Bernardo M. Villegas
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ISKAPARATE Addresses the Digital Divide (Part 1)

            When I hear some business people gush about how the Philippines can take a lead in what is called the Industrial Revolution 4.0, I cannot share their enthusiasm.  As people talk about Artificial Intelligence, Robotization, the Internet of Things, Big Data and other components of the digital world, I dread the intensification of the digital divide, another manifestation of the grossly unequal distribution of income and wealth in the Philippines.  I already see this in the education sector in which the shift to online instruction necessitated by the pandemic has clearly divided the student population into two distinct classes:  the children of the well to do who have all the resources to follow classes online effectively and efficiently and the great masses of pupils, especially in the public school system, who are learning very little because they do not have the resources, neither the internet connections nor the digital devices, to benefit from online learning.

           The same will surely happen in the business sector.  According to a report from the Department of Trade and Industry, the 2020 List of Establishments of the Philippine Statistics Authority (PSA) recorded a total of 957,620 business enterprises operating in the country.  Of these 952,969 (99.51 percent) are MSMEs (Micro, Small and Medium-Scale Enterprises) and 4,651 (0.49 per cent) are large enterprises.  Micro enterprises constitute 88.77 percent (850,127) of total MSMSE establishments, followed by small enterprises at 10.25 percent (98,126) and medium enterprises at 09.49 percent (4,716).  Together, these MSMEs generated a total of 5,380,815 jobs or 62.6 percent of the country’s total employment.  The micro enterprises produced the biggest share (29 percent), followed by small enterprises (26 percent).  The Large enterprises generated a total of 3,206,011 jobs or 37 percent of the overall employment. In terms of value added, the MSME sector contributed 35.7 percent of the total with manufacturing contributing the largest share of 6.87 percent.  Within the entire MSME sector, small enterprises accounted for the largest share of 20.5 percent.  While micro enterprises registered a share of only 4.9 percent, these are the businesses that contribute most to poverty alleviation.  These are also the ones with the least access to digital technology.

           In a quick survey done by the Asian Development Bank, it was found that an average 73.1 percent of MSMEs were forced to close their business a few weeks after the COVID-19 outbreak and the lockdown measures implemented.  This was pronounced for small firms (76.4 percent) and those in services (72.7 percent).  They immediately faced delays in the delivery of products and services, disrupted supply chains, and a sharp drop in the domestic demand, especially in small firms and manufacturing.  Only 2.3 percent of MSMEs on average reported no change in the business environment after the outbreak.  Meanwhile, some groups of MSMEs reported a better business environment than before the pandemic, especially in microenterprises and agriculture, due to increased demand from households and firms for essential goods and services and health care.

           Enter ISKAPARATE.COM.  Clearly meant to address the digital divide in which only the well to do have access to the many benefits of digital technology, this online selling platform was launched by some social entrepreneurs at the height of the economic lockdown that severely limited the mobility of people which explained the results of the findings of the ADB study.   As empirically demonstrated by the study, most Filipino micro-entrepreneurs were complaining that their sales had dropped to zero because they were unable to leave their homes to purchase raw materials, deliver their products, and collect receivables.  Demonstrating again that crisis always creates opportunities and in this case an opportunity to help the underprivileged, a group of businessmen led by former bank CEO and former MAP President Joey Bermudez, former senior bankers Luis Sumabat and Josefina Natividad, and businessmen Manuel and Benjamin Avancena, decided to create a free platform that would enable micro-entrepreneurs to resume selling their products or services, using digital commerce.

           September 8, 2021 will be the first anniversary of this worthwhile social enterprise that addresses both goals of economic growth and poverty alleviation.  All of their beneficiaries surely belong to the 20 percent population that are now once again below the poverty line.  The platform provides each micro-entrepreneur his or her own “iskaraparate” (showcase) via a page that shows pictures of the micro-entrepreneur, his or her contact details and a brief biography as an entrepreneur.  The potential buyer is allowed to contact the micro--entrepreneur directly .  Upon request, Iskaparate acts as store minder for those who do not have the time to tend their online stores (usually they are one-man or one-woman operators who have to divide their time between their home-based business and their families and have limited time or no tools for online selling).  When Iskaparate was launched last September 8, 2020, there were 33 micro-entrepreneurs on the platform.  They were all members of a microfinance institution called Kabuhayan sa Ganap na Kasirinlan Credit and Savings Cooperative (KCoop) which operated in the urban poor communities of Metro Manila, CALBARZON, and Central Luzon.  Since then, 11 other organizations partnered with and have asked that their members be onboarded into the platform.  Among these organizations is the Samahan ng mga Nagkakaisang Pamilyang Pantawid, a nationwide organization of 148,000 4Ps beneficiaries who are engaged in micro-enterprise.    Ninety-three percent (93 %) are females while seven percent (7%) are males.  This explains why the beneficiaries of this platform would eventually  be referred to as “Nanays” (mothers).  Not surprisingly, since the pandemic highlighted the primordial importance of food security,  64 percent of the micro-entrepreneurs produce food, 35 percent non-food items and 4 percent services.  Fifteen percent of the micro-entrepreneurs on the platform were not endorsed by any organization but were walk-ins.  These include micro-entrepreneurs who applied for inclusion in the platform after they heard about it during the special webinars by Go Negosyo for the participants of the Kapatid Mentor ME program, an initiative of top executives and professionals who lend their expertise to mentor for free micro-entrepreneurs.

  plans to have 2,000 micro-entrepreneurs on the platform by June 2022, very timely since at that time the economic recovery of the Philippines will in full swing.  Its target is to have 100,000 micro-entrepreneurs by June 2026 by which time the Philippine GDP could already be growing at a brisk rate of 7 to 8 percent.  By November of 2021, will become a full e-commerce site with “Add to Cart”, “Pay” and “Check Out” functionalities.  This can exponentially increase traffic in the platform from completed online transactions, eliminating the need for any interested buyer to contact the entrepreneur.  The platform will be monetized through platform fees, payment processing fees, store minding fees and various add-on services. 

           Recently, launched its seed capital round to fund the upgrade of its e-commerce capabilities and ensure the attainment of its 100,000-vendor target in five years. A group of individual and institutional investors, including a finance company, an agricultural feeds and industrial cordage company, food distribution company, and an offshore portfolio investor from Backbone (Luxembourg), S.A. (Maybridge’s funding partner in small and medium enterprise lending) subscribed to over $500,000 in common stock, the latest subscription coming at a 50% premium over par.  The seed capital round is continuing and will likely wind up in October 2021. To be continued.