Profiling of Underground Economy Towards Microenterprise Establishment Strategies

The underground businesses, while unregulated, still provide essential income opportunities, yet they face significant barriers that hinder their transition into the formal sector. This study profiled underground economy operators in Roxas City, Capiz, to support their transition into formal microenterprises through tailored establishment strategies. Using a mixed method explanatory sequential design, data were gathered from 346 underground operators across 10 barangays with the lowest National Tax Allotment. Surveys captured demographic and business profiles, while follow-up interviews provided qualitative insights into challenges and needs. Findings revealed that most operators were women, aged 32 to 45, with limited formal education, capitalization below ₱50,000, and businesses were predominantly in retail and food services. Key challenges included costly and complex registration, financial constraints, intense market competition, and limited government support, which hindered formalization and business sustainability. Institutional barriers, particularly the bureaucratic registration process and exclusion from government programs, reinforced informality. The study underscored the necessity of accessible registration processes, financial assistance, and capacity-building initiatives to facilitate integration into the formal economy. Policy recommendations included streamlining business registration at the barangay level through the proposed specialized barangay-level permit, expanding financial support mechanisms, and enhancing entrepreneurial training programs. Addressing these barriers is crucial to fostering an inclusive business environment that empowers underground operators, promotes sustainable microenterprise development, and strengthens local economic resilience.