EFFECTS OF COVID-19 PANDEMIC RESTRICTIONS ON MICRO, SMALL, AND

MEDIUM-SIZED ENTERPRISES (MSMES) IN SAN FRANCISCO, AGUSAN DEL

SUR

A Research Proposal

Presented to

the Faculty of College of Business Education of

St. Francis Xavier College

In Partial Fulfillment

of the Requirements in Accounting Research Methods I

For the School Year 2022-2023

Enriquez, Kaye Jay M.

Esmao, Jessa May P.
Malahay, Jolina June A.

June 11, 2022

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 CHAPTER 1

The Problem and its Background

This chapter includes the introduction, theoretical framework, conceptual

framework, statement of the problem, significance of the study, scope and the

delimitation, and the definition of terms used.

Introduction

The Coronavirus Virus Disease 2019 (COVID-19) caused widespread

health impacts and disruptions to businesses around the globe during 2020. On

March 11, 2020, the World Health Organization declared COVID-19 a global

pandemic (World Health Organization, 2020) prompting immediate action from

governments to mitigate the spread of the disease in an effort to save lives.

Countries around the world adopted different approaches to slowing the spread of

COVID-19 including the Philippines, however, almost all countries implemented

some form of temporary lockdown measures, with ongoing social distancing

restrictions. The impact of such restrictions caused the distortions in the system of

supply and demand for goods and slowed many countries economies. COVID–19

significantly transformed people’s lives and business activities at the national,

regional and global levels. Micro, Small, Medium-Sized Enterprises (MSMEs) are

among the most affected. As countries begin the process of returning to normal life

post-COVID-19, it is important to understand the effect that COVID-19 restrictions

had on micro, small and medium-sized enterprises.

According to (Kaberia & Muathe, 2020) study, Micro, Small, Medium

Enterprises (MSMEs) plays a significant and indispensable role in the economic

development of a country. MSMEs pandemic situation would impact the economy.

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Despite instituting policies and regulations to promote economic growth, there is a

major issue that has developed as a result of the pandemic crisis, which has affected

the operation of micro, small, and medium-sized businesses (MSMEs). Numerous

enterprises are facing different issues with a certain degree of losses. Particularly,

enterprises are facing a variety of problems such as a decrease in demand, supply

chain disruptions, cancelation of export orders, raw material shortage, and

transportation disruptions, among others (Shafi, et. Al., 2020). Nevertheless, it is

evident that COVID-19 outbreaks have significantly impacted micro, small and

medium enterprises (MSMEs).

In the Philippines micro, small, and medium enterprises (MSMEs), comprises

the majority of all businesses in the country. Based on Congressional Policy and

Budget Research Department, micro, small and medium enterprises (MSMEs) are

considered the backbone of many economies in the world including the Philippines. 

Over 99 percent of firms registered in the Philippines are micro, small, and medium

enterprises (MSMEs) (Philippine Statistics Authority [PSA] cited in Department of

Trade and Industry (DTI, 2019). Being a major contributor to economic activity,

MSMEs generated about 62 percent of the country’s total employment and

accounted for 25 percent of the country’s total exports revenue in 2019 (PSA cited in

DTI, 2019). Collectively, MSMEs are those with employee size of less than 200 and

with asset size of below P100 million. These businesses were greatly affected by the

coronavirus disease 2019 (COVID-19) in a matter of months. MSMEs are trying to

cope with the pandemic's dilemma, which has forced most establishments to close

due to the enhanced community quarantine (ECQ).

According to survey performed in the Philippines in February 2020, around 65

percent of respondents believe the COVID-19 pandemic will have a substantial

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impact on the country’s economy. The government’s nationwide lockdowns have had

a negative impact on people’s livelihood (Statista, 2021).

Consequently, the Municipality of San Francisco has not been spared from

the COVID-19 impact. Many owners of SMES’s have been affected a lot because of

the imposed restrictions of the Inter-Agency Task Force (IATF). Big or small

businesses have to be closed down for the mean time and travel restrictions has

greatly contributed to the downfall or bankruptcy of many small business owners.

Luckily, as the restrictions became less strict the municipality of San Francisco,

Agusan del Sur has prioritized the gradual development of MSMEs particularly on

micro and small-scale firms for economic growth, job creation, and the development

of an industrial sector as their means of coping over the effects of the pandemic.

Accounting system, said by Celik & Ecer (2009), and all

practices that are included in it, then, can be further studied
to identify correlations with other variables and be used for
any further purpose in future studies. With this, researchers
aimed to explore and obtain a deep understanding about
accountancy culture of the University of St. Louis
Tuguegarao, and how it is manifested in the accountancy
program and what components/features/relevant factors
comprise it.
This study aims to conceptualize the
meaning of “Accountancy Culture” so as to encompass the
Accounting system, said by Celik & Ecer (2009), and all
practices that are included in it, then, can be further studied
to identify correlations with other variables and be used for
any further purpose in future studies. With this, researchers
aimed to explore and obtain a deep understanding about
accountancy culture of the University of St. Louis
Tuguegarao, and how it is manifested in the accountancy
program and what components/features/relevant factors
comprise it.

All of these unprecedented conditions greatly inspires the researchers to

study the effects of COVID-19 pandemic restrictions to the MSMEs in San Francisco,

Agusan del Sur. The researchers wanted to reach out to the MSMEs to help

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understand and assess the implications of the COVID-19 pandemic restrictions on

communities.

Theoretical Framework

This study will examine the effects of COVID-19 on the micro, small, medium

enterprises (MSMEs) in San Francisco, Agusan del Sur.

Keynesian Theory

Keynesian economics is a theory that says the government should

increase demand to boost growth. Keynesians believe that consumer demand is the

primary driving force in an economy. As a result, the theory supports

the expansionary fiscal policy (Kimberly, A., 2021).

The British economist John Maynard Keynes developed this theory in the

1930s. According to Keynesian theory, then, government spending can take the

place of missing private spending during a crisis. According to (de Rugy and Jones,

2021) study, if the government increases its own spending, it creates new

employment (mostly for workers who would otherwise be unemployed). These newly

employed workers consume more goods and services, and, in turn, the businesses

that produce those goods and services increase their demand for inputs such as

capital goods and labor. In effect, government spending creates a virtuous cycle. In

lined with the COVID-19 pandemic, it revealed the limits of Keynesian stimulus

policy, though. In the Keynesian framework, economic growth is stimulated by

increasing aggregate demand. But amid the pandemic and its accompanying

lockdowns, the COVID-19 recession was driven by supply constraints on growth, not

a lack of aggregate demand. Lockdowns meant that output in some (“non-essential”)

sectors of the economy was illegal, and many businesses, even if they were allowed

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to operate, faced restrictions on the number of customers or employees that could

be in a building at any given time.

Both history and Keynesian-influenced economic theory teach that extra

government spending per se cannot do much to overcome the effects of a supply

shock. Therefore, during the pandemic, it would have been difficult, if not impossible,

to stimulate the economy through government spending.

Conceptual Framework

COVID-19 Micro, Small and

Medium-sized
Pandemic
Enterprises (MSMEs)
Restrictions financial performance

Independent Variable Dependent Variable

Industry Profile

 Type of Business
 Years of
Operation

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 Moderating Variable

Figure I. Conceptual Paradigm of the Study

Statement of the Problem

This study aimed to describe and identify the effects of COVID-19 restrictions on

MSMEs in San Francisco, Agusan del Sur.

Specifically, it seeks to answer the following questions:

1. What is the industry profile of the micro, small, medium-sized enterprises

(MSMEs)?

2. What is the level of restrictions imposed by the local authorities of MLGU San

Francisco, Agusan del Sur to combat the spread of COVID-19 Pandemic?

3. What is the level of the financial performance of MSMEs during the height of

COVID-19 pandemic restriction?

4. What is the level of relationship between the level of COVID-19 pandemic

restrictions and the level of financial performance of MSMEs during the height

of COVID-19 pandemic?

5. Does the industry profile affect the relationship between the level of COVID-

19 pandemic restrictions and the level of financial performance of MSMEs

during the height of COVOD-19 pandemic?

Significance of the Study

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 The study will contribute to set appropriate strategies and policies related to

empower MSMEs in San Francisco, Agusan del Sur during the COVID-19 pandemic.

The study will be of great significance to MSMEs, government, and future

researchers.

MSMEs. This study will provide MSMEs owners about the effects of pandemic

to businesses. It would provide an opportunity for diversification, business

opportunities and coping strategies now and in the near future.

Local Government of San Francisco. This study will help them on having a good

picture on what are the effects of COVID-19 restrictions on MSMEs in the locality.

This will help them on deciding to issue a local provisions or city ordinance and

implementations in dealing with the current matter.

Future Researchers. This can help future researchers as a reference data in

conducting new researches or in testing the validity of other related findings. This

study will also serve as their cross-reference that will give them a background or an

overview of the effects of COVID-19 restrictions in MSMEs.

Scope and Delimitation of the Study

This study is restricted by resource limitation, both financial and non-financial.

Due to the limited time financial, and study scope constraints, the research study had

to focus on a limited number of objectives.

Because of limited access to scarce resources, this study focuses on the

selected MSMEs located in San Francisco, Agusan del Sur as the target population.

Definition of Terms

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 The following terms were defined according to how they are being used in the

study:

Cash flow Shortage. A cash flow shortage happens when more money is flowing out

of a business than is flowing into the business. That means, during a cash flow

shortage, you might not have enough money to cover payroll or other operating

expenses.

Coronavirus Disease (COVID-19). It is an infectious disease caused by the SARS-

CoV-2 virus. Most people who fall sick with COVID-19 will experience mild to

moderate symptoms and recover without special treatment. However, some will

become seriously ill and require medical attention.

Key Stakeholders. A key stakeholder is among the most important stakeholders for

a company. Key stakeholders are highly interested in a particular company's

success, as they are most affected by its business. Likewise, a business's success

and growth often depend upon its key stakeholders.

Lockdowns. A period of time in which people are not allowed to leave their homes or

travel freely, because of a dangerous disease.

Micro small and medium-sized enterprises (MSMEs). Non-subsidiary, independent

firms which employ less than a given number of employees. This number varies

across countries. The most frequent upper limit designating an MSMEs is 200

employees.

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Normal business operations. It refers to activities that businesses engage in on a

daily basis to increase the value of the enterprise and earn a profit. The activities can

be optimized to generate sufficient revenues.

Pandemic. It is an outbreak of a disease that occurs over a wide geographic area

(such as multiple countries or continents) and typically affects a significant proportion

of the population: a pandemic outbreak of a disease.

Restrictions. A set of limitations within specific bounds. Employed in order to stop or

limit something to go beyond the limits.

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 CHAPTER 2

Review of Related Literature

This chapter covers some literature related to the study, particularly on

conceptual literature and research literature which are presented in the following

paragraphs.

MSMEs have grown in number and become the most dynamic category in the

market economy as it has developed. They are vital in the generation of profit, the

retention of jobs, the advancement of people's living standards, technical innovation,

and social stability. MSMEs are the backbone of many economies worldwide that

provide income and employment generation to a large number of people around the

globe but remain vulnerable to external shocks, such as financial crises, disasters,

and forced changes in the business environment. At present, MSME’s and self-

employed individuals have developed into the main channels for absorbing

employment and increasing economic vitality.

What comprises a MSME? In general, there are a number of common

characteristics of such enterprises: they are independent entities, and not part of a

larger corporation; are typically founded and managed by the owners, who also bear

most (or all) of the risk involved in the venture; they have a comparatively small

number of employees (if any); usually only produce or sell a limited range of goods

and services; have limited market shares and a small customer base; and have

limited access to support resources such as finance, external advisers, government

assistance and the like.

The unexpected spread of COVID-19 at the end of 2019 disrupted worldwide

economic development and posed significant dangers and obstacles to global

economic advancement. Multiple factors created by the pandemic, including as

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production standstill, poor growth in domestic demand, financial limits, and

employment issues, have had a significant impact on company activity.

According to the Philippine Statistics Authority (PSA) there were a total of total

of 957,620 business enterprises operating in the country as of 2020. Of these,

952,969 (99.51%) are MSMEs and 4,651 (0.49%) are large enterprises. Micro

enterprises constitute 88.77% (850,127) of total MSME establishments, followed by

small enterprises at 10.25% (98,126) and medium enterprises at 0.49% (4,716),

respectively.

The spread of COVID-19 has a great impact on Philippine economy and has

brought severe challenges to the survival of domestic MSMEs. According to

(Shinozaki, S. and L. N. Rao., 2021) in their paper entitled COVID-19 Impact on Micro,

Small, and Medium-Sized Enterprises under the Lockdown: Evidence from a Rapid

Survey in the Philippines. The Philippines may suffer economic losses between

P276.3 billion and P2.5 trillion due to the COVID-19 pandemic. The most affected

business sectors will be manufacturing, with losses between P82.1 billion and

P855.2 billion, wholesale and retail trade, with losses between P93.2 billion and

P724.8 billion, and transport/storage/communication, with losses between P11.7

billion and P124.3 billion. Abrigo, et. Al (2020) also estimated that, if the ECQ

continued to May 2020, it would potentially cost the Philippine economy at least

P150 billion given the decline in household consumption.

In the Philippines, MSMEs drive the national economy. They accounted for

99.5% of all enterprises and employed 63.2% of the labor force as of the end of 2018

(ADB 2020b). Their ability to access finance faces constraints even during non-crisis

periods. The share of MSME loans in the total outstanding bank loans was 6.1% in

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2019. Bank loans to MSMEs accounted for only 3.2% of the GDP during the same

period. This suggests that a very small number of MSMEs have access to bank

credit. A prolonged pandemic will make it more difficult for MSMEs to raise funds

from formal financial institutions and to survive the cris2is and its aftermath, which

could contribute to more potential losses to the Philippine economy and risk the

projected economic rebound in 2021.

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 CHAPTER 3

Research Methodology

This chapter presents the research methodologies used in the study. This

covers the research design, locale of the study, respondents of the study, research

instrument, validity of the research instrument, reliability of the research instrument

and data-gathering procedure.

Research Design

The researcher used the quantitative descriptive-correlational method which is

appropriate in determining the effects of COVID-19 restrictions on MSMEs in San

Francisco. Descriptive correlational design aims to describe the relationship between

the COVID-19 restrictions and the MSMEs.

Descriptive research, according to Creswell (2017), is fact-finding with

adequate interpretation. Beyond simply data gathering, it involves analyzing,

classifying, and tabulating data about existing conditions, practices, beliefs, cause

and effect relationships and then making appropriate interpretation about such data.

It is the nature of this study to assess the condition of things in their current

state. In the same way, it delves into the relationship among variables that are

considered it most suitable to use the descriptive research design.

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Locale of the Study

Source: Nona.net

Figure 2: Map of the Municipality of San Francisco

The study will be conducted at San Francisco, Agusan del Sur. This place is

selected because it is one of the places wherein you cannot deny the effects of the

COVID-19 pandemic to the owners of small, medium-sized enterprises. Also

according to the Department of Trade and Industries, the municipality of San

Francisco was recognized anew as the most competitive municipality in the Caraga

Region for the past four (4) runs of the Cities & Municipalities Competitiveness Index

Ranking since 2013. On top of this, LGU-San Francisco is also ranked 5th among

490 1st and second-class municipalities nation-wide in the area of Government

Efficiency. In terms of over-all ranking among the same income class of LGUs all

over the country it is at number 29 or at the top 6%. The researchers wanted to know

how did they cope-up considering the fact that San Francisco was one of the top-

performers in income-related works.

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Respondents of the Study

The participants of this study are the owners of micro, small, and

medium businesses in San Francisco, Agusan del Sur. Preferably, who are

registered to the Department of Trade and Industry, and are greatly affected and

successfully bounced back from the effects of COVID-19 pandemic lockdowns and

who are still currently in business.

Research Instrument

The researchers will gather the data through survey questionnaire. Since the

study is to present the effects of COVID-19 restrictions to the MSME’s, the

researchers formulated a set of questions to determine the data. Respondents will

be asked to answer the survey questionnaires regarding the effects of COVID-19

restrictions to the owners of micro, small and medium-sized enterprises.

Validity of the Research Instrument

The set of formulated questions by the researchers will be presented to the

experts of their own field for corrections, comments and suggestions.

Reliability of the Research Instrument

Scale Reliability Statistics

Cronbach's α

scale 0.85

The reliability of the questionnaire will be tested using the reliability analysis of

Jamovi. All the items in the questionnaire got a Cronbach Alpha of more than .70.

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Results revealed that overall, it satisfied the criterion for reliability which is equal to

.85.

Data Gathering Procedure

The researchers will make an intent letter to the Municipality of San Francisco

Office asking permission for their contact number. Researchers will then contact

them and be asked if they are available to answer the survey questionnaires. They

will also be informed beforehand that we protect each and everyone’s privacy and

any personal information that are irrelevant to the study will not be asked and we can

clarify the questions that might be confusing to them.

Moreover, the researchers will be using random sampling method. The

random sampling is an appropriate procedure in choosing the sample for the

research as the respondents will be chosen randomly.

Statistical Treatment

Frequency Distribution

f
%= × 100
n

Where: % = percent
F= frequency
N= number of cases

Mean

Σ×
×=
n

Where: X= mean

Σx= sum of all scores

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 N= number of cases

Multiple Regression Analysis

y = mx1 + mx2+ mx3+ b

Where: Y= the dependent variable of the regression

M= slope of the regression

X1=first independent variable of the regression

The x2=second independent variable of the regression

The x3=third independent variable of the regression

B= constant

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References:

Shafi, M., Liu, J., & Ren, W. (2020). Impact of COVID-19 pandemic on micro, small,

and medium-sized Enterprises operating in Pakistan. Research in

Globalization, 2, 100018. https://doi.org/10.1016/j.resglo.2020.100018

Kaberia, S. K., & Muathe, S. M. (2020). Effect of Covid-19 pandemic on performance

of women owned micro, small and medium enterprises in Kenya. International

Journal of Social Science Studies.

Statista Research Department (2021). Economic impact of coronavirus COVID-19

Philippines 2020 Retrieved from:

https://www.statista.com/statistics/1103540/philippines-economic-impact-

coronavirus-covid-19/

Department of Trade and Industry (2019). 2019 MSME Statistics Retrieved from:

https://www.dti.gov.ph/resources/msme-statistics/

Veronique. R., & Jones. G. (2021, June 2). Keynesian Stimulus: A Virtuous

Semicircle? Mercatus Center.

https://www.mercatus.org/publications/government-spending/keynesian-

stimulus-virtuous-semicircle

Shinozaki, S. (2021, April 23). COVID-19 Impact on Micro, Small, and Medium-Sized

Enterprises under. Asian Development Bank.

https://www.adb.org/publications/covid-19-impact-msme-under-lockdown-

evidence-rapid-survey-philippines

Amadeo, K. (2021, December 30). How Keynesian Economics Works. The Balance.

https://www.thebalance.com/keynesian-economics-theory-definition-4159776

Abrigo, Michael R. M., Jhanna Uy, Nel Jason Haw, Valerie Gilbert T. Ulep, and Kris

Francisco-Abrigo. 2020. Projected Disease Transmission, Health System

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Requirements, and Macro-economic Impacts of the Coronavirus Disease

2019 (COVID-19) in the Philippines. Philippine Institute for Development

Studies Discussion Paper Series No. 2020-15. April. Manila: Philippine

Institute for Development Studies

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