Take microfinance to next level

Over the weekend, ABS-CBN’s Bayan Microfinance Foundation marked its 10th anniversary. I was there at the creation and I felt what a parent feels when an offspring marks a milestone. I recall that management meeting when Gina Lopez presented the business plans for what was to be an extension of what she is already doing for the Bantay Bata program.

I remember Gina justifying putting up the microfinance operations because she found out that in every case of child abuse they have encountered, there is a serious component of hopelessness over poverty that caused and aggravated the violence inflicted on the child. This hopelessness is best addressed not by counseling alone but honest to goodness help to get the family on its feet.

Gina explained that if both mothers and fathers of poor families are able to earn more money through self-employment or jobs, then the welfare of the children would be taken care of better. They would have better health, better education and better housing. They will grow up in families that work and care for each other, living the values of model citizens. That should also reduce cases of child abuse.

I also remember Gina telling us after a devastating typhoon that relief operations are not enough. We have to help people recover their ability to earn livelihood income. Thus, we ended giving microfinance loans for fishermen to build fishing boats and set up cooperatives to handle their fuel needs, among others.

Over a press lunch last Friday at the Bangko Sentral, BSP Governor Say Tetangco recognized the contributions of non-bank NGOs, like ABS-CBN’s Bayan Microfinance Foundation, in the search for "new and better ways to free millions of Filipinos still living in poverty… to accelerate the growth of the microfinance sector in the Philippines."  

Governor Tetangco was particularly elated after he was informed that the ABS-CBN group has decided to bring microfinance in the Philippines to the next level by sharing its wealth of knowledge and experience with rural banks, other NGOs and the "entrepreneurial poor". "Indeed," the BSP Chief said, "providing training and education for the key sectors which make up the microfinance industry is a logical path toward sustainability."

It was the late BSP Governor Paeng Buenaventura who first placed the powers and resources of the Central Bank in support of microfinance. Paeng always said that the rich can take care of themselves but the government and the banking industry have the obligation to help the poor uplift themselves and break out of the cycle of poverty through microfinance.

This is what Governor Tetangco was referring to when he said that the ABS-CBN microfinance effort "complements the Economic and Financial Literacy Program of the Bangko Sentral which covers microfinance;   continuing economic and financial education for journalists; consumer protection for bank customers; and money management program for OFWs and their families and as well as elementary students."

According to the Governor, "latest estimates indicate that NGOs, cooperatives and banks are the principal providers of microfinance. Combined, they serve over 1.7 million clients or approximately 1/3 of the potential market for microfinance." ABS-CBN’s microfinance effort has lent over P5 billion over the last 10 years at 96 percent repayment. The good news is, microfinance has become sustainable, financially.

There is now a mix of proponents and their motives, the Governor noted. "A few large MFIs maintain that their main purpose is to help the poor uplift their lives. However, rural banks and commercial banks have entered the fray with purely business objectives… They have discovered that lending to the bottom of the pyramid is a very attractive business proposition."

But it was pointed out by Ed Morato, president of the ABS-CBN Bayan Microfinance Foundation, financial measures of sustainability are not enough. "The question remained as to whether they were making a big difference in the mission of poverty alleviation and the upliftment of the quality of lives of the poor."

This is how and why under Morato’s direction ABS-CBN’s microfinance efforts have been taken to the next level. Microfinancing, according to Morato, merely serves as the strategic means to help fight poverty, and not its end. "The challenge for Bayan Mircofinance, as for other MFIs, is how to become more and more social and more and more entrepreneurial."

To incorporate the social dimensions and monitor the progress of beneficiaries, loan officers are told their job is not simply to lend money, but to nurture and grow the livelihood of clients, to a point of transforming them into viable microenterprises that can sustain the family and provide jobs to jobless neighbors.

A monitoring system was devised to track the sales, asset growth and net worth of clients. Loan officers were themselves trained in basic enterprise management. Loan officers must also track the education, health, and decent living indices of their clients.

To raise the entrepreneurial competency of their clients, Bayan Microfinance launched a grassroots entrepreneurship and management program, Entrep Eskwela, in collaboration with partner MFIs, notably the Center for Community Transformation. They mobilized experts in training small and medium scale entrepreneurs to create new and exciting modules for micro entrepreneurs. The formula is to use Pilipino (and other dialects) as the language of instruction, make the materials highly audio-visual, and entertaining, and increase the interactivity level of the learning experience.

"Our training modules," Morato proudly pointed out, "are designed to appeal more to the wholistic, visual and emotional right brain rather than the cold calculating logic of the left brain. Admittedly, there will be ample left brain exercises such as preparing personal and family budgets, but this would come after much motivational priming."

Beyond entrepreneurship, they are tying up with local governments and their schools to improve workers’ skills and install job placement programs. They are also fielding mobile training vans or roving schools that would impart skills in the culinary arts, hairstyling, welding, dressmaking and other livelihood courses in 2007 and beyond.

I guess this means, it is not enough to merely lend small sums of money to help a mother put up a sari sari store or to make handicrafts to help tide the family over. Morato wants to raise productivity levels of the microfinance client through innovation and technology. He wants to professionalize the enterprise by adopting better management processes, superior systems and efficient practices. He wants to raise their profitability by creating new markets, delighting customers, optimizing the use of resources and improving management effectiveness.

That is taking microfinance to the next level. I remember Senate president Manny Villar telling me many years ago that the problem with our culture is that we have looked at the entrepreneur as less than respectable. That’s why we raise our children to become employees, or worse, lawyers. So unlike the Vietnamese, for instance, where I noticed a micro enterprise in practically every house in Ho Chi Minh city, even if only to sell noodles.

If Morato succeeds, he would be creating a new culture of entrepreneurship at the grassroots, elevating it to a new status of respectability. This could be the answer to our chronic problem of joblessness and may be just what we need to break the back of poverty that continues to oppress the great mass of our people.

Practice makes perfect

Here’s Dr. Ernie E.

"Mom, hey, Mom! Lennie passed his bar exam so we’re going to get married next week!" the bride-to-be was ecstatic.

"Gee, honey, don’t you think you two should wait till he has been practicing for a year or so?" cautioned her mother.

"Oh Mom," said the bride-to-be with a blush, "we HAVE BEEN practicing."

Boo Chanco ‘s e-mail address is [email protected]