How financial literacy contributes to sustainability of SMEs in the Philippines

How financial literacy contributes to sustainability of SMEs in the Philippines

If SMEs are likened to seeds ready to grow into successful large businesses, a solid foundation on financial literacy in the Philippines will serve as the nourishing soil that allows them to grow and flourish.

Poor financial management makes SMEs less attractive to investors and may hinder their ability to secure funding for growth. Many SMEs face vulnerabilities due to poor decision-making and missed opportunities.

In this blog, let’s explore the importance of financial literacy and its impact on SME sustainability in the Philippines.

Understanding the pillars of financial literacy for SMEs

For Filipino SMEs, navigating the dynamic business landscape requires a robust financial compass. In contrast with large corporations, SMEs operate with smaller profit margins and experience more dynamic changes in their business environment. Let’s shed light on the top four pillars of financial literacy for SMEs to master towards sustainable growth.

1. Budgeting

Foremost, effective budgeting establishes the groundwork for financial stability. Since many Filipino SMEs operate within constrained capital, a budget helps them allocate funds strategically. This includes expenses like inventory, payroll, and marketing. Budgeting also presents cost-saving opportunities. During periods of inflation, SMEs can plan ahead by negotiating better terms with suppliers to mitigate potential price increases in raw materials.

2. Cash Flow Management

Running out of working capital is a critical concern for SMEs and can ultimately lead to business failure. Cash flow is the lifeblood of any business. SMEs can gain clarity and control by tracking cash inflows (sales revenue) and cash outflows (expenses). This also includes receivables (payment collection from customers) and payables (paying vendors). During peak seasons, SMEs can build up their cash reserves, which can then be used to cover expenses during slower periods.

3. Investments and Risks

When SMEs understand investment choices, potential returns, and risks, they can strategically expand for the future. Your business should consider investments like product line expansions, equipment upgrades, or entering new markets to boost return on investment (ROI).

Financial literacy helps SMEs navigate market fluctuations, technological advancements, and competition while managing risks effectively. This includes business diversification where SMEs spread their investments across different product lines or customer groups.

4. Debt and Borrowing

Debt can be a valuable resource SMEs can use to invest in equipment upgrades, inventory, or marketing. When borrowing from banks or financial institutions, it’s crucial to understand loan terms like interest rates, payment periods, and loan structure. Financial literacy enables you to assess your borrowing capacity and develop a realistic repayment plan. By managing debt wisely, your business can utilize it effectively and avoid penalties.

The relevance for Filipino SMEs

Economic progress and financial literacy in the Philippines are interconnected to secure long-term stability. However, only 25% of Filipinos demonstrate proficiency in financial matters, making it challenging to navigate complex market dynamics. 

Here are some statistics on financial literacy in the Philippines:

In 2023, a source stated that 34% of Filipinos are in debt, highlighting the importance of responsible borrowing practices. Are Filipinos prepared for economic fluctuations? In January 2023, the Philippines experienced its highest inflation rate in 14 years, reaching 8.7%.

Philippine Statistics Authority, Retail price survey of commodities for the generation of consumer price index

Benefits of financial literacy for SMEs in the Philippines

Boosting financial literacy in the Philippines empowers SMEs to navigate market challenges and seize opportunities. 

Take Sophia, for example, a passionate baker, and owner of a bakery in Manila. Let’s explore how financial literacy benefits her in three key areas:

1. Informed Decision-Making

Sophia can use data-driven choices to enhance her business success through financial knowledge of: 

  • Pricing Strategies: Sophia diligently monitors her business expenses and tracks ingredient costs of flour, eggs, sugar, etc., and overhead expenses like rent and utilities. She regularly researches nearby bakery pricing and local customer preferences to adjust prices strategically. For example, when flour or egg prices increase, Sofia analyzes the impact on her production cost per pastry. Based on this data, she can raise a few pesos to maintain profitability.
  • Resource Allocation: When Sophia tracks her sales data, she identifies the best-selling cupcakes and pastries. Next, she can invest more ingredients in these pastries and add on some high-quality ones to maintain her reputation. Alternatively, she can consider investing in a marketing campaign to boost customer awareness during slow seasons.
2. Risk Mitigation

Risk mitigation encompasses the methods to reduce risk levels to tolerable thresholds. Sophia can minimize setbacks and address potential challenges that may threaten her bakery business, through her financial literacy background in:

  • Inventory Management: By regularly monitoring sales data and customer preferences, Sophia can prevent overstocking on perishable ingredients. This minimizes waste and avoids financial losses.
  • Debt Management: Sophia plans to get a new oven to increase production capacity and is considering getting a loan. She can analyze interest rates and repayment terms from various financial providers. Sophia can also project how a production increase will impact her sales and repayment abilities.
3. Gaining Access to Money and Resources

Currently, there are seven government business loans and support programs for SMEs in the Philippines. Most government programs offer subsidized loans for businesses with zero or low-interest rates. 

Sophia can tap into these valuable resources for business expansion. With an understanding of the requirements, Sophia can easily apply for a loan to purchase energy-efficient ovens for her bakery.

If Sophia wants to open a second bakery location, she can present a well-thought-out business plan and demonstrate responsible financial management to potential investors. This may attract investors with funding capabilities to partner with her. 

Empowering SMEs with tools like QashierPOS

How does QashierPOS elevate the benefits of financial literacy for Sophia’s bakery business? 

Data-Driven Decisions with Sales Reports

QashierPOS automatically generates comprehensive sales reports that will allow Sophia to analyze daily, weekly, or monthly sales figures. These valuable insights empower Sophia to identify best-selling items, current sales trends, and customer preferences. 

Financial literacy helps Sophia to interpret the data effectively. QashierPOS sales dashboard provides easy-to-understand visuals that can assist her in strategic decision-making, highlighting what’s working well and indicating areas for improvement.

Understanding Your Customers via Qashier CRM

Qashier CRM software lets Sophia collect customer data such as purchase history, contact information, and preferences. The data shows her what to tailor for promotions and marketing campaigns to specific customer segments. For example, Sophia can offer loyalty programs to her regular customers or discounts on their favorite cupcakes.

Maximize Profitability with Inventory Management

Sophia can manage her inventory effectively with QashierPOS. She can monitor her inventory status in real time, preventing stock-outs or overstocking ingredients. Sophia can also easily identify which items sell best, allowing her to optimize her ordering process. When items or ingredients run low, Sophia can request stocks from the warehouse via Qashier’s Stock and Transfer feature.

Are you ready to digitalize? Start fast with QashierApp right now!


Financial literacy in the Philippines is essential for all SMEs to prosper and capitalize on new opportunities. By embracing solid financial education and technological advancements, businesses can ultimately drive economic prosperity in the Philippines.

More about Qashier

Qashier offers multiple digital solutions, including QR code table ordering, table management (F&B), employee management, customer relationship management (loyalty programs), inventory management, data analytics, and track payments, in an all-in-one device.

Qashier promises a seamless setup within 10 minutes, without the need for technical expertise. It boasts a user-friendly interface that is simple for anyone to learn and use. If you require assistance, you’ll find 7 days-a-week responsive technical support from your local team.

Try the Qashier app for free on your own Android device! Speak to us to see if Qashier’s Smart POS can meet your business needs. Schedule a meeting with us here, or contact us at +63 917 QASHIER (7274437) (Whatsapp and Viber) or email at [email protected]



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