterprise? 4.  Projected Selling Prices:
5.  Training Requirements: Indicate the projected selling prices of the product(s) of the enterprise and the basis
ƒƒ What kind of training must be provided to enable the production workers to for this price.
utilize the technology efficiently? 5.  Terms of Sale:
ƒƒ Who will provide this training? Describe the terms of sale of the product(s) of the enterprise. Will the product be
6.  Raw Material Requirements: sold in cash, on terms, on consignment, or with discounts? uu
ƒƒ What raw materials will be required?

102  Social Enterprise Development: Community Businesses at Work Section 9 | Preparation of a Business Plan  103
 6.  Enterprise Start-Up:
ƒƒ What activities that must be completed before the enterprise can begin
production?
ƒƒ What is the length of time required to put together all the different elements so
that an enterprise can actually begin production?
ƒƒ Once an enterprise begins actual operations, how long will it take before it
achieves its planned 100 percent production capacity?
Financial Assessment
1.  Projected Income Statement:
ƒƒ What is the average net income of the enterprise on a monthly basis?
ƒƒ What is the net income at the end of the first year of operations?
2.  Projected Cash Flow Statement:
ƒƒ At what month does the does the enterprise begin to generate a positive ending
cash balance?
ƒƒ What is the cumulative ending cash balance at the end of Year 1?
3.  Return on Investment (ROI)
ƒƒ What is the expected annual Return on Investment (ROI) of the enterprise?
ƒƒ Is this expected ROI satisfactory? Please explain.
4.  Payback Period:
ƒƒ What is the expected Payback Period of the enterprise in terms of years?
ƒƒ Is this expected payback period satisfactory?
Governance, Management and Ownership
1.  Form of Business Enterprise:
ƒƒ Describe the organizational form of the enterprise.
ƒƒ Will this be a single proprietorship, partnership, corporation or cooperative?
ƒƒ Justify the choice of this organizational form.
2.  Governance:
ƒƒ What is the role of the Board of Trustees in the enterprise?
3.  Management and Personnel Functions:
ƒƒ List all management and personnel requirements for the marketing, production,
finance and administration activities of the enterprise.
ƒƒ Please indicate the positions that will be staffed by women and men.
4.  Utilization of Project Income:
ƒƒ How will the net income of the enterprise be utilized?
ƒƒ Describe how the profits of the enterprise will be shared by the target beneficiaries.
5.  Ownership of Project Inputs:
ƒƒ Who will own the project inputs, particularly those that will be funded by
PACAP?
ƒƒ Describe the plan to ensure that the beneficiaries will own and control the
enterprise.
Social Considerations
In what way(s) does the enterprise promote the following values?
1.  Enhanced Gender Equity
2.  Community Participation
3.  Environmental Protection and Regeneration
104  Social Enterprise Development: Community Businesses at Work
4.  Peace-Building
5.  Respect for Culture and Values.
Risk Assessment
1.  Potential Risks
ƒƒ In your assessment, what risks have a high likelihood of occurrence and will
have a high impact level on your enterprise if they occur?
2.  Risk Management Strategies
ƒƒ What risk management strategies have you devised to address the above risks?
ƒƒ Who are responsible to carry out these risk management strategies?
Sample Business Plan
The Palay and Rice Trading Enterprise of the Aganan River Federation of Irrigators’ As-
sociation, Inc. (ARFIA)
General Description of the Enterprise
Palay and rice trading is an agriculture-based enterprise and involves, as a first step, the
procurement of palay from farmers. ARFIA’s main sources of palay will be the farmer mem-
bers-cum-borrowers of its micro-financing program whose production has been assigned o
the Federation as loan payment or as loan guarantee; the Federation is also prepared to buy
the remaining produce of these farmer-borrowers after they have settled their loan obliga-
tions. Further, the Federation will also buy from other IA members through their respective
Irrigators’ Association (IAs).
The Federation will put up marketing centers in its five member-Irrigators’ Associations
(IAs) but the operations center shall be at the Federation’s Post Harvest Facilities (PHF)
complex in Brgy. Mambog, Oton, Iloilo. There will be a Project Team in every IAs to handle
the procurement and marketing of palay.
The procured palay will either be sold as: (a) palay to traders or to government institu-
tions like the National Food Authority (NFA); or (b) milled and converted to rice and sold
directly to rice traders or consumers.
The palay and rice trading operation will be managed by the Federation’s Project Manage-
ment Staff composed of Project Officer, Marketing Officer and Administrative personnel.
Each staff member shall have defined functions and responsibilities as well as corresponding
accountability. The project will be owned and managed by the ARFIA.
Market Considerations
Target Market: Competition and Trading Practices
Generally, the demand of palay is stable and continuous because it is the staple food among
Section 9 | Preparation of a Business Plan  105
 85 percent of the Filipinos. The market of palay is not a problem. However, the Federation practice two croppings a year (May/June to October and November to February). The av-
will ensure that it will have the “right market” of palay – which means a market that will erage production per hectare is 100 sacks at 42 kilos/sack (4,200 kilos). The total estimated
buy the palay at a competitive price that is way up compared to other traders. The following annual production (gross) of the target area is 15,103.2 metric tons or 359,600 sacks.
table shows the local price chain of palay and rice in Iloilo.
Table 9-3. Estimated Production of the Target Sites
Table 9-1. Local Price Chain of Palay and Rice (in pesos) Name of Irrigators’ Association Coverage Estimated Yield in metric tons
Palay Rice Rice Bran Area (ha.) 1st Cropping 2nd Cropping
Levels Description (per kg) (50 kgs. Sack) (30 kgs. Sack) 1. San Jose-Sto. Niño 821 3,448.2 3,448.2
Farm Gate (fresh from Wet: 15% to 30% Mois- 7.00-8.30 2. Macabitu 351 1,474.2 1,474.2
harvest) ture Content
3. Macatuan 545 2,289 2,289
Dried: 14% and below 8.50-10.00
4. Salambitu 991 4,162.2 4,162.2
MC
5. Cappa 888 3,729.6 3,729.6
NFA Below 14% Moisture 10.00
Content TOTAL 3,596 15,103.2 15,103.2
Traders Palay and Rice 8.50 and above 850.00 to 950.00 170.00 to 180.00
Rice Retailers/ Offices Rice 850.00 to 1,000.00 These farmers are selling palay directly to small buyers who usually have a buying station
near their farm or to the grain traders in the Municipalities of Oton, San Miguel, and Pavia
(Iloilo). However, the buying price is normally very low especially during the rainy season.
The palay procured by the Federation will be directly sold to the National Food Authority Farmers have no facilities to preserve the quality of the grains. Because of this, the farmers
(NFA) or to the grain traders who will buy the produce in a competitive price. The NFA is are forced to sell their palay even at a very low price.
a good market during the peak of harvest season. The Federation has existing marketing
agreement with the NFA and it will be renewed annually. However, other grain will be Presently, there are 5 major grain traders operating within the target areas. These traders
milled and the rice will be sold to rice traders, local rice retailers and to the farmer-con- practice contacting the small palay buyers who intensively go to different farms to buy
sumers during lean months. the palay from the farmers – they are commonly known as “middlemen.” This practice is
common particularly during harvest season. The same strategy will be employed by the
If possible, the Federation will apply the cash-on-delivery (COD) approach in buying and Federation to meet its procurement target, and thereby maximizing the IA leaders.
selling the stocks. It will also provide incentives to dealers and provide free freight-in for
bulk purchases within Aganan River Irrigation System service area. Table 9-4. Major Palay Buyers Operating within ARFIA Areas of Operation
Location of Estimated Volume of
The Federation had already established market linkages and had initial marketing discus- Name of Buyers Address
Buying Station Palay Procured (sacks)
sions with the following traders, government and private agencies for the supply of rice and
Grabato Iloilo City San Miguel, Iloilo Unlimited
palay.
Goriceta Rice Mill San Miguel, San Miguel, Iloilo 20,000 sacks up
Table 9-2. Projected Market of Palay and Rice Iloilo
Absorptive Capacity/ Zamora Rice Mill Oton, Iloilo Oton, Iloilo 20,000 sacks up
Name of Buyer Location Volume Required (in sacks) Geonigo Rice dealer Oton, Iloilo Oton, Iloilo 10,000 sacks up
Palay Rice Javellana Rice dealer Oton, Iloilo Oton, Iloilo 10,000 sacks up
Bonza Group of Millers Lapaz, Iloilo City No limit No limit
Roscom Millers Iloilo City No limit No limit
After the intensive consultation, the members have committed to sell 50 percent of their
Direct consumers Iloilo City 10,000
produce to the Federation. The remaining 50 percent of the produce is usually reserved for
consumption and for payment of debt. The Federation cannot really exercise monopoly of
the total production of the members as it still respects the practice of free trade. However,
Estimated Market Share: Demand and Supply Analysis the Federation is confident of procuring at least 210,000 kilos or 5,000 sacks (at 42 kgs.
The Federation will procure palay in all areas within the five member Irrigators’ Associa- per sack), which represents the payment-in-kind of the loans received by the farmers from
tions covered by Aganan River Irrigation System, as primary area, and its adjacent places as the Federation. This is a very conservative estimate: it is only for one cycle production loan
secondary target area. The total area is 3,596 hectares of irrigated rice farms, which usually from 100 beneficiaries with only 1 hectare per farmer. In addition, the Federation will buy

106  Social Enterprise Development: Community Businesses at Work Section 9 | Preparation of a Business Plan  107
 Diagram 9-1. Marketing Activity Flow
additional palay outside payment of production loan. The estimated volume of this addi-
tional palay is 172,200 kilos or 4,100 sacks.

Projected Sales of Palay and Rice FARM

Depending upon the demand, the palay will be milled and the rice will be sold to rice dealers
and retailers or to the farmer’s associations/ direct consumers.

Of the total volume of palay procured, the Federation plans to sell half as palay, while the Marketing Centers Main Buying Warehouse
other half will be milled and sold as rice. Of the palay to be sold as palay, 50 percent will be (5IAs) Station (PHF)
sold wet (with moisture content above 13 percent), while the other half will be sold dried
(with moisture content of 13 percent and below). Palay – in both wet and dry forms – will
be sold to the NFA and private traders, depending on prices offered. Rice and bran (a by-
product of milling palay into rice) will be sold to identified customers. DRYING

Production Considerations
MILLING
Technology Description
After procurement of palay, in the case of selling it dried and for rice conversion the federa-
tion will dry it using either solar or mechanical dryers. The solar driers will be used during MARKETING
normal weather condition and when there is substantial solar energy. The mechanical
dryers are also available during rainy days when solar energy is not enough to dry palay.
There are also glass houses for stocking of wet palay or three to five days while preserving
the quality during rainy days. The palay will be stocked in the warehouse of the federation
before it will be transported to the point of market. NFA Rice Retailers/ Grain Traders Farmer’s Association /
Millers Farmers /
Marketing Activity Flow Direct Consumers
Marketing centers will be put up at the strategic location near the farm to buy palay of the
farmers fresh from the harvest or some areas will use IA offices as their marketing centers,
aside from the main buying station at the Post Harvest Facilities in Barangay Mambog, 3. Palay Warehouse – The dried palay is stock before it milled or before it will be sold
Oton, Iloilo. Two cargo trucks are available to haul palay bought by the federation to the to NFA or traders. The warehouse has the capacity to stock 3,780,000 kilograms
warehouse for drying and warehousing. Other procured palay will be hauled directly to of palay or 90,000 sacks at 42 kilograms per sack.
grain traders in wet form. The marketing program will converge in the main buying station 4. Administration Office – It serves as the office of the federation and all documents
where all inventories will be placed and stored. Proper recording system will be maintained and files (project records) are keep and administrative personnel works.
(see Diagram 9-1). 5. Equipment Shed – This is the place where different equipment like trucks, tractors
and other pre-and post harvest facilities are keep or park.
Land, Infrastructure, Machinery and Equipment
The post-harvest processing of palay consists of drying, milling and storage. The federation In addition to the above, the Federation also has the following production and marketing
with its available storage facilities can procure palay during any weather condition and has equipment (see Table 9-5):
the capability in preserving the good quality of palay. ARFIA managed state-of-the-art Post
Harvest Facilities located about four kilometers south of San Miguel along the provincial
road and about three kilometers from the town of Oton. The site is almost in the center of
the project area and is convenient for the operation of the post facilities.

The PHF, which was a grant from Japan Cooperation Agency (JICA) in 1996, includes the
following facilities:
1. Multi-Purpose Pavement (Drying pavement by solar energy) – It is used to dry
palay during sunny days maximizing solar energy.
2. Glass House – The wet or fresh palay is place when solar energy is not available during heavy
rainy days to preserve palay quality and control the subsequent quality deterioration.

108  Social Enterprise Development: Community Businesses at Work Section 9 | Preparation of a Business Plan  109
 Table 9-5. Production and Marketing Equipment of the Federation
383,000 kilos (383 metric tons), which is less than three percent of the estimated gross
Description # of Units Uses
production of the area targeted by ARFIA. Assuming that there will be shortfall of the pro-
Portable Mechanical Dryer 2 For drying during rainy days duction due to uncontrollable circumstances, there are still potential areas for procurement
4-wheel Farm Tractor 2 For transport of paddies outside the target areas, which are not covered by the irrigation system. Palay procurement
around the facilities site will be done on a cash-and-carry basis.
Cargo Truck 2 For transport of paddies from
the farmer’s house and mar-
keting centers to PHF and from Financial Assumptions
warehouse to NFA or traders or
millers Enterprise Start-Up Date
Year 1 of the enterprise is projected to start in November and end in October of the following
Forklift 2 For lifting rice bags in the
year. This projected start-up date will enable the enterprise to capture a portion of the palay
warehouse
harvest from the first crop (May/June to October) and gain enough marketing experience
Trailer (towed type) 2 For transport of paddies to expand operations in time for the second cropping season (November to February).
around the facilities site
Platform weighing scale 2 For measurement of paddy Capital and Start-up Costs
weight It is assumed that the enterprise shall not incur any capital or start-up costs as the Post-
One-pass Rice Mill 1 For milling of paddies (palay to Harvest Facilities complex are already fully operational.
rice conversion)
Fixed Costs per Month
The only fixed costs are personnel costs, which amount to PhP6,000.00 per month.
Labor Requirements
The federation needs to maintain five to 20 laborers during the peak of harvest or mar- Measures and Conversion Efficiencies
keting season. The laborers are paid on per activity basis (“pakyaw”). Their rate is incorpo- 1)  Palay Sack. A sack of palay weighs 42 kilos.
rated in drying and warehousing cost or in trucking fees. These personnel are usually male 2)  Rice Sack. A sack of rice weighs 50 kilos.
because of the very nature of their work that it needs physical effort. Women sometimes 3)  Palay Shrinkage. It is assumed that all palay to be procured will be wet, that is,
work for drying activities. with moisture content above 13 percent. Palay dried to 13 percent moisture content
is expected to shrink by an average of 15 percent. If palay is to be milled into rice,
Procurement Strategy it must first be dried.
To achieve the procurement target, the following strategy will be employed by the 4)  Rice Milling Recovery. A 65-percent milling recovery is assumed. This means
federation: that one kilo of palay, when milled, will yield 0.65 kilo of rice.
1. Setting up of marketing centers in every member-IAs; 5)  Bran Milling Recovery. A 10-percent milling recovery is assumed. This means
2. Each IA will have a procurement officer that will serve as contact person and will that one kilo of palay, when milled, will yield 0.10 kilo of bran.
be provided with incentives;
3. Payment for production loan including interest must be in the form of palay and Variable Costs
the farmer-beneficiaries will be encouraged to sell even 50 percent of their pro- The enterprise has three main products: wet palay, dry palay and rice. Bran, which results
duced to the federation; from the milling process that converts palay into rice, is considered a byproduct of rice. The
4. Device strategy that would allow payment of irrigation service fee in the form of variable costs of the three main products are listed in Table 9-6.
palay equivalent to the monetary value of service rendered in coordination with
the National Irrigation Administration (NIA);
5. Service fees for farm implements must be in the form of palay corresponding to
the cost of the services rendered and other services of the federation whichever is
applicable; and
6. Provision of patronage refund to the member associations depending on the
volume of palay procured.

Procurement Target
Comparing the procurement target to the estimated annual yield of the target sites, there
is enough supply to fill in the demand. The estimated annual yield for palay for first pro-
duction year is 15,103.2 metric tons or 15,103,200 kilos. The procurement target is only

110  Social Enterprise Development: Community Businesses at Work Section 9 | Preparation of a Business Plan  111
 Table 9-6. Variable Costs (in pesos)
Projected Schedule of Sales
Wet Palay (sold in 42-kilo sack)
The projected sales schedule of the enterprise is shown below (see Table 9-8). Wet palay
Procurement Cost (PhP8.30 per kilo x 42 kilos) 348.60 will be sold during quarters 1 and 4, peak harvest periods when palay prices are at their
Trucking of Palay (per sack) 5.00 lowest. This decision was taken because the Federation does not have sufficient working
Handling of Palay (per sack) 1.00
capital to hold on to palay stocks over a long period of time.

Variable Costs Per 42-kilo Sack 354.60 During quarters 2 and 3 (largely non-harvest periods), the enterprise will sell dried palay.
Variable Costs Per kilo 8.44 Rice (and bran) will be sold in quarters 2 and 4, periods immediately preceding the harvest,
Dried Palay (sold in 42-kilo sack) when the prices of rice are traditionally high.

Wet Palay, PhP8.30/kilo x 51.75 kilos (to compensate for shrinkage) 429.53
Table 9-8. Projected Sales Schedule for Year 1 - Palay (Wet and Dry), Rice and Bran (all in sacks)
Trucking of Palay (per sack) 5.00
Quarter 1 Quarter 2 Quarter 3 Quarter 4
Handling of Palay (per sack) 1.00
(November – January) (February – April) (May – July ) (August – October)
Drying, PhP0.20/kilo x 51.75 kilos 10.35
M1 M2 M3 M4 M5 M6 M7 M8 M9 M10 M11 M12
Variable Costs Per 42-kilo Sack 445.88 Wet Palay 500 500 500 533.33 533.33 533.33
Variable Costs Per kilo 10.62 Dry Palay 200 200 200 200 200 200 226.67 226.67 226.67
Rice (sold in 50-kilo sack) Rice 360 360 360 240 240 240
Dried Palay, 77 kilos x PhP10.62/kilo (assumed 65% milling recovery) 817.74 Bran 87 87 89 58 58 60
Milling, PhP1.20/kilo of rice converted from palay x 50 kilos 60.00
Trucking of Rice (per sack) 5.00
Handling of Rice (per sack) 1.00 Projected Selling Prices
Rice Sack 9.00 The projected average selling prices of the four products are shown below.
Variable Costs Per 50-kilo Sack 892.74
Variable Costs Per kilo 17.86
Table 9-9. Projected Average Selling Prices
Commodities Average Price/ kg. Average Price/Sack
Rice Bran (sold in 30-kilo sack)* Wet Palay (42-kilo sack) 8.80 369.60

Sack 9.00 Dry Palay (42-kilo sack) 11.00 462.00

Rice (50-kilo sack) 18.50 925.00
*Note: All other costs of rice bran are charged to rice milling and marketing.
Rice bran (30-kilo sack) 6.00 180.00

Palay Procurement Target

In Year 1, the enterprise shall procure some 383,000 kilos of palay, representing less than Terms of Sales
3% of the estimated gross production in the target area, at an average price of PhP8.30 per Palay (wet and dry) are sold on cash basis. NFA payments for palay procured from Farmer’s
kilo (farmgate price, wet). The projected palay procurement schedule is presented below Association are either on a cash-and-carry basis within three to five days after delivery.
(see Table 9-7). ARFIA assumes that it will be able to conduct five complete cycles (including procurement,
re-selling and collection of sales proceeds) for palay each month.
Table 9-7. Palay Procurement Schedule
Rice and bran sales shall be sold on 30-day credit terms. This is the prevailing practice in
Quarter 1 Quarter 2 Quarter 3 Quarter 4
(November – January) (February – April) (May – July ) (August – October) the area. The credit sales will be secured by postdated check.

M1 M2 M3 M4 M5 M6 M7 M8 M9 M10 M11 M12

Kilos 21,267 21,267 21,267 42,000 42,000 42,000 8,400 8,400 8,400 56,000 56,000 56,000 Projected Cash Flow Statements
Sacks 506.4 506.4 506.4 1,000 1,000 1,000 200 200 200 1,333.3 1,333.3 1,333.3
Five projected cash flow statements are presented. Four of these (9-10 to 9-13) involve the
Amt. 176,516 176,516 176,516 348,600 348,600 348,600 69,720 69,720 697,20 464,800 464,800 464,800
procurement and re-sale of palay, both wet and dry, both of which are done on a cash basis.

112  Social Enterprise Development: Community Businesses at Work Section 9 | Preparation of a Business Plan  113
 (Note: For the purposes of this analysis, a complete marketing cycle for wet and dry palay Projected Cash Flow Statement for Wet Palay,
is assumed to require six days. It is further assumed that five complete marketing cycles Month 10/Quarter 4 (5 cycles per month)
can be accomplished in one month.) These four cash flows were deemed necessary in order
to determine the external funds required for these operations The first cash flow (9-10) –
Table 9.11. Projected Cash Flow Statement for Wet Palay,
the buy-and-sell of wet palay that begins on Month 1 of enterprise operations – indicates
Month 10/Quarter 4 (5 cycles per month)
that external funds will be required only for the first marketing cycle for wet palay. Subse-
quent marketing cycles can be funded from sales proceeds of previous cycles. The same is Cycle 1 Cycle 2 Cycle 3 Cycle 4 Cycle 5
true for the buy-and-sell of wet palay on Months 10-12 and dry palay from Months 4-12. D1 D6 D7 D12 D13 D18 D19 D24 D25 D30 TOTALS
Cash Inflows                      
Projected Cash Flow Statement for Wet Palay,
Cash Sales                      
Month 1/Quarter 1 (5 cycles per month)

Table 9-10. Projected Cash Flow Statement for Wet Palay, Month 1/Quarter 1 (5 cycles per month) - Wet Palay   65,706   65,706   65,706   65,706   65,706 328,531

Cycle 1 Cycle 2 Cycle 3 Cycle 4 Cycle 5

less: Cash Outflows                     -
Day Day Day Day Day Day Day Day Day Day
1 6 7 12 13 18 19 24 25 30 TOTALS
Fixed Costs                     -
Cash Inflows                      
Cash Sales                       Variable Costs                     -
a. Purchases
- Wet Palay   36,960   36,960   36,960   36,960   36,960 184,800 61,973 - 61,973 - 61,973 - 61,973 - 61,973 - 309,865
less: Cash b. Trucking
Outflows                     - 2,667 - 2,667 - 2,667 - 2,667 - 2,667 - 13,333
Fixed Costs                     - c. Handling
Variable Costs 533 - 533 - 533 - 533 - 533 - 2,667
(Wet Palay)                     -
Subtotal -- 65,173 - 65,173 - 65,173 - 65,173 - 65,173 - 325,865
a. Purchases 34,860 - 34,860 - 34,860 - 34,860 - 34,860 - 174,300
Net Inflows (Outflows) (65,173) 65,706 (65,173) 65,706 (65,173) 65,706 (65,173) 65,706 (65,173) 65,706 2,667
b. Trucking 500 - 500 - 500 - 500 - 500 - 2,500
add: External Funds -                    
c. Handling 100 - 100 - 100 - 100 - 100 - 500
Net Cash Flows (65,173) 65,706 (65,173) 65,706 (65,173) 65,706 (65,173) 65,706 (65,173) 65,706 2,667
Subtotal -- 35,460 - 35,460 - 35,460 - 35,460 - 35,460 - 177,300 add: Cash Balance,
Net Inflows Beg.   (65,173) 533 (64,640) 1,067 (64,106) 1,600 (63,573) 2,133 (63,040)  
(Outflows) (35,460) 36,960 (35,460) 36,960 (35,460) 36,960 (35,460) 36,960 (35,460) 36,960 7,500
add: External Cash Balance, Ending (65,173) 533 (64,640) 1,067 (64,106) 1,600 (63,573) 2,133 (63,040) 2,667  
Funds 35,460                    35,460

Net Cash Flows - 36,960 (35,460) 36,960 (35,460) 36,960 (35,460) 36,960 (35,460) 36,960 42,960
add: Cash
Balance, Beg.   - 36,960 1,500 38,460 3,000 39,960 4,500 41,460 6,000  
Cash Balance,
Ending - 36,960 1,500 38,460 3,000 39,960 4,500 41,460 6,000 42,960  

114  Social Enterprise Development: Community Businesses at Work Section 9 | Preparation of a Business Plan  115
 Projected Cash Flow Statement for Dry Palay, Projected Cash Flow Statement for Dry Palay,
Month 4/Quarter 2 (5 cycles per month) Month 10/Quarter 4 (5 cycles per month)

Table 9-12. Projected Cash Flow Statement for Dry Palay, Month 4/Quarter 2 (5 cycles per month) Table 9-13. Projected Cash Flow Statement for Dry Palay,
Cycle 1 Cycle 2 Cycle 3 Cycle 4 Cycle 5 Month 10/Quarter 4 (5 cycles per month)
D1 D6 D7 D12 D13 D18 D19 D24 D25 D30 TOTALS Cycle 1 Cycle 2 Cycle 3 Cycle 4 Cycle 5
Cash Inflows                       D1 D6 D7 D12 D13 D18 D19 D24 D25 D30 TOTALS
Cash Sales                       Cash Inflows                      

- Dry Palay   18,480   18,480   18,480   18,480   18,480 92,400 Cash Sales                      

less: Cash Outflows                     - - Dry Palay   34,907   34,907   34,907   34,907   34,907 174,536

Fixed Costs                     - less: Cash Outflows                     -

Variable Costs                     - Fixed Costs                     -

a. Cost of Wet Palay 17,181   17,181   17,181   17,181   17,181   85,906 Variable Costs                     -

b. Trucking 200   200   200   200   200   1,000 a. Cost of Wet Palay 32,454   32,454   32,454   32,454   32,454   162,269

c. Handling b. Trucking 378   378   378   378   378   1,889

40   40   40   40   40   200
c. Handling 76   76   76   76   76   378
d. Drying 414   414   414   414   414   2,070
d. Drying 2,346   2,346   2,346   2,346   2,346   11,730
Subtotal -- 17,835 - 17,835 - 17,835 - 17,835 - 17,835 - 89,176
Subtotal -- 35,253 - 35,253 - 35,253 - 35,253 - 35,253 - 176,266

Net Inflows (Outflows) (17,835) 18,480 (17,835) 18,480 (17,835) 18,480 (17,835) 18,480 (17,835) 18,480 3,224
Net Inflows (Outflows) (35,253) 34,907 (35,253) 34,907 (35,253) 34,907 (35,253) 34,907 (35,253) 34,907 (1,730)
add: External Funds                      
add: External Funds                      

Net Cash Flows (17,835) 18,480 (17,835) 18,480 (17,835) 18,480 (17,835) 18,480 (17,835) 18,480 3,224
Net Cash Flows (35,253) 34,907 (35,253) 34,907 (35,253) 34,907 (35,253) 34,907 (35,253) 34,907 (1,730)
add: Cash Balance,
Beg.   (17,835) 645 (17,190) 1,290 (16,546) 1,934 (15,901) 2,579 (15,256)  
add: Cash Balance, Beg.   (35,253) (346) (35,599) (692) (35,945) (1,038) (36,291) (1,384) (36,637)  

Cash Balance, Ending (17,835) 645 (17,190) 1,290 (16,546) 1,934 (15,901) 2,579 (15,256) 3,224  
Cash Balance, Ending (35,253) (346) (35,599) (692) (35,945) (1,038) (36,291) (1,384) (36,637) (1,730)  

Consolidated Projected Cash Flow Statement (Enterprise Level), Year 1

The following Enterprise-Level Cash Flow (E.5) consolidates the two palay marketing op-
erations with the rice and bran trading program. The Enterprise-Level Cash Flow incorpo-
rates a “Month 0” in order to isolate the external funds required during the first marketing
cycle for wet palay (PhP63,960). Additional external funds (PhP284,985) will be required
on Month 4 to fund the initial cycles of rice and bran marketing.

The enterprise will require total external funds of PhP348,945 in Year 1. No additional
infusion of external funds will be required in Year 2 if marketing activities are maintained
at Year 1 levels.

116  Social Enterprise Development: Community Businesses at Work Section 9 | Preparation of a Business Plan  117
 MONTH 0 1 2 3 4 5 6 7 8 9 10 11 12 Totals
Cash Inflows                            
Cash Sales-Wet
Palay   184,800 184,800 84,800             328,531 328,531 328,531 1,539,993
Cash Sales-Dry
Palay         92,400 92,400 92,400 92,400 92,400 92,400 174,536 174,536 174,536 1,078,008
Credit Sales- Rice           333,000 333,000 333,000       222,000 222,000 1,443,000
Credit Sales- Bran           15,660 15,660 16,020       10,440 10,440 68,220
Sub-total -- 0 184,800 184,800 184,800 92,400 441,060 441,060 441,420 92,400 92,400 503,067 735,507 735,507 4,129,221
Cash Outflows                            
Palay Sacks (3,000) 27,000 27,000

Fixed Costs 1,500 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 73,500

118  Social Enterprise Development: Community Businesses at Work

Variable Costs                            
- Wet Palay                            
a. Purchases 34,860 139,440 174,300 174,300           61,973 247,892 309,865 309,865 1,452,495
b. Trucking 500 2,000 2,500 2,500           2,667 10,666 13,333 13,333 47,499
c. Handling 100 400 500 500           533 2,134 2,667 2,667 9,501
- Dried Palay                            
a. Cost of Wet
Palay       17,181 68,725 85,906 85,906 85,906 85,906 118,360 129,815 162,269 162,269 1,002,243
Table 9-14. Consolidated Projected Cash Flow Statement (Enterprise Level), Year 1
cont’d

MONTH 0 1 2 3 4 5 6 7 8 9 10 11 12 Totals
b. Trucking       200 800 1,000 1,000 1,000 1,000 1,378 1,511 1,889 1,889 11,667
c. Handling       40 160 200 200 200 200 276 302 378 378 2,334
d. Drying       414 1656  2,070  2,070  2,070  2,070 4416 9,384 11,730 11,730 39,330
- Rice                            
a. Dried Palay Cost         294,386 294,386 294,386       196,258 196,258 196,258 1,471,932
b. Milling         21,600 21,600 21,600       14,400 14,400 14,400 108,000
c. Trucking         1,800 1,800 1,800       1,200 1,200 1,200 9,000
d. Handling         360 360 360       240 240 240 1,800
e. Rice Sacks         3,240 3,240 3,240       2,160 2,160 2,160 16,200
- Rice Bran (Sacks)         783 783 801       522 522 540 3,951
Subtotal -- 63,960 147,840 183,300 201,135 399,510 415,275 415,293 93,106 93,106 195,603 622,484 722,911 722,929 4,276,452
Net In (Out) Flows (63,960) 36,960 1,500 (16,335) (307,110) 25,785 25,767 348,314 (706) (103,203) (119,417) 12,596 12,578 (147,231)

External Funds 63,960 284,985                 348,945

Net Cash Flows 0 36,960 1,500 (16,335) (22,125) 25,785 25,767 348,314 (706) (103,203) (119,417) 12,596 12,578 201,714
Cash Balance,
Beg. 0 0 36,960 38,460 22,125 0 25,784 51,551 399,865 399,159 295,956 176,539 189,136  
Cash Balance,
End. 0 36,960 38,460 22,125 0 25,784 51,551 399,865 399,159 295,956 176,539 189,136 201,714  
Table 9-14. Consolidated Projected Cash Flow Statement (Enterprise Level), Year 1

Section 9 | Preparation of a Business Plan  119

 MONTH 1 2 3 4 5 6 7 8 9 10 11 12 Totals
Sales                          
- Wet Palay 184,800 184,800 184,800             328,531 328,531 328,531 1,539,993
- Dry Palay       92,400 92,400 92,400 92,400 92,400 92,400 174,536 174,536 174,536 1,078,008

- Rice       333,000 333,000 333,000       222,000 222,000 222,000 1,665,000

- Bran       15,660 15,660 16,020       10,440 10,440 10,440 78,660

Sub-total -- 184,800 184,800 184,800 441,060 441,060 441,420 92,400 92,400 92,400 735,507 735,507 735,507 4,361,661
Less: Cost of
Sales/ Variable
Projected Income Statement for Year 1

Costs                          
- Wet Palay                          
Table 9-15. Projected Income Statement for Year 1

120  Social Enterprise Development: Community Businesses at Work

a. Purchases 174,300 174,300 174,300             309,865 309,865 309,865 1,452,495
b. Trucking 2,500 2,500 2,500             13,333 13,333 13,333 47,499
c. Handling 500 500 500             2,667 2,667 2,667 9,501
- Dried Palay                          
a. Cost of Wet
Palay       85,906 85,906 85,906 85,906 85,906 85,906 162,269 162,269 162,269 1,002,243
b. Trucking       1,000 1,000 1,000 1,000 1,000 1,000 1,889 1,889 1,889 11,667
c. Handling       200 200 200 200 200 200 378 378 378 2,334

MONTH 1 2 3 4 5 6 7 8 9 10 11 12 Totals
d. Drying        2,070  2,070  2,070  2,070  2,070  2,070 11,730 11,730 11,730 35,190
- Rice                          
a. Cost of Dried
Palay       294,386 294,386 294,386       196,258 196,258 196,258 1,471,932
b. Milling       21,600 21,600 21,600       14,400 14,400 14,400 108,000
c. Trucking       1,800 1,800 1,800       1,200 1,200 1,200 9,000
d. Handling       360 360 360       240 240 240 1,800
e. Rice Sack       3,240 3,240 3,240       2,160 2,160 2,160 16,200
- Rice Bran                          
a. Sack       783 783 801       522 522 540 3,951
Table 9-15. Projected Income Statement for Year 1 cont’d

Subtotal -- 177,300 177,300 177,300 409,275 409,275 409,293 87,106 87,106 87,106 716,911 716,911 716,929 4,171,812

Gross Margin 7,500 7,500 7,500 31,785 31,785 32,127 5,294 5,294 5,294 18,596 18,596 18,578 189,849

Less: Fixed Costs 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 72,000

Net Income 1,500 1,500 1,500 25,785 25,785 26,127 (706) (706) (706) 12,596 12,596 12,578 117,849
Section 9 | Preparation of a Business Plan  121
 Profitability Ratios Roles and Functions

Return on Investment (ROI) 1. General Assembly

The highest governing body of the federation where all powers to plan, decide,
ROI = Net Income / Investment implements and control operation emanates. Elects officers and decides on the im-
= 117,489 / 348,945 portant matters pertaining to the operation of the federation. The members must
= 34% patronize the services and the marketing activities, support the projects, contribute
capital and actively participate in all activities of the federation.
Payback Period (PP)
2. Board of Trustees (BOT)
PP = Investment / Net Income As collegial body, formulates plans and policies regarding the operations of the
= 348,945 / 117,489 project as recommended by the Project Manager. Monitors and evaluates progress
= 2.97 years of the project operation and requires pertinent reports from the project man-
ager and other project personnel periodically or as needed. The BOD reports to
the members during General Assembly or by any means the status of the project
Management and Social Considerations operations.

Management and Personnel Functions The Chairperson of the Board is authorized to enter into contract; sign project
documents and other related legal instruments in behalf of the federation. The
Project Management Structure chairperson together with the treasurer is authorized bank signatory for the project
funds.

3. Project Manager (PM)

General Assembly The major function of the manger evolved on the five basic managerial functions,
which are planning, organizing, staffing, leading and controlling. The PM prepares
periodic operational plan based on the approved project plans per project compo-
Board of Trustees nents and device specific strategies. He/she organizes project management team
that will carry-out specific jobs, recommends personnel to be hired that will carry
Treasurer out specific tasked and ensure that all members of the project management staff
are contributing/ working specific tasks that are contributory to the attainment of
Project Manager the general objectives. The PM imposes control measures and evaluates periodic
project development. The Project Manager reports to the Board of Directors the
status of project operations.

Marketing Officer Warehouse Supervisor Bookkeeper 4. Marketing Officer (MO)

The Marketing Officer attends to the day-to-day operations of the project such as
procurements of palay and identification of the market and selling of the stocks.
He/she monitors the status of the satellite buying stations and the mobile buying
Marketing Driver Cashier stations, transact and arrange agreements with buyers and sellers and monitor the
Assistant regular “up and down” of the prices of the commodity in the market. The Marketing
Officer prepares procurement plan and marketing schedule and prepares and sub-
mits periodic accomplishment/ performance reports to the Project Manager.
Laborers Laborer
5. Marketing Assistant (MA)
The Marketing Assistant is in-charge of the operation of the buying stations specif-
ically in the procurement of palay. The MA conducts farm survey and monitoring,
contact prospective farmers for grain supply and manage buying station. Prepares
and submits procurement plan and report to the Marketing Officer.

122  Social Enterprise Development: Community Businesses at Work Section 9 | Preparation of a Business Plan  123
 6. Warehouse Supervisor
The Warehouse Supervisor is in charge of the management and operation of the
warehouse, which include stocking/ warehousing and drying of the grains. Control
the “in and out” of stocks and prepares periodic inventory reports.

7. Laborers
Assist in the procurement, hauling, drying and warehousing of the grains such as
weighing, re-sacking, storing and hauling of palay and other related job as deemed
necessary.

8. Driver
Drives the truck and other vehicle of the federation to the destination as stated in
the travel order, regularly conducts maintenance check of the vehicles and perform
other task as requested.

9. Bookkeeper
Maintains and keeps the records of the financial transactions of the project and
prepares appropriate financial reports.

10. Cashier
Disburses/ releases cash for purchases of palay, receives and checks purchase re-
ports from Procurement Personnel and pays approved disbursements. Receive
cash pertaining to project operation like payments of palay or rice sold, etc. Pre-
pares daily/ or weekly purchase reports and daily/ weekly cash position reports.
Turnover cash collections to treasurer as stated in the internal control system and
procedures.

Form of Business Enterprise

The federation will implement a cooperative form of enterprise for this encourages cooper-
ation, internal capital generation and develop a sense of ownership and cooperation among
members.

Utilization of Project Income

Part of the project income (50%) will be return back to the members IAs as incentives or
patronage refund and interest or share capital (Investment) and the remaining fifty percent
will be added to the revolving or working capital for project sustainability.

Ownership of Project Inputs

The revolving capital will be owned by the federation; however, it will be exclusively used to
sustain the project that would benefit the member IA. n

124  Social Enterprise Development: Community Businesses at Work   125

Section 10

Section 10
Participatory Value
Chains Analysis1
Definition of Value Chain

“The value chain describes the full range of activities which are required to bring a
product or service from conception, through the different phases of production (in-
volving a combination of physical transformation and the input of various producer
services), delivery to final customers, and final disposal after use” (Kaplinsky and
Morris, 2000).

Pro-poor growth requires implementing a range of enterprise development strategies.

These strategies can include establishing microfinance systems and providing other sup-
port for micro-enterprises. The private sector in general can be stimulated and policies that
protect the interests of employees and poor entrepreneurs through, for example, enterprise
regulation, codes of conduct and the promotion of ethical investment and consumerism.
Social policies in education, health and welfare to increase the skills of employees and
micro entrepreneurs and decrease their vulnerability also contribute to pro-poor enterprise
development. Diverse approaches as infrastructure development and changes in property
legislation may also be undertaken. Such a multi-faceted approach poses challenges for im-
pact assessment since impacts may be direct, indirect or unintended and goals may involve
trade-offs. Value chains analysis, used as part of a participatory assessment process, can
contribute to strategic learning for enterprise development.

What is Value Chain Analysis (VCA)?

Value chains analysis conceptualizes enterprises as parts of chains of different but linked
production and exchange activities operating in different geographical areas. It focuses on
analyzing chain governance, i.e., how value is distributed at different levels of the chain
and the different interests and power relations which influence this distribution. In this
way it leads to a more sophisticated modeling of the positive and negative impacts, whether
direct, indirect or unintended, of different interventions. This enables a more complex ex-
ploration of alternative strategies for poverty reduction.

Value chains analysis was initially used to better understand why many of the potential
benefits of globalization fail to reach the poor and why particular countries and types of
enterprises find it difficult to enter certain sectors. It has been widely used as a tool for ac-
tion research by fair trade organizations and those involved in the international Women in

126    127
 the Informal Economy: Globalizing and Organizing (WIEGO) including the Self Employed cate the perspective of those lower down the chain to those nearer the top. It can help make
Women’s Association and HomeNet. It has also been used in some recent fair trade impact chains freer and fairer and redistribute benefits to those currently disadvantaged. Diagrams
assessments. and maps can be continually updated and refined as part of an ongoing learning process.

Empowerment through VCA Value Chains Analysis for Enterprise Development

Value chains analysis can be a participatory and empowering process. Using maps and dia-
grams enables even poor and disadvantaged stakeholders to be involved in the collection
and analysis of information. This promotes dialogue and accountability between stake-
holders as they analyze and negotiate their common interests in improving the functioning
of chains and identifying those interventions likely to be most useful. Participatory value
chains analysis (PVCA) can highlight the constraints on those controlling the chain and
clarify the possibilities for change lower down. It can help overcome barriers and communi-
Figure 10-1. The Forest, Timber and Furniture Value Chain
There are many areas of enterprise development where PVCA might be adopted. Home
workers and other grassroots organizations could use it to increase knowledge of opportu-
nities and constraints throughout the chain and to identify points of leverage where it might
be possible to increase the relative value reaching the bottom of the chain. Microfinance
programs could use PVCA to identify activities where financial services would, or would
not, be particularly appropriate and also to see where constraints at different levels might
be addressed through non financial services. PCVA could be used to identify both the levels
where business development services might be usefully integrated and the types of services
needed at different levels. Policymakers could use PVCA to find out which activities and
stakeholders were likely to be affected, and how, by particular regulatory proposals.

Seeds Machinery Water The PVCA Approach

In its simplest form, PVCA involves bringing together stakeholders with knowledge of dif-
ferent levels of the chain to construct a standard flow mapping. This map identifies the
Chemicals Forestry Extension services main activities in the chains, their geographical spread, the main stakeholders and a rough
idea of the relative size and importance of each element. Different types of governance rela-
tionships are identified on the map such as: arms-length exchange transactions; situations
Machinery where one firm exercises undue control over others; cases where a lead firm directs others
Sawmills as in a buyer-driven chain and hierarchical relationships where parent companies control
subsidiaries.

Design Logistics, quality advice Over time the map can be developed to show features of enterprises, workers or entrepre-
Furniture neurs at each level such as the number of enterprises or workers, workers’ skill levels, the
manufacturers percentage of female workers, total sales revenue, and so on. For impact assessment the
Machinery Paint, adhesives, different types of proposed or actual interventions affecting each level should be included.
upholstery, etc. Hypotheses can be generated about how strategies at one level impact on others and ex-
Buyers isting or potential relationships between enterprises on the same level can be shown.

Gender is an important aspect of value chain analysis since gender relations both affect
Domestic Foreign and are affected by the ways value chains function. For example transnational corporations
wholesale wholesale have taken advantage of existing gender inequalities in bargaining power to cut production
costs by employing large numbers of women at low levels of value chains. At the same time
such increased employment opportunities have had a profound impact on women’s posi-
Domestic Foreign tion within the household and the community. Enterprise interventions can affect gender
retail retail relations both positively and negatively and therefore assessment of the impact of such
interventions must include gender analysis.
Consumers

Recycling
Source: Kaplinsky and Morris,2000.

128  Social Enterprise Development: Community Businesses at Work Section 10 | Participatory Value Chains Analysis  129
 Limitations of PVCA

PVCA cannot be seen as a substitute for negotiating the problems of difference and conflict
of interest and the inevitably contentious issue of how far change can take place in the rela-
tive position of different stakeholders in the chain without breaking the chain itself. Un-
derstanding the chain and its operation is a long term process. Different people will always
have different perspectives and complete information will never be possible.

Nevertheless PVCA can be a useful tool in identifying different types of interventions which
might be desirable at different levels of the chain. It provides a practical focus for stake-
holders to discuss their common or conflicting perspectives and a benchmark framework
against which impacts and contextual changes can be identified. n

Notes

1. Written by Linda Mayoux, Independent consultant, WISE Development. The following is

reprinted from “Enterprise Impact News” of the EDIAIS Products and Services. The Enter-
prise Development Impact Assessment Information Service (EDIAIS) is jointly managed
on behalf of DFID by the Institute for Development Policy and Management at the Univer-
sity of Manchester and Women in Sustainable Enterprise (WISE) Development Ltd. The
EDIAIS web site is at www.enterpriseimpact.org.uk.

130  Social Enterprise Development: Community Businesses at Work

Over its history, PACAP has

made some efforts to capture

lessons arising from its

projects both from a process

and technical perspective.

One of these efforts is the

Enterprise Development

Technical Kit. n
 Training Module
on Enterprise Planning
and Analysis1

Training Objectives

The Philippines-Australia Community Assistance Program (PACAP) is a bilateral devel-

opment program supporting community-initiated, economically sustainable, ecologically-
sound and gender-responsive development efforts in partnership with local government
units (LGUs), non-governmental organizations (NGOs), and people’s organizations (POs).
PACAP commenced operations in 1986.

Over its history, PACAP has made some efforts to capture lessons arising from its projects
both from a process and technical perspective. One of these efforts is the Enterprise Devel-
opment Technical Kit, which is meant to be a key resource of PACAP stakeholders in the
preparation of business plans and enterprise operations. In terms of audience, the Enter-
prise Kit is expected to be useful to PACAP staff and partners (including partners who plan
to expand their businesses after PACAP exit) and have wider application to the broader
development community (including academic institutions).

This short training course, which is based on the Enterprise Development Technical Kit,
is meant as an introductory course in enterprise planning and analysis. At the end of the
course, the participants:

(a) shall have increased awareness and understanding of the dynamics of business
enterprises supported by PACAP and the key factors that determine their success
and failure; and

(b) shall be able to prepare and interpret projected financial statements of enterprise
proposals, critical inputs in PACAP decision-making process on applications.

Training Participants

Training participants may include PACAP Program Officers, members of the PACAP Advi-
sory Committee, selected staff of PACAP partner NGOs and POs. Basic English literacy is a
requirement for participation.

For maximum effectiveness, an offering of the training course should have no more than
20 participants.

  133
 Timing and Duration of Training Attachment 1

Day 1 - Workshop Session: 8 AM – 5 PM Case Study on Enterprise Appraisal

Day 2 - Workshop Session: 8 AM – 5 PM

Introductory Note: The case describes two separate businesses on palay and rice trading
being implemented by two different organizations, one in the Visayas and the other in
Training Schedule Mindanao (the names of the organizations have been changed). Participants are expected
to comment on performance of these two businesses individually and in relation to each
other.
Day 1
Morning
9:00 - Arrival and Registration VIRFIA Integrated Agricultural Credit and Palay Trading Enterprise
9:30 - Introduction of Participants
9:45 - Opening Remarks (PACAP Director) The Organization
10:00 - Leveling of Expectations/Overview of Training Course The Visayas River Federation of Irrigator’s Association (VIRFIA) is a federation of six Ir-
10:30 - Session 1: Enterprise Appraisal (Focused Group Discussion – 3 groups) rigator’s Associations (IAs) in the Visayas River Irrigation System. VIRFIA was organized
12:00 - Lunch by the National Irrigation Administration (NIA) who continues to provide active support to
the federation in organizational strengthening and resource generation.
Afternoon
1:00 - Continuation – Focused Group Discussions NIA has also entrusted VIRFIA with the management of a P117-million Post Harvest Fa-
1:30 - Plenary Discussion – Enterprise Appraisal cility (PHF). The PHF consists of a multi-purpose drying pavement, glass drying house,
3:30 - Afternoon Coffee paddy warehouse, administration office and equipment shed, tractors, cargo trucks, forklift
4:00 - Session 2: Preparation of Enterprise Financial Statements and four-wheel drive vehicle.
ƒƒ Overview, Case Presentation and Tasking
ƒƒ Start of Discussions within Work Groups In addition to the PHF, VIRFIA has also been able to mobilize the following support from
5:00 - End of Day 1 other organizations: (a) two units of mechanical dryers from the Provincial Government
of Iloilo; (b) flash dryer from the Bureau of Post Harvest Research and Extension; (c) soft
Day 2 loan of P75,000.00 from the Visayas Provincial Government and (d) technical and financial
Morning support from the Japan International Cooperation Agency (JICA).
9:00 - Continuation of Work Groups (3) for Session 2
11:00 - Plenary Reporting of Work Group Outputs Income generated from the use of these facilities and equipment goes to the federation
12:00 - Lunch for use in its various activities. NIA audits funds utilization regularly to ensure that these
are used for their intended purposes and are documented in accordance with generally ac-
Afternoon cepted accounting and audit standards.
1:30 - Continuation – Plenary Reporting of Work Group Outputs
3:30 - Afternoon Break The Integrated Agricultural Enterprise
4:00 - Reflection and Introduction of Enterprise Development Technical Kit Using the PHF, equipment and funds obtained from PACAP and other resource institu-
4:45 - Closing Remarks tions, VIRFIA initiated an integrated agricultural development enterprise to serve its mem-
5:00 - End of Training bers through such diverse activities as land preparation services, trucking, warehousing,
selling of farm inputs, palay drying and palay and rice trading.

The enterprise has two major operations: microcredit and marketing. Microcredit involves
Annexes the provision of production loans to target beneficiaries in form of farm inputs and serv-
ices, payable in four months (or 120 days after harvest) at an interest rate of 3% per month.
Annex 1 - Case Study 1 (Enterprise Appraisal) Good borrowers receive new loans for the next production cycle; capital build-up (CBU) is
2 - Case Study 2 (Financial Analysis) integrated in the loan scheme to increase capital for production loans. The Irrigators As-
3 - Facilitator’s Guide sociations are responsible for collecting the loans of their farmer-members. Marketing, on
the other hand, involves the procurement of palay, post-harvest processing activities and
marketing of palay and rice.

134  Social Enterprise Development: Community Businesses at Work Training Module on Enterprise Planning and Analysis  135
 PACAP Assistance
The first PACAP assistance to VIRFIA (a three-year grant) was actually in support of the
palay production activities for SAMICASA, one of the federation’s six Irrigators’ Associa-
tion members. The assistance to SAMICASA served as a pilot for the second PACAP grant
(now on its second year of assistance), which expands the assistance of the Federation to
the member-farmers of its five other Irrigators’ Associations. The current Year 2 PACAP
grant (PhP1.817-million) is utilized for both micro-credit (PhP850,000) and marketing
(PhP510,000) operations. The balance of the grant is used to subsidize capability building,
staff salaries and administrative costs and monitoring and evaluation.
Operations
VIRFIA has two main activities – microcredit and marketing (palay and rice).
Microcredit. The Federation provides production loans to farmer-members using the
PACAP funds and accumulated CBU (to augment its limited credit funds, the Federation
borrows fertilizers and chemicals from inputs suppliers for re-lending to farmers). Farmer-
members receive production loans for both palay cropping seasons (May/June-October
and November-February). To be eligible, a farmer must be up-to-date in the payment of
his/her obligations, including: (a) the production loan for the previous cropping cycle; (b)
payment of CBU (PhP500 per cropping); (c) payment of irrigation service fee (PhP1,700/
hectare during the wet season and PhP2,250/hectare during the dry season); and (d) crop
insurance with the Philippine Crop Insurance Corporation (PCIC).
In addition, an Irrigators’ Association must achieve a minimum repayment rate of 90% of its
production loans for its farmer-members to be eligible for new loans in the succeeding crop
cycle. In effect, the IA serves as guarantor for the loans of its individual farmer-borrowers, a
practice similar to the group liability mechanism first introduced by the Grameen bank.
Members pay their loans in palay upon harvest as follows: (a) the farmer tells VIRFIA of
the date of harvest; (b) the Federation gives the farmer a number of empty sacks needed for
the palay that the farmer plans to send to VIRFIA, whether to repay his/her loan and/or to
sell to the Federation; (c) the Federation agrees to haul the harvest if it is at least 30 bags
of palay; (d) the price of the palay is the same, whether for sale to the Federation or loan
repayment; and (e) the farmer must pay at least a portion of the loan.
Marketing (Palay). The Federation is engaged in palay trading for two reasons: (a) it must
dispose of the palay it receives as loan repayment; and (b) it acts as an alternative market
for the farmers’ palay, thereby stabilizing (and even increasing) the overall price of palay.
As an alternative market, the Federation buys palay from farmers at PhP0.10-0.50 per kilo
more than the traders’ price. At the same time, the Federation does not short-change the
farmer in terms of weight, a common practice among traders.
Upon being informed by the Irrigator’s Association that one of its farmer-members wants
to sell his/her palay, VIRFIA negotiates with the farmer-member and agrees on the quality
of the palay and its price .The Federation truck then picks up the palay and farmer-member
and brings both to the federation warehouse where the palay is weighed and payment made.
In the past, VIRFIA purchased farmers’ palay through barangay-based satellite buying sta-
tions. This practice has been discontinued because: (a) the Federation’s buying agents did
not classify the palay properly (resulting in many disagreements over quality and price be-
tween the farmer and the Federation when the palay arrived at the VIRFIA warehouse); and
136  Social Enterprise Development: Community Businesses at Work
(b) difficulties in the liquidation of the cash advances given by the Federation to its buying
agents for palay purchases.
In turn, the Federation sells the palay it acquired from its members either to the NFA or pri-
vate traders, depending on whose terms are more favorable. The Federation considers NFA
as a buyer of last resort because the agency will buy any and all palay varieties, even those that
have low market acceptability because they are perceived as being of poor eating quality.
Marketing (Rice). About 50% of the palay purchases of the Federation are milled into
rice. The Federation does not have its own milling facilities. Instead, the palay is either
milled by a large ricemill nearby or by a mobile ricemill that goes regularly to the federation
warehouse.
The Federation’s regular customers are employees at government offices (NIA, PCIC, and
SSS) and rice retail outlets. Some of the rice is also sold to farmer-members on credit,
while the latter wait for the palay harvest. These rice credit sales eventually form part of the
farmers’ production loans.
Rice deliveries are usually in small lots – 5, 10, 20 bags per customer - which is appropriate
for the Federation, considering its limited stocks and working capital. The Federation’s
largest customer is the local SSS office, who orders 85 sacks of rice every two months.
Because of limited funds, the Federation does not have the capability to go after larger
institutional markets in the Visayas, such as PLDT (600 cavans of rice a month) or BJMP
(50 cavans a week). While sales terms are supposedly on a 15-day basis, what happens in
actual practice is the Federation collects the payment for the previous delivery at the next
delivery.
Financial Performance
The Income Statement of VIRFIA for the eight-month period ended 31 October 2008 is
attached (see Attachment 1). Over this period, the Federation generated total revenues of
PhP11.4-million from service fees, sales of palay, fertilizers, chemicals, seeds, rice, byprod-
ucts and others.
The Federation achieved a gross profit of PhP1.49-million over the eight-month period and
a net income of PhP894,000 over the period, or about PhP112,000 per month.
Social Equity Impacts
The clearly-identified benefits of the VIRFIA enterprise are those that impact directly on
their farmer-members. These include:
ƒƒ Reduced interest rates on loans (three percent per month) as opposed to loans
from conventional traders that bear interest rates as high as 10 percent per month,
or even 50% over a four-month period.
ƒƒ Farmers can avail of loans with minimal bureaucracy, thus saving them time, ef-
fort and money.
ƒƒ Farmer-members receive higher prices for their palay produce. Moreover, the Fed-
eration does not shortchange farmers in terms of weight and purity, common prac-
tices of conventional traders.
ƒƒ The strong bond among farmer-members has facilitated the work of the Federa-
tion in motivating farmers to adopt new technologies.
Training Module on Enterprise Planning and Analysis  137
 Plans
VIRFIA plans to rehabilitate the ricemill within the PHF complex so that it can perform its
own milling operations. Test runs show a milling recovery of 67 percent, which is compa-
rable to the recovery of the commercial ricemill now being used by the Federation. A second
plan is to source additional working capital. VIRFIA is currently negotiating with Land
Bank for a loan to augment its microfinance fund. If approved, the Land Bank loan will be
used for the cash portion of palay production (labor, land preparation, and so on), while the
PACAP funds will be used only for inputs (fertilizers, chemicals, and the like.).
MIFARCCO Palay Trading Enterprise
The Organization
Mindanao Federation of Agrarian Reform Communities Cooperatives (MIFARRCO) started
out as the Mindanao Agrarian Reform Communities Network for Development (MARCNET)
with 15 coops and associations as original members. Organized through the multi-sectoral
efforts of government line agencies, LGUs, NGOs and the concerned ARC cooperatives and
associations, MARCNET was mainly involved in organizing the yearly CARP anniversary
and advocacy of farmers’ issues, such as, the control by big traders of the markets and
prices of farmers’ products, low agricultural productivity and disunity among farmers.
One component of ARISP-II, an ODA-funded project of the DAR, is the establishment of an
ARC Information & Marketing Center (AIM-C), which will provide member-cooperatives
with: (a) processing and marketing services for farm products; (b) better quality of farm
inputs; (c) agricultural extension services; and (d) financial intermediation services.
In 2003, the ARISP-II Project began negotiations with MARCNET to manage the AIM-C.
Since MARCNET was mainly in advocacy work, it was reorganized as MIFARRCO, a sec-
ondary cooperative of ARC coops and associations. It was registered with the CDA in De-
cember 2003 and started operating the AIM-C in June 2006.
AIM-C Operations
The AIM-C was built with ARISP-II funds and constructed on a 1,000 square meter lot
owned by the provincial government. The center is owned by the 33 ARC member-cooper-
atives of MIFARRCO and is located in a prime commercial area beside the Mindanao City
Gaisano Mall. The AIM-C operates: (a) Shop/Display of Agricultural and Non-Agricultural
Farmers’ Products; (b) Business-to-Business Website; (c) Micro-Finance program (in part-
nership with the Baba foundation; (d) Training Facility (including rental and catering); and
(e) Copra Trading.
Milled rice was intended as the main product of the AIM-C with a number of local institu-
tions – Land Bank of the Philippines, Mindanao City Water District, consumer stores, and
other private companies – as their target customers. The potential of the rice market is
huge because of the rising population of Agusan Norte (projected to grow from 315,194 in
2007 to 328,323 by 2010) and the production output of MIFARRCO’s affiliates, which is
estimated at 29,152 tons of palay per annum.
PACAP Assistance
Motivated by the above opportunity, MIFARRCO applied for PACAP assistance and re-
ceived, in November 2007, a grant of PhP1.4-million, mainly for working capital to expand
138  Social Enterprise Development: Community Businesses at Work
its rice trading operations. The grant had three objectives: (a) provide favorable prices,
processing and transport of the products (i.e., palay) of MIFARRCO farmer-members;
(b) optimize the several post-harvest facilities have been provided by the Department of
Agrarian Reform through its foreign-funded and CARP-funded projects; and (c) establish a
self-sustaining & self-liquidating agricultural-based rural enterprise project.
Operations
MIFARRCO’s originally projected an annual sales volume of 19,859 bags of rice per annum
(1,655 bags per month). Most of this volume, which is equivalent to 3% of the consump-
tion requirements of the province, was targeted for institutional and wholesale buyers. The
AIMC display center would also re-pack rice – in one, two and five-kilo bags – for sale to
low- to middle-income customers. To meet its projected rice sales, MIFARRCO would pur-
chase 17,000 bags of wet paddy per cropping, or 4,000 bags of palay annually.
The MIFARRCO Purchaser/Classifier negotiates buying prices with individual farmers
based on such features rice variety and moisture content. The purchased palay is trans-
ported, dried and stored in designated post-harvest facilities (PHFs) owned and operated
by MIFARRCO member-cooperatives who also provide the labor for hauling wet paddy,
drying and storage. Milling the palay into rice is done at the facilities of the Sto. Niño Multi-
Purpose Cooperative, another member-cooperative of the federation. This enables the un-
derutilized PHFs, vehicles and labor force of the member-cooperatives to earn additional
income from the enterprise.
MIFARRCO buys palay from farmers at the prevailing market price plus PhP0.20 per
kilo. The twenty centavos premium is allocated as follows: PhP0.10 for the farmer-seller,
PhP0.05 as additional capital contribution of the farmer-seller to his/her primary coopera-
tive and PhP0.05 as additional capital contribution of the primary cooperative to the Fed-
eration. The premium is in addition to the service fees earned by the member-cooperatives
in the transport, drying, storage and processing of the palay purchased by the cooperative.
Rice Trading. MIFARRCO has had limited penetration of the targeted institutional market
(e.g., Land Bank, DBP, and so on.) because, among others, it is unable to meet the quality
and volume requirements of institutional markets. Instead, the Federation’s customers
have been mostly public market retailers (40 percent), member-cooperatives (40 percent)
and small restaurants and government employees. Monthly sales have been about 200
sacks of rice.
The recent rice crisis has had a major adverse effect on MIFARRCO’s rice trading opera-
tions. In the summer, tight supply forced the Federation to buy at high prices. Since then,
however, palay prices have dropped as cheap NFA rice has flooded the market, thereby
causing rice prices to move downwards. The Federation would suffer losses if it now mills
the palay purchased during the summer and sells it as rice. To avoid this, MIFARRCO has
stopped selling rice in recent months.
Instead, the Federation has shifted strategy and is now selling its palay to the FOBB
(Farmers’ Option to Buy Back) program of the National Food Authority (NFA). Under the
FOBB, farmers can sell their palay to the NFA and buy it back at the same price within six
months (plus additional minimal charges for handling and storage.) Participation in the
FOBB allows MIFARRCO to free up its working capital and buy additional palay in the
offseason.
Training Module on Enterprise Planning and Analysis  139
 Difficulties in Palay Procurement and Processing. To finance their production inputs, Attachment 1
farmers are forced to borrow from creditors-cum-traders. Land preparation (plowing), har-
vesting and threshing are also contracted out as a package to a service operator. As a result Visayas River Federation of Irrigators’ Associations, Inc.
of these transactions, almost two-thirds of a farmer’s harvest are committed to third parties Income Statement – Postharvest Facilities (for the 8-months ended Oct. 31, 2008)
and therefore not available for sale to the federation. Since the farmer will also set aside a
portion of his share of the harvest to meet consumption needs in the coming months, an %
even smaller portion of the harvest is actually available for immediate sale to the Federation Service Micro- of Total
and other buyers. Fees finance Marketing Admin. Total Revenues
Revenues      
For this reason, the Federation is forced to buy in small lots from many different farmers,
Service Fees 451,677       451,677 4.0%
resulting in an inventory of palay stocks that are made up of different varieties. This is one
reason for the Federation’s inability to penetrate the institutional market, which has very Sales - Fertil. &
strict quality and volume requirements. Chem.   4,824,455     4,824,455 42.4%
Sales – Palay   3,100,840   3,100,840 27.3%
To acquire more uniform palay stocks, the Federation has adopted the following measures:
Sales - Seeds     11,800   11,800 0.1%
(a) focus buying operations on farmers that have no loans from traders; (b) pay an extra
premium of PhP0.20 per kilo during the early part of the harvest season; and (c) buy the Sales - Tricho       4,745 4,745 0.0%
share of the harvest that goes to the harvesting and threshing operators. Sales – Rice/By-
Products   2,982,624   2,982,624 26.2%
Financial Performance Total Revenues --- 451,677 4,824,455 6,095,265 4,745 11,376,142 100.0%
The latest income statement of MIFARRCO (January to June 2008) is attached (see At-
tachment 2). Over this period, the Federation had total sales of PhP2.2-million, or about Less: Cost Of Sales   4,281,916 5,609,207   9,891,123 86.9%
1,800 bags of rice sold (300 bags per month). This sales volume is about 20% of the original Gross Profit 451,677 542,538 486,057 4,745 1,485,018 13.1%
target of 1,655 bags of rice per month. Less: Selling Exp. 191,150 69,293 509,646 12,450 591,390 5.2%
Net Income 260,527 473,244 (23,588) (7,705) 893,628 7.9%
The Federation achieved a gross profit of PhP187,630.25 and a modest net income of
PhP161,657.92 over the six-month period, or about PhP23,600 per month. Add: Other Income          
  Calls       117 117 0.0%
Social Equity Impacts
  Supplies
Even though the enterprise is barely two years old (the activities funded by the PACAP
(Passbook)       412 412 0.0%
grant are only 12 months old), MIFARRCO has identified the following impacts of its rice
trading efforts:   Training Center
ƒƒ Employment and income generation, both for the members of the member-coop-   Rental       1,100 1,100 0.0%
eratives and the staff of MIFARRCO.   Equipment Rental       339 339 0.0%
ƒƒ Utilization of the drying and storage facilities of the member-cooperatives.   Proceeds Sale of
ƒƒ Strengthened relationships between and among the MIFARRCO member-cooperatives.   Scrap       1,000 1,000 0.0%
ƒƒ Farmers have begun to wean themselves away from the traders, assert their inde-
pendence and are learning to become business people.   Interest On Loans   195,361     195,361 1.7%
  Service Charges       9,600 9,600 0.1%
Plans   Seedlings       1,540 1,540 0.0%
MIFARRCO plans to continue its participation in the FOBB program of the NFA, seeing
  Commission
this as an important mechanism to address volatile price fluctuations (in both palay and
  Income     68,160   68,160 0.6%
rice) and to increase its working capital for palay buying. At the same time, the Federation
is considering an application for a credit line of about PhP10-million. Finally, the Federa- Total Other Income 195,361 68,160 14,108 277,630 2.4%
tion is thinking of establishing its own warehouse and ricemill facilities. MIFARRCO has Net Income for
experienced some scheduling problems of its milling requirements because the member- Period 260,527 668,606 44,571 6,403 980,108 8.6%
cooperative chosen as the miller for this enterprise is utilizing its facilities for its own rice
% of Total Net
trading operations. Income 26.6% 68.2% 4.5% 0.7% 100.0%

140  Social Enterprise Development: Community Businesses at Work Training Module on Enterprise Planning and Analysis  141
 Attachment 2 Annex 2

MIFARRCO Income Statement – Rice Trading Case Study on Financial Analysis

(for the 6 months ended 30 June 2008) Palay and Rice Trading Enterprise
Items Amounts % of Sales
Aganan River Federation of Irrigators’ Association, Inc.
Sales - Milled rice 2,247,079.08 99.1% Introductory Note: The following business plan was submitted by ARFIA, a federation
    - Rice bran 19,507.00 0.9% of irrigators’ associations in Iloilo province, as one of the supporting documents for its
funding application to PACAP. The objective of the training session is to revise the original
Total Sales - 2,266,586.08 100.0%
financial statements contained in the business plan to present a clearer picture of the pro-
Less : Cost of Sales   jected financial performance of the enterprise. The ARFIA Business Plan was used in the
pilot-test of this training module but business plans of other PACAP partners can and
Inventory, Beginning 343,733.00 15.2%
should be used since the “corrected” financial statements of ARFIA have already been pre-
Add: Purchases - Palay 644,069.25 28.4% sented in Section 9 of the Enterprise Development Technical Kit.
              - Milled rice 1,160,950.00 51.2%
        - Freight and handling 1,402.00 0.1%
General Description of the Enterprise
Subtotal - Purchases 1,806,421.25 79.7%
Total Goods Available for Sale 2,150,154.25 94.9% Palay trading is an agriculture-based enterprise. It is buying of palay from farmers and the
selling of which to traders or to government institutions like the National Food Authority
Less : Inventory, Ending   (NFA). It may also mill palay to convert it to rice and sell directly to rice traders or con-
ƒƒ Milled Rice 0 0.0% sumers. In relation to the micro-financing program of the Federation, it will primarily buy
palay of the farmer-beneficiaries that has been assigned to the Federation as loan payment
ƒƒ Dried Palay 56,604.42 2.5%
or as loan guarantee and also buy their produce outside loan payment.
ƒƒ Sacks for Palay 3,806.00 0.2%
ƒƒ Sacks for Milled Rice 10,788.00 0.5% Further, the Federation will also buy from other IA members through their respective Irri-
gators’ Association (IAs). It will also put-up of marketing centers in five (5) IAs but the main
Subtotal - Inventory, End. 71,198.42 3.1% center is at the Post Harvest Facilities in Brgy. Mambog, Oton, Iloilo. However, there will be
Cost of Sales 2,078,955.83 91.7% a Project Team in every IAs to handle the procurement and marketing of palay and rice.
Gross Profit on Sales 187,630.25 8.3%
The palay trading operation will be managed by the Project Management Staff composed of
Less : Operating Expenses   Project Officer, Marketing Officer and Administrative personnel. Each personnel have de-
ƒƒ Travel & Transportation 2,000.00 0.1% fined functions and responsibilities as well as corresponding accountability. The amount of
PhP 650,000.00 is projected to be raised as working capital. It is projected that the Federa-
ƒƒ Milling Expense 31,555.50 1.4% tion will generate a net surplus of at least PhP284,199.50 during the first year of operation
ƒƒ Sacks 962.50 0.0% aside from the incentives coming from the National Food Authority (NFA). The project will
be owned and managed by the ARFIA.
ƒƒ Labor 3,154.00 0.1%
ƒƒ Trucking 6,905.50 0.3%
ƒƒ Miscellaneous Expense 100.80 0.0% Market Considerations
ƒƒ Storage fee 918.00 0.0% Target Market: Competition and Trading Practices
Subtotal - Operating Expenses 45,596.30 2.0% Generally, the demand of palay is stable and continuous because it is the staple food among
85 percent of the Filipinos. The market of palay is not a problem. However, the Federation
Net Operating Income 142,033.95 6.3%
will ensure that it will have the “right market” of palay – which means a market that will buy
Add: Other Income 503.99 0.0% the palay at a competitive price that is way up compared to other traders.
Net Income Before Depreciation 142,537.94 6.3%
The palay procured by the Federation will be directly sold to the National Food Authority
Less : Depreciation expense 880.02 0.0%
(NFA) or to the grain traders who will buy the produce in a competitive price. The NFA is
Net Income 141,657.92 6.2% a good market during the peak of harvest season. The Federation has existing marketing

142  Social Enterprise Development: Community Businesses at Work Training Module on Enterprise Planning and Analysis  143
 Table 3. Estimated Production of the Target Sites
agreement with the NFA and it will be renewed annually. However, other grain will be
Name of Irrigators’ Association Coverage Estimated Yield in metric tons
milled and the rice will be sold to rice traders, local rice retailers and to the farmer-con-
Area (ha.) 1st Cropping 2nd Cropping
sumers during lean months.
(100%) (100%)
The Federation had already established market linkages and had initial marketing discus- 1. San Jose-Sto. Niño 821 3,448.2 3,448.2
sions with the following traders, government and private agencies for the supply of rice and
2. Macabitu 351 1,474.2 1,474.2
palay:
3. Macatuan 545 2,289 2,289
4. Salambitu 991 4,162.2 4,162.2
Table 1. Projected Market of Palay and Rice 5. Cappa 888 3,729.6 3,729.6
Absorptive Capacity/ TOTAL 3,596 15,103.2 15,103.2
Name of Buyer Location Volume Required (in sacks)
Palay Rice
Bonza Group of Millers Lapaz, Iloilo City No limit No limit These farmers are selling palay directly to small buyers who usually have buying station
near the farm or to the grain traders in the Municipalities of Oton, San Miguel, and Pavia
Roscom Millers Iloilo City No limit No limit
(Iloilo). However, the buying price is normally very low especially during rainy period.
Direct consumers Iloilo City 10,000 Farmers have no facilities to preserve the quality of the grains. Because of this, the farmers
are force to dispose their palay even at very low price.
If possible, the Federation will apply the cash-on-delivery (COD) approach in buying and
selling the stocks. It will also provide incentives to dealers and provide free freight-in for After the intensive consultation, the members committed to sell 50% of their produce to
bulk purchases within Aganan River Irrigation System service area. the Federation. The remaining 50% of the produce is usually reserved for consumption and
for payment of debt. The Federation cannot really exercise monopoly of the total produc-
tion of the members as it still respects the practice of free trade. However, the production
Table 2. Price Chain (PhP) of the members financed by the Federation through loan will be procured. The estimated
Palay Rice Rice Bran volume is 210,000 kilos or 5,000 sacks (42 kgs per sack). This estimate is only for one cycle
Levels Description (per kg) (50 kgs. Sack) (30 kgs. Sack) production loan from 100 beneficiaries with only 1 hectare per farmer. Also, the Federation
will buy additional palay outside payment of production loan. The estimated volume will be
Farm Gate (fresh from 15% to 30% Moisture 7.00-8.30
172,200 kilos or 4,100 sacks.
harvest) Content
Dried – 14% and 8.50-10.00 Presently, there are 5 major grain traders operating within the target areas. These traders
below moisture practice of contacting small palay buyers who intensively went to farm to buy the palay of
content the farmers or they are commonly known as “middlemen”. The practice has been common
NFA Below 14% Moisture 10.00 during harvest season. The same strategy will be employed by the Federation to meet its
Content procurement target maximizing the IA leaders.
Traders Palay and Rice 8.50 and above 850.00 to 950.00 170.00 to 180.00
Table 4. Major Palay Buyers Operating within ARFIA Areas of Operation
Rice Retailers/ Offices Rice 850.00 to
Estimated Volume
1,000.00 Location of Buying
Name of Buyers Address of Palay Procured
Station
(sacks)
Grabato Iloilo City San Miguel, Iloilo Unlimited
Estimated Market Share (Demand, Supply and Market Analysis)
The Federation will procure palay in all areas within the five member Irrigators’ Associa- Goriceta Rice Mill San Miguel, Iloilo San Miguel, Iloilo 20,000 sacks up
tions covered by Aganan River Irrigation System, as primary area, and its adjacent places Zamora Rice Mill Oton, Iloilo Oton, Iloilo 20,000 sacks up
as secondary target area. The total area is 3,596 hectares of irrigated rice farms, which usu-
Geonigo Rice dealer Oton, Iloilo Oton, Iloilo 10,000 sacks up
ally practice two croppings a year (May/June to October and November to February) . The
average production per hectare is 100 sacks at 42 kgs/sack (4,200 kgs.). The total estimated Javellana Rice dealer Oton, Iloilo Oton, Iloilo 10,000 sacks up
annual production (gross) of the target area is 15,103.2 metric tons or 359,600 sacks.

144  Social Enterprise Development: Community Businesses at Work Training Module on Enterprise Planning and Analysis  145
 Projected Sales of Palay and Rice Marketing Activity Flow
The palay procured by the Federation, as mentioned earlier, will be sold as dried palay
(with moisture of 13% and below), wet form and will be milled and sold as rice. Half of the
palay procured will be sold to NFA: 50% of this will be sold as dried palay and the other 50% FARM
in wet form. The other half of the palay procured will be milled and sold as rice. By milling,
the Federation will also have rice bran.

Table 5. Projected Schedule of Sales Marketing Centers Main Buying Warehouse

Commodity Total Quarter 1 Quarter 2 Quarter 3 Quarter 4 (5IAs) Station (PHF)
Palay(42kg/sack)
Wet 3,100 1,500 1,600
Dry 1,880 600 600 680
DRYING
Rice -50kgs./sack 2,053 1,310 743
Bran – 30 s/sack) 314 240 74
Note: Conversion of Palay to Rice Bran is 1:10-at 30 kilos per sack
MILLING

Production Considerations
MARKETING
Technology Description
After procurement of palay, in the case of selling it dried and for rice conversion the federa-
tion will dry it using either solar or mechanical dryers. The solar driers will be used during
normal weather condition and when there is substantial solar energy. The mechanical
dryers are also available during rainy days when solar energy is not enough to dry palay. NFA Rice Retailers/ Grain Traders Farmer’s Association /
There are also glass houses for stocking of wet palay for three to five days while preserving Millers Farmers /
the quality during rainy days. The palay will be stock in the warehouse of the federation Direct Consumers
before it will be transported to the point of market.

Marketing centers will be put up at the strategic location near the farm to buy palay of the
farmers fresh from the harvest or some areas will use IA offices as their marketing centers,
aside from the main buying station at the Post Harvest Facilities in Barangay Mambog,
Oton, Iloilo. Two cargo trucks are available to haul palay bought by the federation to the
warehouse for drying and warehousing. Other procured palay will be hauled directly to grain
traders in wet form. The marketing program will converge in the main buying station where
all inventories will be placed and stored. Proper recording system will be maintained.

Depending upon the demand, the palay will be milled and the rice will be sold to rice dealers and
retailers or to the farmer’s associations/ direct consumers. Furthermore, 50 percent of the stocks
will be sold as palay either to the NFA or traders and 50 percent will be sold as rice.

Land, Infrastructure, Machinery and Equipment

The post-harvest processing of palay consists of drying, milling and storage. The federation
with its available storage facilities can procure palay during any weather condition and has
the capability in preserving the good quality of palay. ARFIA managed state-of-the-art Post
Harvest Facilities located about 4 kilometers south of San Miguel along the provincial road
and about 3 kilometers from the town of Oton. The site is almost in the center of the project
area and is convenient for the operation of the post facilities.

146  Social Enterprise Development: Community Businesses at Work Training Module on Enterprise Planning and Analysis  147
 The PHF, which was a grant from Japan Cooperation Agency (JICA) in 1996, includes the
following facilities:
1.  Multi-Purpose Pavement (Drying pavement by solar energy) – It is used
to dry palay during sunny days maximizing solar energy.
2.  Glass House – The wet or fresh palay is place when solar energy is not avail-
able during heavy rainy days to preserve palay quality and control the subsequent
quality deterioration.
3.  Palay Warehouse – The dried palay is stock before it milled or before it will be
sold to NFA or traders. The warehouse has the capacity to stock 3,780,000 kgs. of
palay or 90,000 sacks at 42 kgs./sack.
4.  Administration Office – It serves as the office of the federation and all docu-
ments and files (project records) are keep and administrative personnel works.
5.  Equipment Shed – This is the place where different equipment like trucks, trac-
tors and other pre-and post harvest facilities are keep or park.
The marketing equipment of the Federation is listed in Table 6:
Procurement Strategy
To achieve the procurement target, the following strategy will be employed by the
federation:
1. Setting up of marketing centers in every member-IAs;
2. Each IA will have a procurement officer that will serve as contact person and will
be provided with incentives;
3. Payment for production loan including interest must be in the form of palay and
the farmer-beneficiaries will be encouraged to sell even 50 % of their produced to
the federation;
4. Device strategy that would allow payment of irrigation service fee in the form of
palay equivalent to the monetary value of service rendered in coordination with
the National Irrigation Administration (NIA);
5. Service fees for farm implements must be in the form of palay corresponding to
the cost of the services rendered and other services of the federation whichever is
applicable; and
6. Provision of patronage refund to the member associations depending on the
volume of palay procured.

Table 6. Marketing Equipment of the Federation Procurement Target

Comparing the procurement target to the estimated annual yield of the target sites, there
Description # of Units Uses is enough supply to fill in the demand. The estimated annual yield for palay for first pro-
Portable Mechanical Dryer 2 For drying during rainy days duction year is 15,103.2 metric tons or 15,103,200 kilos. The procurement target is only
4-whell Farm Tractor 2 For transport of paddies around 382,200 kilos or 382 MT which is 2.53 percent of the estimated production. Assuming that
the facilities site there will be shortfall of the production due to uncontrollable circumstances, there are still
potential areas for procurement outside the target areas, which are not covered by the ir-
Cargo Truck 2 For transport of paddies from
rigation system. Palay procurement will be done on a cash-and-carry basis.
the farmer’s house and mar-
keting centers to PHF and from
warehouse to NFA or traders or Table 7. Palay Procurement Target
millers
Total Quarter 1 Quarter 2 Quarter 3 Quarter 4
Forklift 2 For lifting rice bags in the
Kilogram 382,200 63,800 126,000 25,200 168,000
warehouse
Amount 3,350,232 522,900 1,206,132 226,800 1,394,400
Trailer (towed type) 2 For transport of paddies around
the facilities site
Platform weighing scale 2 For measurement of paddy
weight The average procurement price for palay is PhP8.30 /kilo (farm gate price/fresh).
One-pass Rice Mill 1 For milling of paddies (palay to
rice conversion)
Financial Assumptions

Capital and Start-up Costs

Labor Requirements
The federation needs to maintain 5 to 20 laborers during the peak of harvest or marketing
season. The laborers are paid on per activity basis (“pakyaw”). Their rate is incorporated in
drying and warehousing cost or in trucking fees. These personnel are usually male because
of the very nature of their work that it needs physical effort. Women sometimes work for
drying activities.
The total estimated amount that will be raised as revolving capital of palay trading is
PhP650,000.00.
Fixed Costs per Quarter
The fixed costs per quarter includes only personnel cost which are presented in the fol-
lowing table. Other costs are considered variable costs.

148  Social Enterprise Development: Community Businesses at Work Training Module on Enterprise Planning and Analysis  149
 Variable Costs Financial Statements

Table 8. Fixed Costs Per Quarter Projected Income Statement (Year 1), Quarterly Basis
Quarter 1 Quarter 2 Quarter 3 Quarter 4
36,000 18,000 18,000 42,000 Q1 Q2 Q3 Q4 Totals
Sales 554,400.00 732,960.00 707,400.00 1,917,000.00 3,911,760.00
Beginning Inventory     616,452.00 226,800.00  
Terms of Sales
Purchases 522,900.00 1,206,132.00 226,800.00 1,394,400.00  
Table 9. Variable Costs (in pesos)
Fixed Expenses 36,000.00 18,000.00 18,000.00 42,000.00  
Palay Procurement Price Per Kilo (average) – farm gate price/fresh 8.30
Drying   16,800.00  
Trucking of Palay (per sack) 5.00
Sacks   4,978.00 7,467.00 10,763.50  
Handling (per sack 1.00
Milling   31,440.00 47,160.00 67,980.00  
Milling (per kilo of rice converted from palay 1.20
Trucking 7,500.00 16,200.00 3,600.00 15,200.00  
Handling 1,500.00 8,460.00 7,860.00 11,630.00  
Palay will be sold on cash basis. Usually, the NFA procured palay from Farmer’s Association Delivery   5,240.00 7,860.00 11,330.00  
on cash basis or they usually pay the federation within three to five days after delivery. Sales Representation     1,500.00  
of palay to traders shall also be on a cash basis. Cash on delivery shall also be observed for
rice sales. If this is not possible, the federation will give credit terms of up to seven days. The Cost of Goods 569,400.00 1,298,910.00 326,607.00 1,583,233.50  
credit will be secured by postdated check.

Projected Selling Prices Projected Cash Flow

Table 10. Projected Average Selling Prices   Q1 Q2 Q3 Q4

Commodities Average Price/ Average Price/ Beginning Balance - 536,500.00 29,010.00 492,663.00
kg. Sack
Inflows 1,104,400.00 782,960.00 782,400.00 2,042,000.00
Palay (42 kgs.)  - Wet 8.80 369.60
   - Dried 10.00 420.00 Capital Build-Up 50,000.00 50,000.00 75,000.00 125,000.00

Rice (50 kgs.) 18.00 900.00 PACAP Grant 500,000.00      

Rice bran (30 kgs.) 6.00 180.00 Sales 554,400.00 732,960.00 707,400.00 1,917,000.00
Outflows 567,900.00 1,290,450.00 318,747.00 1,560,273.50
Purchases 522,900.00 1,206,132.00 226,800.00 1,394,400.00
Fixed Expenses 36,000.00 18,000.00 18,000.00 42,000.00
Other Assumptions
Drying     - 16,800.00
ƒƒ 15 % allowance for shrinkage of procured palay.
ƒƒ 50% of the procured palay will be sold as palay, while the other 50% will be dried, Sacks   4,978.00 7,467.00 11,630.00
milled and sold as rice. Of the procured palay that will be sold as palay, half will be Milling   31,440.00 47,160.00 15,200.00
sold in wet form and the other half will be sold as dried palay.
Trucking 7,500.00 16,200.00 3,600.00 67,980.00
ƒƒ The conversion efficiency of palay to rice is 65%.
ƒƒ The conversion efficiency of palay to rice bran is 10%. Handling 1,500.00 8,460.00 7,860.00 10,763.50
ƒƒ The cost of milling is PhP1.20 per kilo of rice converted from palay. Delivery   5,240.00 7,860.00 1,500.00
ƒƒ Laborers are paid on per piece/activity basis.
Representation   - -
ƒƒ The salary of the driver is included in the hauling cost.
ƒƒ The project year starts on November and ends on October. Ending Balance 536,500.00 29,010.00 492,663.00 974,389.50

150  Social Enterprise Development: Community Businesses at Work Training Module on Enterprise Planning and Analysis  151
 Return on Investment
ROI = Net Income/Capital Investment
Quarter 2
= P 269,919.50/ P 700,000.00
= 42% Feb-Apr Dry-Dry Dry-Rice TOTAL
Sales
Payback Period
  600 sks @ 42 @ P10 252,000.00
PP = Total Investment/Net Income (for the year)
= P 700,000.00/P446,299.50   40% x 1310 480,960.00 732,960.00
= 5 Years GROSS SALES 252,000.00 480,960.00 732,960.00
Attachment: Income Statement Assumptions on a Quarterly Basis Less: Cost of Sales
Purchases
ARFIA PACAP Year 2
  3000 sks @ 42 @ P9 226,800.00 979,332.00 1,206,132.00
Marketing Component
Trucking 3,600.00 12,600.00 16,200.00
Assumptions Made on a Quarterly Basis Handling 600.00 7,860.00 8,460.00
Milling @ 1.20/kg 31,440.00 31,440.00
Quarter 1
Sacks 4,978.00 4,978.00
Nov-Jan Wet to Wet
Delivery 5,240.00 5,240.00
Sales
Available for Sales 231,000.00 1,041,450.00 1,272,450.00
  1500 sks @ 42 @ P8.80 554,400.00
Less: End Invty 616,452.00 616,452.00
Less: Cost of Sales
Cost of Sales 231,000.00 424,998.00 655,998.00
Purchases
Income from Sales 21,000.00 55,962.00 76,962.00
  1500 sks @ 42 @ P8.30 552,900.00
Trucking
  1500 sks @ P5 7,500.00
Handling
  1500 sks @ P1 1,500.00 531,900.00
Income from Sales 22,500.00

152  Social Enterprise Development: Community Businesses at Work Training Module on Enterprise Planning and Analysis  153
 Quarter 3
Attachment 3
May-July
Facilitator’s Guide
Sales 707,400.00
Less: Cost of Sales
Introductions
  Beg. Invty. 616,452.00
 Purchases 226,800.00 1. Two possible modes
  Milling 47,160.00 ƒƒ 4-quadrants exercise (Greatest Achievement, Greatest Failure, Current Situation,
Future Situation); done in small groups (better if small groups already established
  Sacks 7,467.00
prior to session through color-coding or other means) through counting off; will
  Trucking 3,600.00 need blank letter-size bond paper and pens for participants. Useful if group is quite
  Handling 7,860.00 large (over 20 pax) and time constraint is a factor.
  Delivery 7,860.00 ƒƒ Individual Introductions (“Name, Rank Serial Number” + Greatest Achievement
that Participant is very proud of but few people know). Useful if group is small (less
  Goods Available 917,199.00 than 20 pax), participants already know each other and time constraint not really
  Less: End Invty. 226,800.00 a factor.
Cost of Sales 690,399.00
2. Points to Remember
Income from Sales 17,001.00
ƒƒ Introductions are very important. Getting a person to talk in the group, even if
only to introduce him(her)self is important in breaking the tension and gives the
person confidence to speak out later. One can make the case that the speaking out
is probably the most important part of this exercise. The facilitator should make
sure that people speak out slowly and do not feel they have to rush through their
Quarter 4 introduction.
Aug-Oct Wet-Wet Wet-Dry Wet-Rice TOTAL ƒƒ At the same time, the facilitator must guard against taking too long to complete
the introductions exercise. As a general rule, the verbal introduction of a person
Sales 591,360.00 285,600.00 1,040,040.00 1,917,000.00
should not last longer than one minute. In terms of time requirement, the 4-quad-
Less: Cost of Sales rants exercise is a “better” exercise since introductions are done simultaneously.
Beginning Inventory 226,800.00 226,800.00 The advantage of the Greatest Achievement” mode is that the introductions are
done to the whole group.
Purchases
  4000 sks @ 8.30/kg. 557,760.00 278,880.00 557,760.00 1,394,400.00
Drying 5,600.00 11,200.00 16,800.00 Leveling of Expectations
Handling 1,600.00 2,000.00 8,030.00 11,630.00
Trucking 9,600.00 5,600.00 15,200.00 1. The title of the session is “Leveling of Expectations” not “Surfacing…” What are leveled
are the expectations of the participants with each other and with the designer-cum-fa-
Milling 67,980.00 67,980.00
cilitator of the workshop. Once the meta-plan cards have been posted and classified on
Sacks 10,763.50 10,763.50 the white board, the facilitator must state which of the expectations will be discussed in
Delivery 11,330.00 11,330.00 the workshop and which will not be discussed.
Representation 1,500.00 1,500.00
2. The expectations session is also supposed to introduce the meta-card technique. You
Cost of Sales 568,960.00 293,580.00 893,863.50 1,756,403.50 can use the exercise to point out the mistakes in the use of meta-cards so that par-
Income/(Loss) from Sales 22,400.00 (7,980.00) 146,176.50 160,596.50 ticipants will be able to avoid these in later meta-planning sessions. Please emphasize
the three major rules in the use of meta-cards – WRITE BIG, ONE IDEA PER CARD,
Add: CDIF @ P0.25 7,140.00 7,140.00
MAXIMUM OF THREE LINES PER CARD.
Net Income/(Loss) 22,400.00 (840.00) 146,176.50 167,736.50
3. The expectations session is also meant to introduce the importance of keeping within
timelines. That is why you must set a time period for the completion of the writing (e.g., 5
minutes) and continually remind people of how much time is left. Of course, you must be
flexible and give more time to people to complete their work if they really need it.

154  Social Enterprise Development: Community Businesses at Work Training Module on Enterprise Planning and Analysis  155

1. In posting the meta-plan cards, you must start from the top left of the board going to
the write. If you reach the right end of the board, you can start at the middle left of the
board.
2.  Points to Remember:
ƒƒ Do not let anyone else post the cards. When you post the cards yourself, you are
doing so with a certain framework in mind. If someone else posts the cards, s/he
will do so using his(her) own framework, which you may not know or fail to appre-
ciate. Try to avoid having a pre-conceived framework of how to post the cards be-
fore you actually begin posting; the framework will emerge as you post the cards.
ƒƒ In posting cards of similar ideas, always start from the top left going to the right.
Feel free to change the order of the columns; ideally, the columns with the largest
number should be on the left.
ƒƒ Do not make the mistake of putting separate but related cards (e.g., apparent
“cause-and-effect” cards) in one column. If you want to show a relationship be-
tween two columns of cards, put the two columns beside each other.
ƒƒ Some cards are easy to classify; others will be less so. If you are not sure where to
post a card, put it on a “free area” (posted but not classified) and go back to it later
on when most of the cards have already been classified.
ƒƒ Some cards are difficult to classify because you do not understand them; in this
case, you must ask the writer of the card to explain. Sometimes, a card is difficult
to classify because it contains two or more ideas. When this happens, cut the card
into two or more pieces (each piece containing one idea) and post the pieces in the
appropriate columns.
Session 1: Case Study on Enterprise Appraisal
1. There is no need to present the case before the focused group discussions. There will
be time to get the “facts of the case” during the plenary session following the small
groups.
2. There is need to emphasize the basic rule in case analysis, namely: that the discussion
should be limited to the case as presented in the case study. Otherwise, individuals with
special (or “inside”) knowledge of the case will have undue advantage and the learning
values may be lost.
3. Some practitioners of the case method do not provide guide questions beyond re-stating
the purpose of the session (in this case, enterprise appraisal). They reason that analysis
begins with the formulation of questions and that this, in fact, allows the discussants to
better situate themselves within the case. If you are uncomfortable with this approach
and would like to provide a few guide questions, the following may be useful:
ƒƒ What are the facts? For the first business? For the second business?
ƒƒ Which enterprise is doing better? Why?
ƒƒ What went wrong? For the first business? For the second business? Why?
ƒƒ If the enterprises could start all over, what should they do differently?
ƒƒ Are the proponents on the right track in terms of what they need to do to ensure
the long-term success of their enterprises? If not, what should they be doing?
ƒƒ In case PACAP receives a similar proposal in the future, what are the three to four
156  Social Enterprise Development: Community Businesses at Work
key elements that should be present in the enterprise to justify support? Conversely,
what are the “red flags” that should make PACAP wary of funding the proposal?
4. As shown above, there are many possible questions. What is important is that the ques-
tions focus the attention of the discussants towards understanding the dynamics of the
enterprises and the major factors for success and failure.
5. The facilitator should move among the small groups in order to provide guidance, par-
ticularly if the participants are unfamiliar with the case method.
6. Given inevitable time constraints, it would be better to facilitate the plenary session
by surfacing the responses of the participants to the guide questions. If no guide ques-
tions were provided beforehand, the facilitator can still run the session by presenting
the questions s/he considers important and use these questions to structure the
discussion.
Session 2: Case Study on Financial Analysis
1. By necessity, this is a much more structured session. Hence, the instructions must be
very clear and specific. Participants are expected to accomplish the following:
a) Prepare the following financial statements:
ƒƒ Projected Cash Flow Statement on a monthly basis for Year 1. The projected cash
flow statement should take into account: (a) the internal dynamics of the enter-
prise and (b) existing PACAP procedures in the release of grant funds.
ƒƒ Projected Income Statement on a monthly basis for Year 2
ƒƒ Break-Even Analysis (Sales Volume only) – include palay, rice and rice bran.
ƒƒ Return on Investment and Payback Period
b) List the assumptions used in the preparation of the above financial statements.
Emphasize that financial statements are only as good as the assumptions on which
they are based. In this regard, participants should formulate their own assumptions
if they find that some important assumptions are either missing or unrealistic.
By way of example, you may provide the following (partial) list of assumptions
missing from the business plan:
ƒƒ Projected monthly sales schedule for the three products of the enterprise for Year
1 (the fiscal year of the enterprise is from November to October). Please note that
the area has two cropping cycles (May/June to October and November to Feb-
ruary) and that the prices of palay and rice drop during the harvest period.
ƒƒ Projected schedule for the procurement/purchase of palay over the twelve
months of Year 1. Please note the cropping cycles in the area. Purchase of palay
is done on a cash basis (see Business Plan).
ƒƒ The length of the start-up period or the amount of time between the receipt
of PACAP funds and the start of normal (=full capacity) operations of the
enterprise.
  An example of an unrealistic assumption is that the sales of rice (and bran)
will be in terms of cash. Rice is only sold on a cash basis only in a retailing
operation.
c) After completing the financial statements listed above, please answer the following
question: “In your opinion, is the projected financial performance of the enter-
Training Module on Enterprise Planning and Analysis  157
 prise sufficiently satisfactory to justify PACAP support? What is the basis for your
answer?”

1. The exercise can be done individually or in small groups. Either method has intrinsic
advantages and disadvantages. As a facilitator, your primary concern is handling the
reporting that will be done afterwards in plenary session. If the participants opt for
group work, each of the workshop groups will be asked to present its output. If work
will be done individually, three to four individuals can be selected to report the work
they have done. If the individual mode is chosen, selection of the individuals who shall
make presentations should be done just before the plenary reporting session. Other-
wise, individuals not selected may no longer be motivated to carry out the exercise.

2. Apart from correcting methodological errors in the assumptions used and/or the fi-
nancial statements themselves, the plenary discussion can also focus on more general
lessons. For example, one important lesson is that the magnitude of external funds
required is directly related to the strategic decisions regarding the procurement of raw
materials and the marketing of finished products.

Materials and Logistics Requirements

1. Manila Paper – enough sheets for the small groups and plenary sessions plus a few
extras.
2. Meta Cards (limit to 4 colors = white, yellow, light blue, pink) – enough for all small
group and plenary sessions plus a few extras.
3. Pentel Pens (limit to 2 colors = black and blue) – enough for all participants plus a few
extras.
4. Masking tape – at least one roll (minimum of one-inch thick)
5. Scissors and cutter – make sure these can cut masking tape.
6. LCD projector
7. Projection Screen – if no screen is available, use a white sheet. Avoid using the white-
board as the screen because of the glare.
8. Computers – there should be at least one computer for each group in Session 2.
9. Waste cans (minimum of 2, placed in strategic locations around the room) – the pres-
ence of waste receptacles will facilitate clean-up and enable the participants to concen-
trate on the tasks that need to be accomplished.
10. Conference hall and break-out rooms – if no break-out rooms are available, the confer-
ence hall should be sufficiently large so that small group discussions can be carried out
simultaneously with minimal disturbance for each group.

158  Social Enterprise Development: Community Businesses at Work