Enabling Access to Government Social Security Services through Microfinance

by Romeo Arahan Jr.

It is ironic that the poor get social security through microinsurance from microfinance institutions first before they are able to access government-mandated social security benefits. Based on SEDPI’s research, 90% of microfinance clients have access to microinsurance from MFIs while only 10% have access to Social Security System (SSS), PhilHealth and Pag-IBIG. The public sector’s social security programs are less accessible than the private sector’s.

The important benefits of government-mandated social security services are home ownership, pension for retirement, and access to health services. These social security services address basic needs that lighten the financial burden of the poor. The lack of access to these social security services hinders the poor to enjoy these benefits and exclude them from social welfare.

Mariel Vincent Rapisura, president and chief executive officer of SEDPI, facilitating “innovative meeting” with employees of Ramon Aboitiz Foundation, Inc., (RAFI) said that MFIs are in the best position to bridge the social and financial inclusion gap. “MFIs can apply as collection agents of government-mandated social services to augment current microfinance operations,” he said. “Forging strategic partnerships with government agencies enable both MFIs and government to achieve poverty eradication through financial inclusion. These are good client retention and client expansion strategies for MFIs.” he added.

MFIs benefit as collection agents since they earn up to 7% of the amount collected. “They can design savings products that enable the poor to save and afford payment to government social security services. Aside from the commission they earn, MFIs also benefit from this additional liquidity.” Rapisura explained.

Through savings product development and acting as collection agents MFIs are able to provide access to government social security services to the poor. This is an excellent opportunity for MFIs to attain financial sustainability while at the same time addressing social and financial exclusion.

SEDPI conducts “Innovative Meetings” to microfinance institutions. It is a service that aims to come up with social innovations – doing things differently that create both social and economic value. The innovative meeting service with RAFI Microfinance was held on November 12, 2015 in Cebu City.