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Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
AT A GLANCE:
A cottage industry refers to any economic activity carried on mainly in the homes for profit.
It is usually small-scale and mainly done with the help of family members. (Section 11, Republic Act No. 3470)
To organize, revive, encourage and promote the establishment of cottage industries in the Philippines, the National Cottage Industries Development Authority (NACIDA) was created under the then-Department of Commerce and Industry (now Department of Trade and Industry or DTI). (Section 2, R.A. No. 3470)
A cottage industry refers to any economic activity carried on mainly in the homes for profit. It is usually small-scale and mainly done with the help of family members.
The law says:
The term “cottage industry” as used in this Act shall mean an economic activity in a small scale which is carried on mainly in the homes or in other places for profit and which is mainly done with the help of the members of the family.
It shall include the following:
- Fiber crafts such as making of abaca ropes and twines, buntal fiber extracting and buri leaf braiding;
- Woodcraft such as making of wooden shoes, wooden fans, walking sticks (canes) and wood carvings;
- Hat weaving such as Calasiao, buri, rafia, buntal and bamboo hats, salakots and helmets;
- Mat weaving such as door, sleeping, buri, pandan, balihan, and sabutan mats;
- Metal craft such as making of jewelries, knives, boloes, scissors, razors, silverwares, and brassworks;
- Ceramics such as making of potteries, hollow blocks, tiles, firebricks, clay stoves and other ceramics products;
- Shell craft such as making of sea shell buttons and coconut shell products;
- Bamboo and rattan crafts such as making of hammocks, basketry, making of sawali and other bamboo and rattan furniture and articles;
- Small agricultural hand tools such as plow point;
- Toy craft such as making of dolls and toys;
- Embroidery industries;
- Needle craft (including knitting and crocheting);
- Loom weaving such as making of fish nets, making of mosquito nets, weaving of Ilocano cloth, Igorot weaving, piña “barong Filipino,” jusi and sinamay;
- Machine parts manufacture such as wheels and stone mortars;
- Poultry including duck raising and “balut” making;
- Piggery;
- Home cigar making;
- Food preservation and canning, including the making of vinegar wine, “bagoong,” “mazapan” pili, “tostado compitado” de pili, “bucayo;”
- Small mining operations;
- Other related crafts such as making of brooms, nito and buri bags, “karagamoy” bags, bead making, guitar and other musical instruments; and
- Such other industries clone in the home with the aid of electrical gadgets and/or by hand manipulation.” (Section 11, R.A. No. 3470)
The law likewise provides that cottage industries shall be owned and operated by Filipino citizens, or if a corporation, partnership or cooperative, at least seventy-five per cent (75%) of its capital and its stockholders and all members of its Board of Directors shall be Filipino citizens.
Any person, corporation, partnership, or association who desires to avail of the benefits and assistance in relation to cottage industries may register with NACIDA. Any registered person or firm who fails to comply with the rules and regulations issued by NACIDA shall not be entitled to the assistance and benefits of the law, including but not limited to granting of loans to fund its cottage industry. (Section 11, R.A. No. 3470)
From Cottage Industries to Small and Medium Enterprises
Former President Corazon Aquino issued Executive Order No. 133, reorganizing the Department of Trade and Industry (DTI). Section 18 thereof provided that the NACIDA was reorganized into the Cottage Technology Center (CITC), and its functions, other than technology development and training, were transferred to the Bureau of Small and Medium Business Development and relevant line operating units of the DTI.
Upon the enactment of the Magna Carta for Small Enterprises (Republic Act No. 6977) in 1990, the capitalization for a cottage enterprise was changed, viz.:
“SEC. 3. Small and Medium Enterprises as Beneficiaries. – “Small and medium enterprise” shall be defined as any business activity or enterprise engaged in industry, agribusiness and/or services, whether single proprietorship, cooperative, partnership or corporation whose total assets, inclusive of those arising from loans but exclusive of the land on which the particular business entity’s office, plant, and equipment are situated, must have value falling under the following categories:
micro : less than ₱50,000
cottage : ₱50,001 – ₱500,000
small : ₱500,001 – ₱5,000,000
medium: ₱5,000,001 – ₱20,000,000
In a generic sense, all enterprises with total assets of Five million pesos (₱5,000,000) and below shall be called small enterprises.” (Section 3, R.A. No. 6977)
In 1998, Republic Act No. 8289 was enacted to amend the Magna Carta for Small Enterprises (Republic Act No. 6799), wherein the term cottage industry or cottage enterprise has been completely eliminated.
SEC. 3. Small and Medium Enterprise as Beneficiaries. – “Small and Medium Enterprise” shall be defined as any business activity or enterprise engaged in industry, agribusiness and/or services, whether single proprietorship, cooperative, partnership or corporation whose total assets, inclusive of those arising from loans but exclusive of the land on which the particular business entity’s office, plant, and equipment are situated, must have value falling under the following categories:
micro : less than ₱1,500,001
small : ₱1,500,001 – ₱15,000,000
medium: ₱15,000,001 – ₱60,000,00
The above definitions shall be subject to review and adjustment by the said Council motu proprio or upon recommendation of sectoral organization(s) taking into account inflation and other economic indicators. The Council may use as variables the number of employees, equity capital and asset size.
Reference: The case of Sterling Selections Corporations v. Laguna Lake Development Authority (G.R. No. 171427, march 30, 2011)
Read also:
What is a Micro Small Medim Enterprise (MSME)?
Asset Size of Micro, Small and Medium Enterprises
Tax Liability of Micro, Small and Medium Enterprise (MSMEs)
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