In a compelling narrative at the 2nd Socialized Housing Summit, Ms. Marilyn Estrellado of Habitat for Humanity Philippines shared insights into the transformative work of her organization in addressing the critical housing needs across the nation. Held at Ateneo de Manila University on March 18-19, 2024, and organized by ACSent and SEDPI, the summit served as a crucial platform for stakeholders to convene and deliberate on strategies for socialized housing.
Habitat for Humanity Philippines, with its 35-year legacy in the country, has been instrumental in sheltering over 150,000 families, reflecting its commitment to fostering communities and hope. Estrellado emphasized the multifaceted benefits of housing, which span health, sanitation, social cohesion, and the breaking of poverty cycles. Her experience underlines the significance of strategic and sustainable investment in housing to achieve broad developmental impacts.
The organization adopts a PEOPLE-CENTERED approach, encapsulating Resilient, Inclusive, Sustainable, and Empowered (RISE) strategies, thus ensuring that housing initiatives are not merely about constructing buildings but about building resilient communities. Initiatives like the “Panday Buhay” Construction Skills Development Program underscore the importance of skill enhancement and economic resilience for construction workers, contributing to improved standards in the construction industry.
A pivotal aspect of Habitat for Humanity’s strategy involves People-Public-Private Partnerships (P4 Approach), which optimizes resources across financing models, cross-sector collaborations, and innovative solutions to make housing more affordable. Projects such as the Paknaan Housing Project and Humanity Ville Site 2 exemplify successful collaboration among government units, the private sector, and civil society, showcasing effective models of partnership.
Despite the strides made, challenges persist, including mismatches between housing priorities and the needs of low-income families, insufficient government funding, and environmental hazards. However, opportunities for enhancement are plentiful, with the potential to maximize partnerships, provide technical assistance to local government units, engage with the private sector, and collaborate with micro-financing institutions.
Estrellado also highlighted the organization’s shift towards a more integrated approach with the RISE program in 2018, addressing not just housing but also community development, disaster risk reduction, water, sanitation, and hygiene, and partnership development. This shift represents a holistic strategy to empower communities fully.
The presentation detailed various financing and partnership models that Habitat for Humanity employs, from balanced housing compliance and collaborations with the Social Housing Finance Corporation and Pag-IBIG, to community savings mobilization. These models are crucial for navigating the complex landscape of socialized housing and ensuring that projects are both sustainable and impactful.Estrellado concluded her presentation with a call to action, urging continued collaboration and innovation to address the housing sector’s challenges. She underscored the importance of not losing hope despite the difficulties, drawing on the history of housing advocacy in the Philippines as a source of inspiration.
Ateneo de Manila University warmly welcomed delegates to the pivotal 2nd Socialized Housing Summit with open arms and open minds, as Dean Roberto Galang set the stage for a collaborative discourse on tackling the Philippines’ housing crisis.
Dean Galang acknowledged the gravity of the situation, noting the distressing shortfall in socialized housing units—the demand being 500,000, while a mere 11,000 were constructed last year, exacerbating an already 7 million unit shortage.
In his remarks, he brought to light the glaring presence of informal settlements, a visible sign of the dire housing shortage that is far from the norm in other developing nations. The historical perspective provided a sobering reminder of past efforts, including post-independence housing projects in Quezon City, which now call for a renewed commitment to innovation and action. He urged the assembly of thought leaders and stakeholders to engage in a concerted effort, combining legislative and executive solutions, to advance housing solutions with urgency, especially in the face of increasing climate change risks. The summit, co-organized by ACSent and SEDPI on March 18-19, 2024, at the Ateneo de Manila University, aims to harness social entrepreneurship and forge partnerships across sectors to create lasting and meaningful change in providing adequate housing for Filipinos.
Cagayan de Oro, Philippines – In the aftermath of the devastating Tropical Storm Sendong in 2011, which took hundreds of lives and left thousands homeless in Cagayan de Oro, a beacon of hope and innovation emerged through the efforts of Xavier University and its community. Engr. Dexter S. Lo, during the 2nd Socialized Housing Summit, shared the compelling journey of Xavier Ecoville, a project that not only provided shelter to the survivors but also laid the foundation for a sustainable and disaster-resilient community.
Engr. Lo, who played a pivotal role in this initiative, explained the grave reality that led to the creation of Xavier Ecoville. The project was born out of the urgent need to respond to the catastrophic impact of Sendong, which highlighted the city’s vulnerability to natural disasters. Through detailed maps and simulations created by Xavier University’s Engineering Resource Center, the critical areas affected by the flood were identified, underscoring the importance of disaster risk reduction and the need for resilient housing solutions.
Despite early warnings and the clear danger presented by residing near the Cagayan de Oro river, many were caught unprepared when Sendong struck, leading to significant loss of life and property. This tragedy spurred Xavier University, under the leadership of then-President Fr. Roberto Yap, SJ, and the board of trustees, to take decisive action. They launched the Xavier Ecoville Resettlement Project, utilizing 5 hectares of land donated for temporary shelters and another 5 for permanent homes for the flood survivors.
With an overwhelming outpour of support from various donors, the university managed to raise approximately 85 million pesos for the project. This fund not only facilitated the construction of homes but also ensured transparency and accountability, with regular updates provided to the public via the university’s website.
The construction of Xavier Ecoville was a collaborative effort, involving faculty and students from the university’s Engineering Resource Center, architects, international organizations, and even the Philippine Army. This partnership resulted in the creation of temporary bunkhouses and, eventually, permanent homes that housed over 500 families, transforming their lives and providing a new beginning away from the flood-prone areas.
However, Xavier Ecoville’s vision extended beyond merely providing shelter. It aimed to build a community that was not just safe but also sustainable and self-sufficient. This comprehensive approach included the development of social infrastructure such as the St. Francis Xavier Chapel, a community center, and a study center, among others. The project emphasized the importance of integrating technology, resources, and people – focusing on appropriate technology that meets the community’s needs, mobilizing resources through partnerships, and investing in people to foster a strong, resilient community spirit.
As Engr. Lo eloquently put it, Xavier Ecoville is not just about building houses but building a community. The project served as a model for disaster response and community development, showcasing how academic institutions, government, and the private sector can come together to address urgent social issues effectively. It highlighted the role of education, community engagement, and innovative thinking in creating solutions that not only address immediate needs but also ensure long-term sustainability and resilience against future disasters.The success of Xavier Ecoville stands as a testament to the power of collaboration, innovation, and compassion in the face of adversity. It serves as a beacon of hope for other communities facing similar challenges, demonstrating that, with the right approach and commitment, it is possible to turn disaster into an opportunity for growth, development, and a better future for all.
In a recent address at the 2nd Socialized Housing Summit, Vince Rapisura, a pivotal figure in microfinance and social entrepreneurship, presented a compelling case for integrating affordable housing solutions into microfinance. His presentation, rooted in a deep understanding of the challenges faced by low-income Filipinos, offered a fresh perspective on addressing poverty through sustainable housing.
Rapisura, known for his innovative approaches in the field of microfinance, emphasized the necessity of moving beyond traditional loan models to meet the multifaceted needs of impoverished communities. Drawing from his extensive experience, he highlighted the pitfalls of a debt-centric culture, where loans are often seen as the primary solution to financial growth and stability. Instead, Rapisura advocates for a model that encourages savings and responsible financial management as keys to achieving long-term prosperity.
One of the critical insights shared by Rapisura was the debt trap many low-income individuals find themselves in, exacerbated by the lack of access to architectural and engineering services and quality building materials. He shared poignant stories of individuals like Jade, a puto vendor overwhelmed by debt, and Cherry, whose family’s health suffered due to their inadequate living conditions. These stories underscore the urgent need for more holistic and accessible housing solutions that consider the realities of those they aim to serve.
Rapisura’s proposal involves a shift in perspective from viewing low-income individuals as debtors to seeing them as business partners in joint venture projects. This approach not only fosters a more equitable relationship between financial institutions and their clients but also emphasizes the importance of saving over borrowing. By encouraging clients to save for future needs, including housing, SEDPI aims to break the cycle of debt and promote financial stability and growth.
A significant part of Rapisura’s presentation focused on the SEDPI Lay-away Program, a novel approach to helping low-income individuals achieve their goals without resorting to high-interest loans. By saving for items like smartphones, clients can avoid the debt trap associated with installment plans, which often lead to paying significantly more than an item’s retail price. This model is extended to housing, where saving for a down payment becomes a viable path to homeownership, contrasting sharply with the high costs and risks associated with traditional housing loans.
SEDPI’s research into the housing needs of its community revealed a stark reality: the demand for affordable housing far outstrips supply, with a significant portion of the population living in hazard-prone areas without proper documentation or access to quality building materials. This situation calls for innovative solutions that go beyond financial assistance, requiring partnerships between microfinance institutions, government agencies, and the private sector to address the complex challenges of providing safe, affordable housing.
Rapisura’s vision for SEDPI KaBalai, a pilot housing project in Bislig City, embodies this comprehensive approach. By combining ethical financing principles with a focus on community building and disaster resilience, SEDPI aims to provide not just houses but homes that offer security, stability, and a foundation for future prosperity. This initiative highlights the potential for microfinance to play a crucial role in addressing one of the most pressing challenges facing low-income Filipinos today: the need for accessible and sustainable housing.As the presentation concluded, it was clear that Rapisura’s approach to integrating housing solutions into microfinance offers a hopeful blueprint for addressing poverty. By focusing on savings, ethical financing, and community partnership, SEDPI is paving the way for a future where affordable housing is within reach for all, proving that, indeed, wealth can be built slowly and collaboratively.
ASA Philippines Foundation, one of the giant microfinance institutions in the Philippines, presented its innovative Home Financing program at the 2nd Socialized Housing Summit, showcasing its contributions to addressing the housing needs of low-income communities. The summit, organized by the Ateneo Center for Social Entrepreneurship (ACSent) and Social Enterprise Development Partnerships Inc. (SEDPI) on March 18-19, 2024, at the Ateneo de Manila University, provided a platform for critical discussions on social housing initiatives in the Philippines.
Kamrul Tarafder, ASA Philippines’ Chief Executive Officer, highlighted the foundation’s significant reach, operating in 100% of the provinces and with extensive penetration in municipalities and cities throughout the Philippines. With over 1700 branches nationwide, the organization has a profound impact on providing access to financial services to marginalized communities.
Tarafder presented the Foundation’s Home Financing (HomFin) program, designed to address the dire need for affordable housing solutions. The HomFin program has disbursed over 12 billion PHP, significantly affecting the lives of numerous Filipinos. By offering non-interest-bearing loans and other subsidiary loans, ASA Philippines has displayed its commitment to financial inclusion and its innovative approach to socialized housing.
ASA Philippines has also demonstrated impressive financial performance, showcasing the Foundation’s sustainable growth. The financial position of the organization reflects a robust balance sheet with strong capital assets and an operational self-sufficiency that exceeds industry standards. Such financial health allows the Foundation to continue its crucial work in community services, providing extensive support from burial assistance to scholarships and business development programs.
A notable component of ASA Philippines’ presentation was its successful track record in debt repayment, including a groundbreaking ₱5 billion Gender Bond in 2023 and strategic partnerships with institutions like ADB and Citi. These achievements underscore the organization’s reputation as a reliable and innovative financial institution dedicated to sustainable development and economic inclusion.
Tarafder shared inspiring before-and-after photos of beneficiaries who have received HomFin funding, transforming not only their living conditions but also their lives. One striking story was that of Lourdes Otilano from Guinobatan, Albay, who, with the help of a HomFin loan, improved her family’s living conditions, demonstrating the program’s tangible impact.
Another impactful story was of Agustina Completo from Tabaco City, Albay, whose new home construction was funded through the HomFin program, illustrating the program’s reach and effectiveness. Stories of individuals like Lucita Boytiquel and Marissa Pisay, who received HomFin funding and ASA grants, show the organization’s dedication to uplifting lives and building resilient communities.The presentation concluded with a call to action for other organizations and individuals to engage in similar transformative work. Tarafder’s insights and the success stories shared provided a beacon of hope and a model for addressing the housing crisis.
In an enlightening presentation at the 2nd Socialized Housing Summit, Dr. Marife M. Ballesteros of the Philippine Institute for Development Studies (PIDS) delved into the pressing issue of housing affordability in the Philippines. Her analysis shed light on the multifaceted challenges of providing adequate housing for all income groups, particularly the low-income and impoverished segments of society.
Dr. Ballesteros began by defining housing affordability, introducing two critical methodologies for its assessment: the Income Ratio Method and the Residual Income Approach. The latter, she explained, offers a more nuanced view by accounting for households’ capacity to maintain a minimum standard of living after housing costs. This method highlighted a stark reality: many Filipino families are experiencing “housing stress,” where their income, after housing expenses, falls short of covering basic non-housing needs.
The presentation featured results from the Residual Income Method, indicating a significant portion of the population could not afford adequate housing. It painted a vivid picture of the income disparity and its impact on housing accessibility. Dr. Ballesteros outlined the income clusters ranging from poor to rich, providing a detailed look at the annual family housing expenditure across these groups. Notably, the analysis revealed that for lower-income groups, the amount allocated to housing far exceeds the 30% threshold often considered sustainable, underscoring the depth of the affordability crisis.
One of the most compelling parts of Dr. Ballesteros’ talk focused on the concept of “housing stress,” illustrated by data showing how various income groups fare in affording socialized vs. economic housing. The data indicated that while middle and upper-income families could manage the costs associated with housing, the poor and low-income families faced insurmountable barriers, often lacking the means even to meet the down payment requirements for socialized housing units.
In her conclusions and recommendations, Dr. Ballesteros called for innovative, out-of-the-box solutions to the housing affordability crisis. She stressed the need for significant government subsidies, such as grants and donations, to provide for the poor and low-income families. Moreover, she highlighted the importance of community-led housing initiatives and the development of social and affordable private rental housing as viable paths forward. She also addressed the necessity to curb speculative increases in land and property prices through various measures, including mixed-use development and real estate valuation reform.
Dr. Ballesteros’ presentation underscored the complexity of the housing affordability issue in the Philippines, urging a holistic approach that goes beyond traditional market-led housing provision. By emphasizing the role of decent housing in lifting families out of poverty and improving overall well-being, she made a compelling case for comprehensive, coordinated action involving government, private sector, and community stakeholders.As the 2nd Socialized Housing Summit continues, Dr. Ballesteros’ insights serve as a crucial reminder of the urgent need to address housing affordability. Her call for innovative solutions and collaborative efforts offers a roadmap for making decent, affordable housing a reality for all Filipinos, reinforcing the summit’s goal of bridging gaps and building futures through socialized housing.
Nitong ika-16 ng Marso, 2023, nagsagawa ang Social Enterprise Development Partnerships Inc. (SEDPI) ng relief operations sa mga lugar na apektado ng Low Pressure Area sa Carmen, Davao del Norte at Prosperidad, Agusan del Sur. Ang organisasyon ay tumugon sa mga pangangailangan ng mga tao sa mga apektadong lugar sa pamamagitan ng SEDPI KaTambayayong na isang uri ng damayan system.
Batay sa datos na nakalap ng SEDPI, apektado ang 193 sa 1,097 members sa Carmen, Davao del Norte, habang sa Prosperidad, Agusan del Sur ay 38 sa 1,251 members ang apektado ng Low Pressure Area. Ayon sa mga members sa lugar, umabot ang tubig hanggang bewang at leeg. Karamihan sa mga residente ay pansamantalang tumira sa mga kalsada at sa municipal gymnasium bilang evacuation center.
Nagbibigay ang SEDPI KaTambayayong ng life, sickness, calamity, fire, funeral, at accident assistance benefits. Kasama sa calamity benefit ang relief goods at PhP250 cash. Ang mga benefits na ito ay karaniwang naibibigat sa mga members sa loob lamang ng isa o dalawang araw, na labis na mas mabilis kumpara sa 3 hanggang 6 na buwan na claims processing ng karaniwang insurance company. Ang mga benepisyong ito ay eksklusibo lamang sa SEDPI members at maaring nagbabago depende sa nakolektang pondo. Noong 2021 at 2022, umabot sa PhP4.6M at 5.9M ang kabuuang naipamigay na benepisyo sa mga SEDPI KaTambayayong members.
Bagaman umabot na ang relief operations sa mga lugar na ito, hindi pa rin sapat ang mga tulong na ipinagkakaloob upang tugunan ang lahat ng pangangailangan ng mga apektadong residente. Kailangan ng mga solusyong tumutugon sa pinagmumulan mismo ng problema. Una na rito ang paglipat sa mga residente mula sa mga hazard prone areas papunta sa mga safe zones. Pangalawa, ang pagbibigay ng abot-kayang pabahay sa mga residente. At pangatlo, ang pagkakaroon ng disenyo ng bahay na angkop sa lugar at sa kalamidad.
Upang matulungan ang mga miyembro nito, ang SEDPI ay kasalukuyang nagsasagawa ng socialized housing, SEDPI Building Adequate Livable Affordable and Inclusive (BALAI) communities, na naglalayong magbigay ng maayos at disaster resilient housing sa mga low-income members. Ang organisasyon ay nakikipagtulungan din sa pamahalaan, social investors, at civic organizations upang magbigay ng abot-kayang pabahay sa mga nangangailangan.
Update 18 of SEDPI’s Rapid Community Assessment (RCA) October – December 2022
As the world slowly recovers from the pandemic, the economic landscape remains uncertain, especially for nanoenterprises. A recent survey conducted by our organization, Social Enterprise Development Partnerships, Inc. (SEDPI), reveals that 99% of nanoenterprises have resumed operations as of December 2022, indicating a promising recovery for this crucial sector of the economy.
Despite the positive news, recovery remains fragile with 52% of nanoenterprises surveyed experiencing weak demand. Access to supplies has been a continuing concern with 27% of nanoenterprises still reporting difficulties in obtaining the necessary supplies.
SEDPI’s latest self-rated poverty survey reveals that the impact of the pandemic on poverty levels remains significant. For 2022, 54% of respondents rated themselves at the poverty line, a decrease from 81% in 2021. The number of respondents who rated themselves as poor is steady at 3% and 4%. On a positive note, the number of respondents who no longer consider themselves poor nearly tripled from 16% in 2021 to 41% in 2022.
According to the Social Weather Stations, which conducts the survey at the national level, self-rated poverty was recorded at 48% in 2021 and 51% in 2022. The considerably elevated self-rated poverty at the national level suggest that a greater number of nanoenterprises that SEDPI serves experienced better economic conditions.
Over the past three years, SEDPI has conducted an impact assessment to evaluate its support for nanoenterprises through self-evaluation or perception surveys. The results are as follows:
Dec 19
Dec 21
Dec 22
Help in growing business
82%
100%
98%
Education of children
70%
85%
98%
Improve housing
67%
99%
98%
Improve nutrition
81%
100%
100%
Increase income
82%
100%
97%
The perception survey suggests that SEDPI’s assistance plays a crucial role in alleviating hardships among nanoenterprises in areas such as business growth, education, housing, nutrition, and income. This may be the reason why the highly significantly lower self-rated poverty data among SEDPI nanoenterprises compared to the national survey. Additional interventions and strategies in the areas of disaster risk reduction, housing and health are necessary to enable a more comprehensive and lasting escape from poverty.
The majority of respondents are nanoenterprises (45%), owned and operated by women, with an average age of 43 and 73% being married. Of these nanoenterprises, 40% rely on other sources of income, such as employment, while 12% are unpaid family members, and 2% are unemployed.
SEDPI is a microfinance institution dedicated to providing ethical financing to nanoenterprises in Agusan del Sur, Davao de Oro, Davao del Norte, and Surigao del Sur. Their efforts have led to significant improvements in various aspects of the beneficiaries’ lives, such as business growth, education, housing, nutrition, and income.
The COVID-19 pandemic has had a profound impact on nanoenterprises (NEs) worldwide, with various stages of recovery, demand trends, and access to supplies experienced throughout the course of the pandemic. This article examines the chronological analysis of NEs’ recovery, demand trends, and access to supplies from March 2020 to December 2022, based on the Rapid Community Assessment conducted by the Social Enterprise Development Partnerships, Inc. (SEDPI). By analyzing these trends, we can better understand the challenges faced by NEs and the factors contributing to their resilience and adaptability.
March 2020: Initial Pandemic Impact, Demand Shift, and Supply Chain Disruptions
At the beginning of the COVID-19 pandemic in March 2020, 34% of NEs stopped their operations due to lockdowns and social distancing measures, while 66% resumed operations. Demand was characterized by 8% of NEs experiencing no buyers, 78% experiencing weak demand, and 13% witnessing strong demand, as consumers’ priorities shifted towards essential goods and services. Supply chain disruptions affected NEs, with 36% facing difficult access to supplies and 64% having access to necessary resources.
June 2020: Early Recovery, Persistent Weak Demand, and Supply Chain Struggles
In June 2020, the recovery of NEs continued, with 91% resuming operations and only 9% remaining closed. However, demand remained weak, with 7% of NEs having no buyers, 72% facing weak demand, and 21% enjoying strong demand. Access to supplies was a significant challenge, as 81% of NEs had adequate access while 19% faced difficulties due to ongoing supply chain disruptions caused by the pandemic.
December 2020: Relief, Recovery, Improved Demand, and Better Supply Access Amid Typhoon Vicky’s Impact
By December 2020, government relief packages and easing of lockdown restrictions helped many NEs recover, with 3% remaining closed and 96% resuming operations. Demand improved slightly, with 4% of NEs having no buyers, 75% facing weak demand, and 21% enjoying strong demand. The holiday season likely contributed to increased consumer spending. Access to supplies significantly improved, with 90% of NEs having access and only 10% experiencing difficulties.
However, during this period, Typhoon Vicky hit the region, causing agricultural production losses in rice, corn, high-value crops, and livestock. The typhoon also triggered floods and landslides, resulting in damaged or destroyed homes in coastal areas. The natural disaster added challenges to the recovery process of nanoenterprises, particularly those in the affected areas and those dependent on agricultural production. Although the overall trend in December 2020 indicated progress in recovery, improved demand, and better access to supplies for nanoenterprises, the recovery would have been even more significant if not for the added challenges brought about by Typhoon Vicky.
March 2021: Steady Recovery, Increased Strong Demand, and Improved Supply Access
By March 2021, the situation for NEs had improved, with 97% resuming operations and only 3% remaining closed. Demand patterns shifted, with only 1% of NEs having no buyers, 52% experiencing weak demand, and 47% enjoying strong demand, likely due to the easing of restrictions and ongoing vaccination campaigns. Access to supplies improved, with 73% of NEs having adequate access and 27% still facing difficulties.
June 2021: Full Recovery, Diverse Demand, and Enhanced Access to Supplies
By June 2021, 100% of NEs resumed operations, marking a full recovery in this period. Demand varied, with 2% of NEs having no buyers, 64% facing weak demand, and 34% experiencing strong demand. Access to supplies continued to improve, with 82% of NEs having adequate access and only 18% facing difficulties.
September 2021: Delta Variant Surge, Granular Lockdowns, and Nanoenterprise Adaptation
In September 2021, the Delta variant surged in the Philippines, prompting the government to implement granular lockdowns as opposed to the general lockdowns previously imposed. This new approach aimed to prevent the wholesale disruption of jobs and livelihoods while still addressing the public health crisis. Despite the surge and the implementation of granular lockdowns, 96% of NEs continued to operate, while only 4% temporarily stopped their operations.
Demand patterns during this period fluctuated, with 12% of NEs having no buyers, 66% experiencing weak demand, and 22% witnessing strong demand. As the granular lockdowns targeted specific areas with high infection rates, many nanoenterprises had to quickly adapt to the changing circumstances and market conditions. Access to supplies remained relatively stable, with 77% of NEs having adequate access and 23% facing difficulties.
The September 2021 period demonstrated the resilience of nanoenterprises in the face of new challenges posed by the Delta variant and the government’s shift in lockdown strategy. Despite the hurdles, the sector continued to adapt and maintain its operations, contributing to the nation’s economic recovery.
December 2021: Continued Recovery, Increased Strong Demand, and Moderate Access to Supplies
By December 2021, widespread vaccination campaigns allowed for more relaxed social distancing measures and a resurgence in consumer demand. The percentage of stopped NEs remained at 3%, while 97% resumed operations. Demand for NE products and services further improved, with 9% of NEs having no buyers, 65% facing weak demand, and 26% experiencing strong demand. Access to supplies became more moderate, with 77% of NEs having access and 23% facing difficulties.
March 2022: Steady Operations, Persistent Weak Demand, and Improved Access to Supplies
By March 2022, the status of operations remained consistent, with 4% of NEs stopped and 96% resumed operations. Demand continued to lean towards weakness, as 8% of NEs had no buyers, 67% faced weak demand, and 26% experienced strong demand. However, access to supplies significantly improved, with 85% of NEs having access and only 15% facing difficulties.
September 2022: Temporary Setbacks, Fluctuating Demand, and Slightly Reduced Access to Supplies
In September 2022, the temporary increase in stopped NEs to 4% could be attributed to localized outbreaks and new COVID-19 variants. Despite these setbacks, 96% of NEs remained operational. However, demand patterns fluctuated, with 15% of NEs having no buyers, 36% experiencing weak demand, and 49% witnessing strong demand. Access to supplies slightly declined, with 73% of NEs having access and 27% facing difficulties.
December 2022: High Inflation Impact on Nanoenterprises, Demand Patterns, and Purchasing Power
In December 2022, the Philippines’ headline inflation increased to 8.1 percent, as reported by the Philippine Statistics Authority (PSA). The high inflation rate led to a decrease in purchasing power, resulting in reduced consumer spending, particularly among low-income households. Despite the inflationary pressures, 99% of NEs remained operational, while only 1% stopped their operations, showcasing the resilience of the sector.
Compared to September 2022, when 36% of NEs faced weak demand, the percentage increased to 52% in December 2022, illustrating the heightened challenges for these enterprises due to reduced consumer spending amid high inflation. The decreased purchasing power of consumers, especially in low-income households, contributed to the fluctuations in demand patterns for nanoenterprises.
Access to supplies remained relatively stable, with 73% of NEs having access to necessary resources and 27% facing difficulties in acquiring them. The December 2022 period highlighted the challenges faced by nanoenterprises due to high inflation and its impact on consumer spending, while also demonstrating the adaptability of the sector in sustaining operations amid economic challenges.
Conclusion:
Throughout the COVID-19 pandemic and various external challenges, such as natural disasters and high inflation, nanoenterprises have consistently demonstrated resilience and adaptability in maintaining operations, responding to fluctuating demand, and navigating supply chain disruptions. As of December 2022, the sector has reached a near full recovery, with stabilizing demand patterns and steady access to supplies. The findings from SEDPI’s Rapid Community Assessment underscore the importance of continued support and empowerment for nanoenterprises, as they play a crucial role in local economies and communities. As the world moves forward from the pandemic’s impact, fostering collaboration between government, business, and community organizations will remain vital in ensuring the sustained success and growth of nanoenterprises in the face of ongoing and future challenges.
Respondents:
In December 2022, the Rapid Community Assessment (RCA) conducted by SEDPI garnered responses from 1,398 respondents across the provinces of Agusan del Sur, Davao de Oro, Davao del Norte, and Surigao del Sur. The profile of respondents in this edition of the survey was similar to that of previous editions. The majority of respondents were female (86%), with an average age of 43, and 73% of them were married. When it came to sources of income, 40% were employed, 45% were nanoenterprise owners, 12% were unpaid family members contributing to the family business, and 2% were unemployed.
Nanoenterprises are typically unregistered livelihoods of self-employed individuals or informal solo-preneurs with asset size ranging from PhP3,000 to PhP150,000. They operate businesses alone or with the help of unpaid family members targeting their immediate local communities. Microenterprises are mostly registered enterprises able to hire employees albeit on a minimum wage rate. There are approximately 8.1 million nanoenterprises in the Philippines as of 2022.[1]
Most government programs and private sector engagement fall under the banner of microenterprises, that grossly misrepresents the needs and largely excludes the magnitude of nanoenterprises. Making nanoeterprises visible means more effective and customized policies and programs that should provide them the opportunity to grow into a more sustainable enterprise that would lift them out of poverty.[2]
There are 30 million Filipinos considered as poor based on a survey the Department of Social Welfare and Development conducted in 2022.[3] Directly addressing the needs of the 8.1 million estimated nanoenterprise will reduce this number by 27% which is a great leap forward for a truly inclusive Philippine economic development.[4]
The table below is a brief summary that compares and contrasts nanoenterprises from microenterprises.[5]
Nanoenterprise
Microenterprise
Assets
PhP3,000 to PhP150K
>PhP150K to PhP3M
Employees
0
1 to 9
Approximate number
8,100,000
1,000,000
Enterprise registration
Mostly unregistered
Mostly registered
Economic status
Mostly poor
Mostly non-poor
This paper attempts to provide a more comprehensive profile of nanoenterprises in terms of the following: livelihood characteristics, access to finance, market participation, coping mechanisms in times of emergencies – climate crisis and disasters, digital inclusion, and access to government programs and services.
Livelihood characteristics
Examples of nanoenterprises include sari-sari stores operators, carinderia, small holder farmers and fisherfolks, dressmakers, and ambulant vendors. Those who participate in the gig economy are also largely considered as nanoenterprises such as delivery riders, and ride share drivers. Freelancers could also be considered as nanoenterprise such as graphic artists, video editors, content creators, writers etc.
Nanoenterprises use rudimentary and obsolete equipment in manufacturing products or delivering services or they may have more advanced equipment that they lease. Microenterprises typically have better equipment and have ownership of these.
Most nanoentarprises are individuals who typically have low educational levels and hardly maintain bookkeeping records. Microenterprises typically have higher educational levels compared to nanoenterprises and could maintain some level of record keeping. Microenterprises also pay business permits and taxes that nanoenterprises hardly pay since they are mostly unregistered.
Both nano and microenterprises lack managerial and technical skills to grow their livelihood and are forced to be entrepreneurs due to lack of employment opportunities. They also have limited access to technology, information and financing that leads to low productivity and low product quality.
Access to finance
Nanoenterprises heavily rely on loans to afford basic needs – food, education, shelter utilities – and recover from a disaster. Loans are also typically used to grow their livelihoods and to finance major life events such wedding, anniversaries and death.
NEs typically access loans from informal sources which make them vulnerable to predatory financing practices. Aside from this, most of them also borrow money from cooperatives, rural banks, microfinance NGOs and pawnshops. Majority also borrow from family and friends albeit in limited amounts.
This goes to show how NEs are trapped in debt. There are very few savings and insurance products available in the market that cater to their needs and preferences – simple, fast, accessible and affordable. Savings and insurance products are more appropriate for disaster risk mitigation and financing major life events. Microfinance institutions, in their continuous drive for growth and profitability, aim to increase their loan portfolio. It is also far simpler for MFIs to offer loans and gain profit to address NE needs compared to designing savings and insurance products for profit that address the same. This are the reasons why most MFIs use loans as the financial product to address livelihood needs, coping in times of emergencies and financing major life events.
It has been shown that low-income individuals can save and will pay premium for insurance if these financial products are designed according to their needs and preferences.[6] Most NEs have extremely limited savings and insurance coverage due to the lack of financial product that directly cater to their needs and preferences.
On average, nanoenterprises borrow a small sum of money ranging from PhP3,000 to PhP20,000 to finance their livelihoods. Although in the proposed definition of naneoneterprises, their loans could be up to PhP150,000.[7]
Microfinance institutions offer them short-term, collateral-free loans to them usually payable in three to six months with interest rates ranging from 2% to 5% per month. SEDPI, a microfinance institution, has a loan portfolio composed of 95.7% with less than PhP20,000 in terms of loan size. Four percent (4%) of loans extended are greater than Php20,000 but less than PhP50,000. A miniscule 0.3% have loans greater than PhP50,000.
Market participation
High cost of raw materials, labor, limited market access, lack of market information, outdated technology, inadequate services and infrastructure hampers overall business environment of NEs. The poor are more than mere victims of circumstance. They are creative individuals. A major barrier preventing NEs from exiting poverty is the problematic market environment. An effective development strategy is to remove the barriers that stand in the way of NE’s ability to help themselves and enhance their ability to participate in markets.
Developing markets and improvements in market linkages and market infrastructure will strengthen the participation of NEs in value chains. The government and development organizations should design programs that lead to sustainable solutions. These interventions should be designed using the following development principles – achieves high impact, specific and focused interventions, sustainable, cost-effective and market-driven.[8]
Coping mechanisms in times of emergencies
The Philippines topped the world disaster risk index in 2022. The Philippines scored high in its exposure, vulnerability, susceptibility, lack of coping capacities, and lack of adaptive capacities in the face of disasters.[9] Impacts of climate change and the global economic crisis are compounding the threats faced by people living in poverty around the world.[10]
The top coping mechanisms, pre-pandemic, of NEs in times of extreme natural events are accessing loans, finding additional work, asking for help from family members, assistance from government and charitable institutions, and selling of assets. Other coping mechanisms mentioned were saving, praying, damayan ang insurance.[11]
Loans topping the coping mechanisms is not surprising but a lot are not aware that this is not good for one’s financial health. Loans should be used for productive purposes only, a cardinal rule when borrowing money. In times of emergencies, loans will be used for consumption – to buy food, rebuild or repair houses, medicines for the sick etc. The loan purpose is not bad but the financial product used is incompatible with the purpose. There is no return from the loan use and loans accessed in times of emergencies typically have high interest rates.
The appropriate financial tool used should be insurance and savings. It is a stark contrast that these two are at the bottom of the coping mechanism strategies of the poor while accessing loans is on top. Insurance is specifically design as a protection strategy against emergencies and external shocks. Savings on the other hand provides a cushion or a buffer to smoothen the impact of financial shocks.
The pandemic made matters worse for NEs since this added to their vulnerabilities – extreme natural events due to the effects of climate crisis. During this period, the coping mechanisms of NEs changed. This time the top coping mechanism used was getting assistance from the government. This was followed by insurance, savings, accessing loans, damayan and distress selling of assets.[12] When strict lockdowns were enforced, NEs could not operate their livelihoods that’s why they did not seek loans as a top coping mechanism. Finding additional work was not mentioned as a coping mechanism unlike before the pandemic. Mobility restrictions imposed during lockdowns prevented NEs from working.
Insurance and savings ranked higher in the coping strategies during the pandemic which is an improvement when these two were at the bottom before the pandemic. This is because microfinance institutions offering savings and insurance products have already penetrated all municipalities in the Philippines. There was less market penetration a decade earlier that made these products inaccessible then.
Although access to savings and insurance products already improved, there are still opportunities for improvement to make these more effective. For example, microfinance institutions should promote savings mobilization rather than provision of higher loan amounts to finance the growth of NEs. MFIs should not merely treat savings from its borrowers as collateral to loans but also a means to smoothen expenditures especially in times of emergencies.
Insurance products for NEs could be improved by offering coverage for disasters that would enable them to restart their livelihoods so that NEs need not be too dependent on loans. Turnaround time in processing claims could also be improved from current practices which takes months due to voluminous documentary requirements. These all could be simplified through streamlining processes and procedures.
Digital inclusion
The Philippines has been dubbed as the social media capital of the world. Meltwater, an Oslo-based social listening and social media analytics company, ranks the Philippines as second in the world in terms of social media use.[13]However, this social media use does not seem to translate to positive economic changes, especially to the poor.
Digital Inclusion refers to the activities necessary to ensure that all individuals and communities, including the most disadvantaged, have access to and use of Information and Communication Technologies (ICTs).[14] Internet access and ownership of gadgets are therefore important in order to take advantage of opportunities in the digital age. This is where the challenge starts for NEs since only 40% of them have access to the internet, 52% of have smart phones and only 8% have laptops.[15] Aside from this, there is also the challenge of the cost of smart phones and internet subscription. NEs, especially in the rural areas, have difficulty getting mobile phone signals due to lack of infrastructure.[16] Not owning a phone, having basic phones and limited access to the internet prevents NEs from accessing information and taking advantage of opportunities online.
These ICT challenges of NEs constrained their participation in e-commerce. SEDPI’s research shows that in 2022 only 19% of NEs are into online selling and 13% buy products online. There was a short-lived participation in e-commerce in 2021 but this was not sustained due to the lifting of mobility restrictions and high cost of deliveries of products ordered online.[17]
Digital financial inclusion among NEs is low. Only 23% of them have bank accounts, 3% have mobile wallets and 3% know how to do online banking.[18]
Access to government programs and services.
At the personal level, they also lack civil registry documents such as birth certificates and marriage certificates that makes it challenging for them to access government welfare services such as SSS, Pag-IBIG and PhilHealth. These civil registry documents are typically required to get government identification cards such as a driver’s license, voter’s ID, passports. These government-issued identification cards are then required to apply for membership in SSS, Pag-IBIG, PhilHealth and other government programs.
Due to the lack of government-issued identification cards, NEs experienced delays in getting the cash assistance program the government provided to its citizens during the pandemic. Lockdowns started on March 14, 2020.[19] A month after, only 60% of NEs under SEDPI received cash assistance. This improved to 98% by the end of the month when local government units started easing requirements.[20]
As of May 2021, there are 3.36M self-employed individuals who are members of the SSS. This is the membership classification where NEs fall. However, they comprise minority since self-employed members also include professionals, proprietors of businesses, farmers, fisherfolks and the informal sector. Even if the 3.36M self-employed members of SSS were all considered as NEs, this will only make up 41% of the 8.1M estimated NEs.
Nanoenterprises lack support from the government because they are lumped with the microenterprise sector. Nano and microenterprises clearly have different profile, behavior and needs. Microenterprises are defined as having up to Php150,000 in assets as defined under the Republic Act 8425 (Social Reform Agenda) and Republic Act 10693 (Microfinance NGO Act). However, the Bangko Sentral ng Pilipinas defines loans extended to microenterprises at a maximum of PhP300,000. Meanwhile, the Department of Trade of Industry defines microenterprises as entities with up to PhP3M in assets.
In reality, MFIs serve mostly NEs, who are considered mostly poor, but have financial products and services designed for MEs, who are considered mostly non-poor. Financial products designed for microenterprises focus more on repayment history, capacity to pay and using savings as collateral. These designs are inappropriate for NEs since they face more vulnerabilities. There should be more social safety net mechanisms for financial product designed for NEs such as using savings for emergency purposes, capacity building for livelihood development, insurance coverage for disasters and subsidies from the government.
The inconsistencies in the definition of various government agencies on what microenterprises are, barring the fact that nanoenterprises are rendered invisible, leads to ineffective and inappropriate policies and programs. Microfinance institutions design their financial products and services according to the criteria set by government financial institutions geared towards microenterprises. Thus, the needs and financial product preferences of NEs are not addressed which may explain why they have a hard time escaping poverty.
Way forward
Making nanoenterprises separate and distinct from microenterprises means more effective and customized policies and programs that should provide them the opportunity to grow into a more sustainable enterprise that would lift them out of poverty.
A more robust welfare and social safety net programs should be in place to allow NEs to not just cope or survive in their current situation but to recover and thrive to transition as a micro or even a small enterprise. This strategy would complement existing market-based approaches that would reduce vulnerabilities of NEs.
The sheer number of nanoenterprises as distinguished from microenterprises should make them more visible to the government and private sector. Upscaling nanoenterprises renders tremendous multiplier effect. If NEs eventually transition as MEs, they will provide employment that starts at the bottom of the pyramid. They should be recognized as a pillar in socio-economic development since lifting them out of poverty will propel the Philippines to a developed country through inclusive growth.
[11] Based on SEDPI’s research conducted in 2008 with Opportunity International, 2014 with Cordaid and 2015 with People In Need. There were 79 FGDs conducted all over the Philippines.
[12] SEDPI conducted a research in 2020 in CARAGA region to determine coping mechanisms used by NEs during the pandemic.
