Microfinancing for the poor

ONCE again, former President Corazon Aquino is calling for people power — this time, to reduce poverty.

Aquino has convened a private sector social consortium to form PinoyME, or Filipino Micro-enterprise. After a year’s existence, PinoyME was launched last Monday.

The movement aims to enable Microfinance institutions (MFIs) to raise P5 billion in capital in order to provide financial services to 5 million clients in poor communities in 5 years. By granting access to savings, credit and insurance to the poor, PinoyME hopes to create a broad middle class.

“PinoyME harnesses people power by bringing various stakeholders together to eventually enable our marginalized countrymen to rise out of poverty through their own efforts,” Aquino said in a speech during the launch.

Read Aquino’s speech.

Nobel laureates Muhammad Yunus and the Grameen Bank have shown that microcredit has been an effective means of reducing poverty in Bangladesh. Aquino hopes to duplicate this in the Philippines, enlarging the scope of microfinancing through PinoyME.

PinoyME aims to raise its capital through donations or low-yielding investments. It has already partnered with the eight largest microfinancing organizations in the Philippines. These provide microfinancing to two million Filipinos.

Daisy Lacibal is 36 years old and a single mother. She is working towards paying off her third loan from the ASA Philippines Foundation. A friend referred her to ASA after the former OFW came home. Lacibal started with a P2,000 loan, which she used to resell soap. After she paid off her first loan, she borrowed P5000 from ASA. After she paid off her second loan, she borrowed P8,000. Now she says that she only has 23 weeks to go before she pays off her loan.

Lacibal adds that for every P1,000 loaned by ASA, one needs to pay back P50 a week in addition to P10 for insurance and another amount for savings.

Now, Lacibal earns P16,000 a month reselling soap and making handicrafts such as faux flowers. She is grateful for the loan, saying that she would not have been able to send her three children to school without it.

Women like Lacibal are the main beneficiaries of microfinancing. 97 percent of Grameen’s borrowers are women. Aquino hopes that women are better borrowers than men, as many men tend to gamble away their loans.

During its first year of operation, PinoyME established its Social Investment Fund (SIF) and launched its website.

The movement’s SIF is different from other forms of credit available to microfinancing organizations because it will focus on increasing the reach of MFI’s towards poorer clients, according to PinoyME steering committee member Ramon del Rosario. In places where there is already a large number of microfinancing organizations, the SIF will finance higher value adding enterprises instead of traditional trading and retail businesses.

Read del Rosario’s speech.

Ultimately, we hope to see most of the micro-entrepreneurs…graduate into more stable businesses that would create jobs in their communities,” says Aquino.