The potential Value of small ruminant production in the Philippines is measured in terms of its suitability to smallhold farming systems which constitute the vast majority of the farming community. With 68% of the rural population living in poverty, small ruminant raising offers bright prospects of augmenting the dwindling supply of meat and milk in the country, providing economic employment to idle family members, providing additional income to families of smallholders and optimising utilisation of farm resources. The goat population in 1994 was reported to have reached 2.63 million head, about 99% of which was intended to supplement household income. Sheep raising, on the other hand, needs to be further promoted among smallhold farmers; its population as of 1994 was relatively low at 30 000-40 000 heed. Among current production systems, integration with existing crops such as coconut promises to be rewarding, as farm byproducts and residues, as well as the land, are put to better, more efficient use by the animals. Future R&D directions address such concerns as low productivity due to animal health, nutrition and feeding, housing, herd management, and husbandry practices; insufficient marketing systems to promote the commodity; inadequate credit facilities and incentives for smallhold ventures; lack of trained manpower; and unavailability of breeding stocks and production technology.