During the first and second waves of the COVID-19 pandemic, our business, like many micro, small, and medium enterprises (MSMEs), struggled to survive. The pandemic exposed a painful reality: large companies with vast resources could swiftly adapt, launching e-commerce platforms, enhancing logistics, and executing digital campaigns.
Meanwhile, small businesses lacked the capital, digital literacy, and tools to keep up. Their resilience was admirable, but not enough. Many were unable to compete or remain visible online. The crisis taught us that survival in a digital-first world demands more than hard work. It requires access, support, and the wisdom to navigate rapid change with the right strategies and skills.
As the world moves forward and economies begin to stabilize, many MSMEs are still struggling to catch up. A large number of them still cannot afford paid ads on social media or develop a basic website. As artificial intelligence (AI) enters mainstream business operations, these challenges only grow more complex. AI is often mentioned in headlines and conferences, but for many MSMEs, it remains a vague concept—something out of reach, something designed only for big players.
Yet, these are the very businesses that form the foundation of our economy. MSMEs account for 99.63% of all business establishments in the Philippines and employ millions across the country.1 Their collective impact is enormous.
As AI rapidly transforms global industries, Philippine MSMEs stand at a critical crossroads. They must learn how to leverage AI to enhance innovation, efficiency, and competitiveness, or risk being left behind in an increasingly digital and data-driven world.
The Current Landscape of AI Adoption Among MSMEs
Despite the global surge in AI adoption, many Philippine MSMEs continue to lag behind. According to a study by the Philippine Institute for Development Studies (PIDS), as of 2021, only 14.9% of firms in the country had implemented any form of AI. Most of which are larger companies concentrated in urban areas.2 This highlights a significant digital divide that underscores both a challenge and a critical opportunity for inclusive innovation.
AI adoption is notably higher in industries such as Information and Communications Technology (ICT) and Business Process Outsourcing (BPO), with adoption rates of 5.94% and 7.19%, respectively. In contrast, sectors like agriculture remain far behind, with only 1.55% AI adoption. These disparities reflect how technological advancement is unevenly distributed, often favoring well-resourced firms in metropolitan regions over smaller businesses in rural or underserved areas.
Despite the promise of AI, several structural barriers continue to hinder its widespread adoption among micro, small, and medium enterprises (MSMEs) in the Philippines:
Limited Infrastructure: Many MSMEs operate in areas with poor internet connectivity and outdated hardware, restricting their ability to access and deploy AI-powered tools effectively.
Skills and Awareness Gap: A significant number of small business owners are unaware of AI's potential applications. Moreover, most lack access to upskilling programs or technical support needed to integrate AI into their operations.2
Financial Constraints: Limited funding, compounded by difficulties in accessing credit, prevents many MSMEs from investing in modern technologies such as AI.
These barriers are further exacerbated by regional inequalities, as digital infrastructure and AI adoption efforts are concentrated primarily in Metro Manila and other highly urbanized areas—leaving rural-based MSMEs at a significant disadvantage.
Despite these challenges, recent data reflect a rising optimism and openness to AI among both Filipino workers and business leaders.
According to the JobStreet by SEEK Decoding Global Talent Report 2024, 46% of Filipino workers now report using AI tools monthly, surpassing the global average of 39%.3 This notable uptake signals the increasing digital adaptability of the Filipino workforce and their readiness to thrive in a future shaped by intelligent technologies.
Echoing this positive trend, the PwC 2025 Global CEO Survey found that 75% of Philippine CEOs express trust in integrating AI into their companies’ core processes.4 This growing confidence highlights a strategic shift among Philippine business leaders, who now place technological innovation, particularly AI, at the forefront of their organizational growth agendas.
Together, these indicators suggest that while systemic challenges remain, the Philippines is gradually building a foundation of AI readiness, with both the workforce and leadership increasingly aligned in embracing the potential of intelligent automation.
How AI Can Transform MSMEs
When implemented strategically, artificial intelligence (AI) can unlock transformative benefits for micro, small, and medium enterprises (MSMEs). According to a report from Harvard Business Review, small businesses around the world are already leveraging AI to streamline operations, personalize marketing, and improve customer service. Impressively, 62% of these businesses reported increased revenue after adopting AI technologies.5
Productivity challenges continue to be a pressing issue for MSMEs. A 2024 study by Slack, a Salesforce company, revealed that small business owners lose an average of 96 minutes of productivity per day, totaling nearly three weeks of lost time per year. The study highlights how AI and automation can help reclaim this lost time by simplifying repetitive tasks and streamlining workflows. Interestingly, millennial business owners were found to be more likely than Gen Z to adopt technology that optimizes time and resources.6
Kris Billmaier, Executive Vice President and General Manager at Salesforce, affirms this trend, noting that:
“AI and agents are reshaping what’s possible across business functions like marketing, sales, service, and commerce.”7
For MSMEs, this presents a critical opportunity to embrace AI as a catalyst for operational agility, customer-centricity, and innovation.
The real-world benefits of AI are further underscored by a landmark study conducted by researchers from Stanford University and the Massachusetts Institute of Technology (MIT). The study found that customer service agents who used generative AI tools experienced a 14% increase in productivity, with the most significant gains observed among less-experienced agents. AI helped them automate routine tasks, offer more accurate responses, and focus on complex customer needs. This thereby enhances the quality of service and improves employee performance.8
Artificial intelligence (AI) is a versatile tool that micro and small enterprises (MSMEs) can utilize in practical ways. Here are some of the most impactful applications:
Gallup’s latest research on workplace technology trends reinforces the value of AI for MSMEs. The study found that small business owners who invested in AI and automation tools saw a 23% increase in employee productivity and a 19% reduction in operational costs.9
The Role of Government and Ecosystem Support
ASEAN countries are actively developing policies to harness the transformative potential of artificial intelligence (AI) while mitigating associated risks. Each nation’s approach reflects a balance between technological ambition and contextual realities such as governance structures, economic priorities, and digital infrastructure readiness.
In Singapore, the government launched the National AI Strategy in 2019 and updated it in 2023. This roadmap is complemented by the Model AI Governance Framework developed by the Personal Data Protection Commission (PDPC). Singapore has committed over SGD 500 million to AI research and development, emphasizing ethical innovation, sectoral transformation (e.g., healthcare, urban planning), and international collaboration.10
Malaysia’s strategy is articulated through the National AI Roadmap (2021) and the broader National Fourth Industrial Revolution (4IR) Policy. These initiatives aim to balance economic diversification with ethical AI deployment, promoting practical applications in manufacturing, agriculture, and healthcare.11
Thailand unveiled its National AI Strategy and Ethics Guidelines in 2021. The strategy prioritizes AI-driven economic competitiveness while incorporating responsible and ethical development principles. Emphasis is placed on human capital development and establishing digital ecosystems to support AI startups.12
Indonesia envisions becoming a regional AI hub, as outlined in its National Strategy for Artificial Intelligence (2020–2045). The strategy focuses on five priority sectors: healthcare, bureaucratic reform, education, food security, and mobility.13
According to a comprehensive regional analysis by the ASEAN-Korea Cultural and Creative Sectors Research (2023), several key policy trends are emerging across Southeast Asia:
Common AI Policy Elements of ASEAN Countries
Economic Development Focus: AI is viewed as a catalyst for productivity and economic transformation.
Public-Private Partnerships: Most strategies stress collaboration among government, industry, and academia.
Ethical Considerations: While interpretations vary, all countries are addressing the need for responsible AI governance.
Talent Development: Recognizing the AI skills gap, governments are investing in AI education and workforce reskilling.
Sectoral Applications: Common target sectors include healthcare, manufacturing, education, and public administration.
Regional Variations of AI Policies of ASEAN Countries
The variation in AI strategies can be attributed to several contextual factors:
Digital Infrastructure Readiness: Countries like Singapore and Malaysia, with advanced infrastructure, have more mature policies.
Governance Traditions: Policymaking is influenced by each country’s administrative models and regulatory environment.
Economic Structures: AI priorities align with dominant industries. For example, the Philippines emphasizes the use of AI in services and the BPO sector.
Cultural and Religious Contexts: Nations such as Indonesia and Brunei incorporate Islamic ethical principles into AI policy.
Global Alignment: Engagement levels with international AI governance frameworks also differ across ASEAN.
The AI initiatives of neighboring ASEAN countries offer valuable insights and potential models for shaping the Philippines’ own roadmap for artificial intelligence (AI) development. These regional strategies can serve as a powerful reference point for forecasting how AI might transform the Philippine micro, small, and medium enterprise (MSME) sector in the coming years.
In 2024, the Philippine government advanced its AI agenda by launching the National AI Strategy Roadmap 2.0 and establishing the Center for Artificial Intelligence Research (CAIR). Building on earlier efforts, the updated roadmap highlights key priorities such as generative AI, ethical governance, workforce upskilling, and increasing AI research funding to 1% of GDP. CAIR, the country’s first AI research hub, focuses on developing AI solutions for agriculture, urban planning, and disaster resilience. These initiatives aim to accelerate innovation, drive digital transformation, and position the Philippines as a regional leader in AI.14
While these are promising first steps, more comprehensive and inclusive measures are needed to ensure that MSMEs, who make up the backbone of the Philippine economy, can access and benefit from AI technologies.
Strategic Entry Points for AI in MSMEs
Adopting artificial intelligence (AI) doesn't require immediate, large-scale overhauls. For small and medium businesses in the Philippines, a gradual and strategic approach is the best way to grow. Below is a practical, research-informed roadmap to help guide AI integration in the Philippine business landscape:
1. Learn What AI Is and How It Can Help You
First things first: understand what AI is and how it can make your life easier. Many small businesses are not yet familiar with AI. Think of AI as innovative tools that can do tasks for you, like answering customer questions, making your operations run smoother, or even helping you sell more.
2. Start Small and See Quick Wins
Don't try to change everything at once. Pick a small, simple task where AI can make a big difference right away. This helps you see the benefits quickly and build confidence.
3. Help Your Team Learn
AI tools are only as good as the people using them. Teach your employees the basics of computer skills and how to utilize new digital tools. They don't need to be AI experts, but they should be comfortable working with these new technologies.
4. Work With Others, Don't Do It Alone
You don't have to build everything yourself. Team up with tech companies, new startups, or even universities. They can help you create or find AI tools that fit your exact business needs.
5. Use AI Responsibly and Safely
As you start using AI, always think about doing it the right way. This means protecting your customers' private information, ensuring the AI operates fairly for everyone, and being transparent about how AI informs decision-making.
AI as a Growth Imperative for Philippine MSMEs
Artificial Intelligence (AI) is a strategic necessity for the sustainable growth of micro, small, and medium enterprises (MSMEs) in the Philippines. For resource-constrained businesses, AI offers practical solutions to improve productivity, enhance customer service, and streamline operations.
Although the country still faces considerable challenges in digital transformation, such as limited infrastructure, skills gaps, and low awareness, these obstacles are certainly addressable. With the right combination of education, public-private partnerships, infrastructure investments, and supportive policies, MSMEs can unlock the transformative potential of AI.
The future of Philippine MSMEs will not only depend on entrepreneurial grit and creativity but also on their readiness to embrace digital innovation. Adopting AI today is a step toward building a more resilient, efficient, and globally competitive MSME sector tomorrow.
ABOUT THE AUTHOR
Marlon is the Editor-in-Chief and Managing Director of Molmisa Point, leading its vision as a premier digital platform for leadership, business, and personal growth. A thriving leadership and management consultant, corporate trainer, and best-selling book author in the Philippines, he is also the founder of Mzone Training and Chairman of the Molmisa Group. Marlon holds a Master’s in Public Management from Ateneo de Manila University - School of Government and a postgraduate certificate from the Asian Institute of Management. He also co-founded the Business and Management Consultants Association of the Philippines.
Footnotes
1 Department of Trade and Industry (DTI), MSME Statistics, 2024.
2 Philippine Institute for Development Studies (PIDS), Readiness for AI Adoption of Philippine Business and Industry: The Government’s Role in Fostering Innovation and AI-Driven Industrial Development, 2024.
3 JobStreet by SEEK, Decoding Global Talent Report, 2024.
4 PwC, 2025 Global CEO Survey, 2025.
5 Chui, M., Manyika, J., & Miremadi, M., The State of AI in 2023, Harvard Business Review, 2023.
6 Salesforce, Small Business Productivity Trends 2024, 2024.
7 Salesforce, SMBs AI Trends 2025, 2025.
8 Brynjolfsson, E., Rock, D., & Syverson, C., The Productivity J-Curve: How Intangibles Complement General Purpose Technologies, Stanford & MIT Study, 2023.
9 Gallup, State of the Global Workforce Report, 2023.
10 Smart Nation and Digital Government Office (SNDGO), Singapore Digital Government Blueprint, 2023.
11 Ministry of Science, Technology, and Innovation (MOSTI), National Policy on Science, Technology and Innovation (NPSTI), 2021.
12 Digital Economy Promotion Agency (DEPA), Thailand Digital Economy Development Plan, 2021.
13 Agency for the Assessment and Application of Technology (BPPT), Indonesia Digital Transformation Framework, 2020.
14 Department of Trade and Industry (DTI), DTI Drives AI Innovation through National Roadmap 2.0 and CAIR Launch, 2023.
The Response of MSMEs to the Rise of AI
During the first and second waves of the COVID-19 pandemic, our business, like many micro, small, and medium enterprises (MSMEs), struggled to survive. The pandemic exposed a painful reality: large companies with vast resources could swiftly adapt, launching e-commerce platforms, enhancing logistics, and executing digital campaigns.
Meanwhile, small businesses lacked the capital, digital literacy, and tools to keep up. Their resilience was admirable, but not enough. Many were unable to compete or remain visible online. The crisis taught us that survival in a digital-first world demands more than hard work. It requires access, support, and the wisdom to navigate rapid change with the right strategies and skills.
As the world moves forward and economies begin to stabilize, many MSMEs are still struggling to catch up. A large number of them still cannot afford paid ads on social media or develop a basic website. As artificial intelligence (AI) enters mainstream business operations, these challenges only grow more complex. AI is often mentioned in headlines and conferences, but for many MSMEs, it remains a vague concept—something out of reach, something designed only for big players.
Yet, these are the very businesses that form the foundation of our economy. MSMEs account for 99.63% of all business establishments in the Philippines and employ millions across the country.1 Their collective impact is enormous.
As AI rapidly transforms global industries, Philippine MSMEs stand at a critical crossroads. They must learn how to leverage AI to enhance innovation, efficiency, and competitiveness, or risk being left behind in an increasingly digital and data-driven world.
The Current Landscape of AI Adoption Among MSMEs
Despite the global surge in AI adoption, many Philippine MSMEs continue to lag behind. According to a study by the Philippine Institute for Development Studies (PIDS), as of 2021, only 14.9% of firms in the country had implemented any form of AI. Most of which are larger companies concentrated in urban areas.2 This highlights a significant digital divide that underscores both a challenge and a critical opportunity for inclusive innovation.
AI adoption is notably higher in industries such as Information and Communications Technology (ICT) and Business Process Outsourcing (BPO), with adoption rates of 5.94% and 7.19%, respectively. In contrast, sectors like agriculture remain far behind, with only 1.55% AI adoption. These disparities reflect how technological advancement is unevenly distributed, often favoring well-resourced firms in metropolitan regions over smaller businesses in rural or underserved areas.
Despite the promise of AI, several structural barriers continue to hinder its widespread adoption among micro, small, and medium enterprises (MSMEs) in the Philippines:
These barriers are further exacerbated by regional inequalities, as digital infrastructure and AI adoption efforts are concentrated primarily in Metro Manila and other highly urbanized areas—leaving rural-based MSMEs at a significant disadvantage.
Despite these challenges, recent data reflect a rising optimism and openness to AI among both Filipino workers and business leaders.
According to the JobStreet by SEEK Decoding Global Talent Report 2024, 46% of Filipino workers now report using AI tools monthly, surpassing the global average of 39%.3 This notable uptake signals the increasing digital adaptability of the Filipino workforce and their readiness to thrive in a future shaped by intelligent technologies.
Echoing this positive trend, the PwC 2025 Global CEO Survey found that 75% of Philippine CEOs express trust in integrating AI into their companies’ core processes.4 This growing confidence highlights a strategic shift among Philippine business leaders, who now place technological innovation, particularly AI, at the forefront of their organizational growth agendas.
Together, these indicators suggest that while systemic challenges remain, the Philippines is gradually building a foundation of AI readiness, with both the workforce and leadership increasingly aligned in embracing the potential of intelligent automation.
How AI Can Transform MSMEs
When implemented strategically, artificial intelligence (AI) can unlock transformative benefits for micro, small, and medium enterprises (MSMEs). According to a report from Harvard Business Review, small businesses around the world are already leveraging AI to streamline operations, personalize marketing, and improve customer service. Impressively, 62% of these businesses reported increased revenue after adopting AI technologies.5
Productivity challenges continue to be a pressing issue for MSMEs. A 2024 study by Slack, a Salesforce company, revealed that small business owners lose an average of 96 minutes of productivity per day, totaling nearly three weeks of lost time per year. The study highlights how AI and automation can help reclaim this lost time by simplifying repetitive tasks and streamlining workflows. Interestingly, millennial business owners were found to be more likely than Gen Z to adopt technology that optimizes time and resources.6
Kris Billmaier, Executive Vice President and General Manager at Salesforce, affirms this trend, noting that:
For MSMEs, this presents a critical opportunity to embrace AI as a catalyst for operational agility, customer-centricity, and innovation.
The real-world benefits of AI are further underscored by a landmark study conducted by researchers from Stanford University and the Massachusetts Institute of Technology (MIT). The study found that customer service agents who used generative AI tools experienced a 14% increase in productivity, with the most significant gains observed among less-experienced agents. AI helped them automate routine tasks, offer more accurate responses, and focus on complex customer needs. This thereby enhances the quality of service and improves employee performance.8
Artificial intelligence (AI) is a versatile tool that micro and small enterprises (MSMEs) can utilize in practical ways. Here are some of the most impactful applications:
Gallup’s latest research on workplace technology trends reinforces the value of AI for MSMEs. The study found that small business owners who invested in AI and automation tools saw a 23% increase in employee productivity and a 19% reduction in operational costs.9
The Role of Government and Ecosystem Support
ASEAN countries are actively developing policies to harness the transformative potential of artificial intelligence (AI) while mitigating associated risks. Each nation’s approach reflects a balance between technological ambition and contextual realities such as governance structures, economic priorities, and digital infrastructure readiness.
In Singapore, the government launched the National AI Strategy in 2019 and updated it in 2023. This roadmap is complemented by the Model AI Governance Framework developed by the Personal Data Protection Commission (PDPC). Singapore has committed over SGD 500 million to AI research and development, emphasizing ethical innovation, sectoral transformation (e.g., healthcare, urban planning), and international collaboration.10
Malaysia’s strategy is articulated through the National AI Roadmap (2021) and the broader National Fourth Industrial Revolution (4IR) Policy. These initiatives aim to balance economic diversification with ethical AI deployment, promoting practical applications in manufacturing, agriculture, and healthcare.11
Thailand unveiled its National AI Strategy and Ethics Guidelines in 2021. The strategy prioritizes AI-driven economic competitiveness while incorporating responsible and ethical development principles. Emphasis is placed on human capital development and establishing digital ecosystems to support AI startups.12
Indonesia envisions becoming a regional AI hub, as outlined in its National Strategy for Artificial Intelligence (2020–2045). The strategy focuses on five priority sectors: healthcare, bureaucratic reform, education, food security, and mobility.13
According to a comprehensive regional analysis by the ASEAN-Korea Cultural and Creative Sectors Research (2023), several key policy trends are emerging across Southeast Asia:
Common AI Policy Elements of ASEAN Countries
Regional Variations of AI Policies of ASEAN Countries
The variation in AI strategies can be attributed to several contextual factors:
The AI initiatives of neighboring ASEAN countries offer valuable insights and potential models for shaping the Philippines’ own roadmap for artificial intelligence (AI) development. These regional strategies can serve as a powerful reference point for forecasting how AI might transform the Philippine micro, small, and medium enterprise (MSME) sector in the coming years.In 2024, the Philippine government advanced its AI agenda by launching the National AI Strategy Roadmap 2.0 and establishing the Center for Artificial Intelligence Research (CAIR). Building on earlier efforts, the updated roadmap highlights key priorities such as generative AI, ethical governance, workforce upskilling, and increasing AI research funding to 1% of GDP. CAIR, the country’s first AI research hub, focuses on developing AI solutions for agriculture, urban planning, and disaster resilience. These initiatives aim to accelerate innovation, drive digital transformation, and position the Philippines as a regional leader in AI.14
While these are promising first steps, more comprehensive and inclusive measures are needed to ensure that MSMEs, who make up the backbone of the Philippine economy, can access and benefit from AI technologies.
Strategic Entry Points for AI in MSMEs
Adopting artificial intelligence (AI) doesn't require immediate, large-scale overhauls. For small and medium businesses in the Philippines, a gradual and strategic approach is the best way to grow. Below is a practical, research-informed roadmap to help guide AI integration in the Philippine business landscape:
1. Learn What AI Is and How It Can Help You
First things first: understand what AI is and how it can make your life easier. Many small businesses are not yet familiar with AI. Think of AI as innovative tools that can do tasks for you, like answering customer questions, making your operations run smoother, or even helping you sell more.
2. Start Small and See Quick Wins
Don't try to change everything at once. Pick a small, simple task where AI can make a big difference right away. This helps you see the benefits quickly and build confidence.
3. Help Your Team Learn
AI tools are only as good as the people using them. Teach your employees the basics of computer skills and how to utilize new digital tools. They don't need to be AI experts, but they should be comfortable working with these new technologies.
4. Work With Others, Don't Do It Alone
You don't have to build everything yourself. Team up with tech companies, new startups, or even universities. They can help you create or find AI tools that fit your exact business needs.
5. Use AI Responsibly and Safely
As you start using AI, always think about doing it the right way. This means protecting your customers' private information, ensuring the AI operates fairly for everyone, and being transparent about how AI informs decision-making.
AI as a Growth Imperative for Philippine MSMEs
Artificial Intelligence (AI) is a strategic necessity for the sustainable growth of micro, small, and medium enterprises (MSMEs) in the Philippines. For resource-constrained businesses, AI offers practical solutions to improve productivity, enhance customer service, and streamline operations.
Although the country still faces considerable challenges in digital transformation, such as limited infrastructure, skills gaps, and low awareness, these obstacles are certainly addressable. With the right combination of education, public-private partnerships, infrastructure investments, and supportive policies, MSMEs can unlock the transformative potential of AI.
The future of Philippine MSMEs will not only depend on entrepreneurial grit and creativity but also on their readiness to embrace digital innovation. Adopting AI today is a step toward building a more resilient, efficient, and globally competitive MSME sector tomorrow.
Marlon is the Editor-in-Chief and Managing Director of Molmisa Point, leading its vision as a premier digital platform for leadership, business, and personal growth. A thriving leadership and management consultant, corporate trainer, and best-selling book author in the Philippines, he is also the founder of Mzone Training and Chairman of the Molmisa Group. Marlon holds a Master’s in Public Management from Ateneo de Manila University - School of Government and a postgraduate certificate from the Asian Institute of Management. He also co-founded the Business and Management Consultants Association of the Philippines.
Footnotes
1 Department of Trade and Industry (DTI), MSME Statistics, 2024.
2 Philippine Institute for Development Studies (PIDS), Readiness for AI Adoption of Philippine Business and Industry: The Government’s Role in Fostering Innovation and AI-Driven Industrial Development, 2024.
3 JobStreet by SEEK, Decoding Global Talent Report, 2024.
4 PwC, 2025 Global CEO Survey, 2025.
5 Chui, M., Manyika, J., & Miremadi, M., The State of AI in 2023, Harvard Business Review, 2023.
6 Salesforce, Small Business Productivity Trends 2024, 2024.
7 Salesforce, SMBs AI Trends 2025, 2025.
8 Brynjolfsson, E., Rock, D., & Syverson, C., The Productivity J-Curve: How Intangibles Complement General Purpose Technologies, Stanford & MIT Study, 2023.
9 Gallup, State of the Global Workforce Report, 2023.
10 Smart Nation and Digital Government Office (SNDGO), Singapore Digital Government Blueprint, 2023.
11 Ministry of Science, Technology, and Innovation (MOSTI), National Policy on Science, Technology and Innovation (NPSTI), 2021.
12 Digital Economy Promotion Agency (DEPA), Thailand Digital Economy Development Plan, 2021.
13 Agency for the Assessment and Application of Technology (BPPT), Indonesia Digital Transformation Framework, 2020.
14 Department of Trade and Industry (DTI), DTI Drives AI Innovation through National Roadmap 2.0 and CAIR Launch, 2023.
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