Mariel Vincent Rapisura, Author at Social Enterprise Development Partnerships, Inc.

SEDPI and PhilHealth partnership: An empowering step towards accessible health insurance for nanoenterprises

The significance of the National Health Insurance Program (NHIP) under the Universal Health Care (UHC) Act in the Philippines is undisputable. As a nation, we must ensure that healthcare is both accessible and affordable to every Filipino citizen, particularly those from marginalized sectors.

SEDPI, an organization that champions social investments, nanofinancing, and financial education to alleviate poverty among Filipinos worldwide, is taking a significant stride in this direction. In a recent development, SEDPI entered into a strategic partnership with the Philippine Health Insurance Corporation (PhilHealth), marking a significant step in fortifying its KaTambayayong program.

This alliance with PhilHealth follows the organization’s successful collaborations with Pag-IBIG Fund in 2018 and the Social Security System (SSS) in 2019, enhancing SEDPI’s commitment to providing comprehensive social protection to its members. As SEDPI President and CEO, Vince Rapisura states, “Our partnerships with government agencies aim to bridge the gap in access to social welfare services, especially for marginalized communities.”

In the last six years, the KaTambayayong program has disbursed Php 19.1 million as benefits to its members to cover for death, calamity, medical, fire and accident assistance. As of June 2023 alone, the program has released Php 2.9 million in benefits to 1,199 members. These milestones highlight the program’s commitment to providing an accessible and dependable safety net for nanoenterprises in times of crisis.

The partnership with PhilHealth is poised to amplify the benefits that SEDPI members can avail of. Through the Group Enrollment Program under the NHIP, SEDPI will facilitate the registration of its enrollees, conduct educational campaigns about PhilHealth policies and benefits, and remit their premium contributions, thereby ensuring its members are covered by health insurance.

Looking towards the future, SEDPI aims to further enhance its network of collaborations, with the Department of Social Welfare and Development (DSWD) and the Philippine Statistics Authority (PSA) being the next potential partners. These future partnerships will focus on securing civil identity documents for SEDPI members, further solidifying their access to government services.

Indeed, the partnership between SEDPI and PhilHealth is not just about providing health insurance; it is about empowering Filipino nanoenterprises, reducing poverty, and fostering a healthier nation. This collaboration represents a vital step towards ensuring the well-being of Filipinos, solidifying SEDPI’s commitment to sustainable development and its overarching goal of poverty alleviation.

SEDPI at 19: Pioneering change and empowering communities

Comparative Overview of Nanoenterprises, Microenterprises, and Gig Economy Jobs: Characteristics, Market Factors, Risk Resilience, and Potential Impact

Introduction

Across the economic landscape of the developing world, one cannot overlook the proliferation of small scale enterprises that create a significant economic impact at the grassroots level. This intricate tapestry of economic activity, composed of nanoenterprises, microenterprises, and gig economy jobs, holds tremendous potential for poverty alleviation and socio-economic mobility. To unlock this potential, it is imperative to delve deeper into their unique characteristics, operational factors, resilience to risk, and potential for growth and impact.

Nanoenterprises, the smallest economic units, often operate on the margins of the formal economy, usually out of necessity rather than opportunity. They serve local communities, providing essential goods and services, often with limited resources and technological access. On the other end of the spectrum, microenterprises tend to be more established entities that, despite their small size, exhibit opportunity-driven entrepreneurship and contribute significantly to local and national economies.

Occupying an increasingly significant role in the 21st-century economy, gig jobs – driven by the burgeoning digital platform economy – provide flexible employment opportunities for millions. Like nanoenterprises, they primarily cater to the individuals’ survival and livelihood, but they leverage the power of technology to a much greater extent.

This paper provides a comparative overview of these three crucial components of the economic fabric. It unpacks their defining features, elaborates on their market and operational factors, gauges their risk resilience, and appraises their potential impact. By doing so, the study seeks to reveal opportunities for targeted policy interventions and entrepreneurial support programs to bolster these enterprises’ potential to contribute to sustainable development goals and socio-economic betterment.

In the global south, the sheer scale of nanoenterprises underscores their pivotal role in poverty reduction and economic development. As of 2022, an estimated 8.1 million nanoenterprises operate in the Philippines, and Nigeria boasts a staggering 32.8 million of such businesses (Olagboye, 2021). This highlights a potent yet often overlooked economic force in these developing nations.

Despite the mammoth scale of nanoenterprises, their nuanced understanding remains a challenge due to the prevalent practice of grouping them under the microenterprise umbrella. This conflation, common in many developing nations, masks the unique challenges and potential of nanoenterprises, potentially hindering effective policy and intervention design. Distinguishing nanoenterprises from their larger counterparts, microenterprises, and understanding their intersections with gig jobs offers an opportunity for a more targeted, effective approach to sustainable economic development.

In this light, focusing on the growth and resilience of nanoenterprises, coupled with a nuanced understanding of microenterprises and gig economy jobs, can unlock an inclusive economic paradigm. This approach acknowledges and leverages the power of the smallest economic actors to address poverty, arguably one of the most formidable challenges of our times.

This grand scale and potential of nanoenterprises is not unique to the Philippines or Nigeria but resonates across the developing world. Recognizing and understanding this magnitude can spur a more global momentum towards harnessing these enterprises’ potential and integrating them more effectively into sustainable economic development strategies.

This paper serves as a stepping-stone to understanding these enterprises’ multi-layered complexities in the context of the developing world. It sets the stage for an inclusive discourse that acknowledges the unique role and challenges of each sector and propels evidence-based decision-making towards a more inclusive and resilient economy.

Nanoenterprise definition

Chapter 2 delves into the unique landscape of nanoenterprises, dissecting their characteristics and operational dynamics across four crucial categories.

The first category, ‘Enterprise Characteristics’, encapsulates the foundational attributes that define a nanoenterprise. This includes asset size, enterprise registration, the poverty level of owners, motivation for entrepreneurship, education levels and record-keeping habits, and number of employees. These characteristics set the stage for understanding the breadth and depth of nanoenterprises, their constraints, and their operational capabilities.

The second category, ‘Market and Operational Factors’, explores the interaction of nanoenterprises with the market and the operational choices they make. These factors shape the nanoenterprise’s economic footprint and influence their growth trajectory. The access to finance, market participation, use of technology and information, ownership of equipment, capacity for value addition, and the structural dynamics of nanoenterprises fall under this category.

Next, ‘Risk and Resilience Factors’ delve into how nanoenterprises respond to challenges, market shifts, and disasters. Their resilience and flexibility can be pivotal in determining the survival and potential growth of nanoenterprises, especially in volatile economic climates common in the developing world.

Lastly, the ‘Potential and Impact’ category examines the broader socio-economic contribution of nanoenterprises and their growth potential. This section illustrates the role nanoenterprises play in their communities and the larger economy and identifies opportunities for enhancing their economic impact.

Also within Chapter 2, we embark on a crucial comparative analysis. Nanoenterprises, while often subsumed under the broader umbrella of microenterprises, present distinctive characteristics, challenges, and opportunities. The delineation between these two segments of enterprises is imperative to discern for tailoring more effective support interventions and policies.

The comparison also extends to gig economy jobs, an emergent form of livelihood that has grown exponentially in the recent decade. The gig economy, while seemingly disparate from nanoenterprises, offers interesting parallels and contrasts particularly in their resilience to market shifts, flexibility, and the nature of the jobs itself.

This three-way comparison serves not just to highlight the unique attributes of nanoenterprises, but also to illustrate the nuances and fluidity of the entrepreneurship landscape in the contemporary economic milieu. The analysis paves the way for a more refined perspective, challenging traditional classifications and urging for a more dynamic understanding of these small-scale economic activities.

Throughout this chapter, we aim to shed light on the interactions and differentiations between nanoenterprises, microenterprises, and gig economy jobs. Ultimately, our goal is to present a comprehensive picture of their respective roles and potential in fostering inclusive economic growth and poverty alleviation in developing countries.

Enterprise Characteristics

	Nanoenterprises	Microenterprises	Gig Economy Jobs
Asset Size	PhP3,000 to PhP150,000	>PhP150,000 to PhP3M	Varies
Enterprise Registration	Mostly Unregistered	Mostly Registered	Typically Unregistered
Poverty Level of Owners	Mostly Poor	Mostly Non-Poor	Poor and Non-Poor
Motivation for Entrepreneurship	Survival and livelihood	Opportunity-seeking and growth	Survival and livelihood
Educational Level/Record Keeping	Lower educational levels and minimal record keeping.	Higher educational levels and better record keeping.	Varies. Some may maintain good records, especially digital gig workers
Number of Employees	0	1 to 9	1 (Self)

In the Philippines, asset size of nanoenterprises generally ranges from PhP3,000 to PhP150,000. This amount is close to nanoenterprises located in developing economies in Asia, Africa and Latin America. This relatively low capital base forms the backbone of a mostly unregistered economic segment largely populated by poor owners.

Driven by survival and livelihood needs, these nanoentrepreneurs typically possess lower educational levels and maintain minimal record keeping – a reflection of their constraints and the informality of their businesses. Furthermore, nanoenterprises usually have no employees, with the owner doing all the operational tasks. Unpaid family members usually help in their livelihood.

In contrast, microenterprises operate on a larger scale, with asset sizes ranging from more than PhP150,000 to PhP3 million. A majority of these businesses are registered, signaling a greater engagement with formal financial and regulatory systems. Microenterprise owners typically fall within the non-poor category and are driven by opportunity-seeking and growth motives rather than mere survival. Reflecting a step up from nanoenterprises, microenterprises are characterized by higher educational levels and better record keeping. Moreover, they provide employment opportunities, supporting between 1 to 9 employees.

Meanwhile, gig economy jobs represent a distinct segment, operating on varied asset sizes and typically functioning as unregistered entities. The poverty level of gig workers spans both poor and non-poor categories, suggesting a wide socioeconomic spectrum within this group. Motivated by survival and livelihood needs, gig workers’ educational level and record-keeping practices vary considerably, largely influenced by the nature of their jobs which are primarily digital or app-based. As the term implies, gig economy jobs predominantly engage the individual worker – the ‘self’ in self-employment, with each gig worker essentially constituting their own ‘enterprise’.

Market and operational factors

	Nanoenterprises	Microenterprises	Gig Economy Jobs
Examples	Sari-sari stores, Carinderia, Ambulant vendors, Smallholder farmers and fisherfolks	Small retail stores, manufacturing businesses, service providers.	Delivery Riders, Ride Share Drivers, graphic artists, video editors, content creators, writers
Access to Finance	Rely heavily on loans, mostly from informal sources, making them vulnerable to predatory lending.	Have more access to formal financial services but still face financial constraints.	Usually rely on personal finance and may use digital platforms for fundraising
Market Participation	Limited due to barriers like high cost of raw materials, lack of market information, and outdated technology.	Have better market access but still face challenges such as lack of resources and information.	Varies, could be local or global based on gig platform
Access to Technology and Information	Very Limited (due to unaffordable gadgets and low internet availability and high cost of internet access)	Moderate (may have more access to technology, but still limited due to financial constraints)	High (largely reliant on technology platforms for their services)
Ownership of Equipment	Use rudimentary and obsolete equipment or lease more advanced equipment.	Typically possess better equipment and have ownership.	Owned
Value Addition	Very limited due to high resource constraints.	Can add value through improvements, innovations	Depends on the job, but often limited by platform constraints
Structure	Atomistic, low capacity for coordination	Small Organizational Structure , can coordinate internally and externally	Usually individualistic, coordination varies

Nanoenterprises in the Philippine context take on various forms such as sari-sari stores, carinderias, ambulant vendors, and smallholder farmers and fisherfolks, among others. These enterprises heavily rely on loans, predominantly sourced informally, which makes them susceptible to predatory lending. Their participation in the market is relatively limited due to barriers such as high raw material costs, lack of market information, and use of outdated technology. Access to technology and information is generally very limited, primarily due to the unaffordability of gadgets, and the limited availability and high cost of internet access. As for equipment, nanoenterprises often use rudimentary and obsolete tools, or they lease more advanced equipment when resources permit. The potential for value addition in these businesses is extremely limited, due to their resource constraints. The structure of nanoenterprises is atomistic, with low capacity for coordination due to limited resources and high cognitive load on the entrepreneurs.

On the other hand, microenterprises – such as small retail stores, manufacturing businesses, and service providers – have relatively better access to finance, often availing of formal financial services, albeit still facing financial constraints. Their participation in the market is significantly improved compared to nanoenterprises, though they still encounter challenges such as lack of resources and information. Access to technology and information is moderate, with financial constraints acting as a limiting factor. Microenterprises typically possess better, owned equipment, which facilitates value addition through improvements and innovations. Their organizational structure allows for internal and external coordination, reflecting a degree of organizational maturity.

Gig economy jobs represent a new facet of employment and entrepreneurship. These include delivery riders, ride share drivers, and online freelancers such as graphic artists, video editors, content creators, and writers. Unlike the other two categories, gig workers often rely on personal finance and digital platforms for fundraising. The nature of their market participation varies significantly and can span local to global markets, depending on the gig platform they engage with. Access to technology and information is generally high, as their jobs are largely reliant on technology platforms. In terms of equipment, gig workers typically own their own eqipment, but the potential for value addition is often limited by platform constraints. Gig jobs usually involve individualistic structures with varying degrees of coordination.

Risk and resilience factors

	Nanoenterprises	Microenterprises	Gig Economy Jobs
Disaster Resiliency	Very Low	Low	Low
Flexibility	High. Can shut down, re-open or pivot easily as opportunities arise	Medium. May require substantial effort for pivoting	High. Can shift roles/platforms quickly
Agility to Market Shifts	Very Low	Low	Moderate to High, depending on the gig

A critical factor in assessing the potential and vulnerability of nanoenterprises, microenterprises, and gig economy jobs is their level of disaster resilience. In this respect, nanoenterprises exhibit a very low level of disaster resiliency, making them highly vulnerable to various shocks and stressors. Microenterprises and gig economy jobs have slightly higher disaster resiliency, but they still remain at the low end of the spectrum, underscoring the precariousness of their operations in the face of disruptive events.

Another vital aspect is flexibility – the ability to adapt, pivot, or shift in response to changes and opportunities. Nanoenterprises show a high level of flexibility due to their small size and simplicity of operations. They can shut down, reopen, or pivot easily as opportunities or challenges arise. In contrast, microenterprises display medium flexibility, often requiring substantial effort and resources to effect meaningful pivots. Gig economy jobs also exhibit high flexibility, primarily due to the inherent nature of gig work which allows workers to swiftly shift roles or platforms based on demand, personal preferences, or changes in the gig marketplace.

Finally, agility to market shifts is an important indicator of the capacity of these entities to respond quickly and effectively to changes in the market environment. In this regard, nanoenterprises demonstrate very low agility to market shifts, primarily due to their resource constraints, limited market information, and technology gaps. Microenterprises exhibit low agility due to similar reasons, although to a lesser degree given their better resources and market positioning. On the other hand, gig economy jobs display moderate to high agility to market shifts, depending largely on the nature of the gig. Those involved in digital gig work, for instance, can respond relatively quickly to market changes due to their reliance on technology platforms that provide real-time market information and trends.

Potential and impact

	Nanoenterprises	Microenterprises	Gig Economy Jobs
Economic Impact	Provide essential goods and services to local communities, foster local economic development.	High (Beyond Community Level) Contribute to local and national economies, can provide employment.	High (Service Sector) Contribute to the economy by providing goods or services
Potential for Growth	Low. Have the potential to grow into more sustainable businesses with proper support and interventions.	Moderate to High. Have more potential for growth due to better resources and market access.	Moderate to High. Growth potential is highly dependent on the individual’s skills, the demand for their services, and their business strategies.
Gender and development	Mostly women who provide for the needs of the household	Mixed (Men and Women)	Mixed (Men and Women)

In terms of economic impact, nanoenterprises play a fundamental role in local communities by providing essential goods and services. Despite their small scale, they help foster local economic development and serve as a significant lifeline for local consumers, especially in remote or underserved areas. On the other hand, microenterprises have a more substantial impact that extends beyond the community level. They not only contribute to local economies but also to the national one, providing employment and enhancing local and regional supply chains. Similarly, gig economy jobs significantly contribute to the economy, especially within the service sector. They provide goods or services, often fulfilling niche demands or offering convenience through digital platforms.

The potential for growth varies across these categories. Nanoenterprises have relatively low growth potential due to their resource constraints and other barriers. However, with proper support and interventions, they could evolve into more sustainable businesses. Microenterprises, on the other hand, have moderate to high potential for growth, attributable to their better resources and market access. Likewise, gig economy jobs offer moderate to high growth potential, highly contingent on the individual’s skills, the demand for their services, and their business strategies.

Examining these categories from a gender and development perspective reveals that nanoenterprises are predominantly owned and run by women, often catering to the household’s needs. This characteristic emphasizes the role of these enterprises in empowering women economically and providing them with a source of income. On the contrary, both microenterprises and gig economy jobs present a more mixed picture with both men and women participating, reflecting the broader societal gender roles in the world of work and entrepreneurship.

Review of related literature

The rise of nano-enterprises as a driving force in the informal economy cannot be overlooked. These entities, defined as non-salaried individuals running their own businesses outside an employment contract framework, often emerge as alternatives for family income generation or due to the absence of formal employment opportunities (Lagunas, 2021). Frequently, nano-entrepreneurs do not opt for the informal economy out of choice; instead, they are pushed by a lack of opportunities in the formal sector and the absence of alternative means of subsistence.

This trend towards nanoenterprise entrepreneurship has attracted academic attention due to its significant influence on the informal sector. Various scholars (Acs, 2006; De la Garma, 2010) have devoted studies to this phenomenon. Entrepreneurship is globally perceived as a tool to combat poverty and unemployment (Sigalia and Carney, 2012; Rodríguez and Palavicini, 2013; Pazmiño, Merchán, and Jiménez, 2018). However, there’s an argument that ventures in the informal economy function more as a survival option than poverty alleviation (Walton and López, 2005; Delgado, Cruz, and Lince, 2019).

Nanoenterprises are typically characterized by individual ownership and operation. Valdés (2004) identifies a nanoentrepreneur as a self-employed worker who independently carries out commercial activities. Lejarriaga (2003), García and Fernández (2005), and Raydán (2010) all concur with this definition, adding that nano-enterprises are typically operated as sole proprietorships. This understanding is reinforced by the European Observatory for SMEs (2018) and the Ministry of Economy and Business of Spain (2002), which classify nano-entrepreneurs as individuals running their own businesses with complete autonomy.

Nonetheless, the classification and criteria for micro, small, and medium-sized enterprises have been criticized for their lack of uniformity globally (McKeown, 2017; Poole, 2018). As Olagboye (2021) proposes, it’s crucial to recognize nano-enterprises as an independent category, separate from micro-enterprises. This is particularly true in Sub-Saharan Africa, where many individual entrepreneurs exist in the informal economy.

The informal economy has long been a point of academic interest, attracting a plethora of terms such as the irregular economy, the subterranean economy, the underground economy, the black economy, the invisible economy, and the shadow economy (Ferman and Ferman, 1973; Gutmann, 1977; Dilnot and Morris, 1981; Simon and Witte, 1982; McCrohan and Smith, 1986; Frey and Schneider, 2000; Charmes, 2012). The consideration of the informal economy as independent of the formal one has led to debates over whether to regulate or eradicate it, especially considering its role as a safety net for the poorest populations (2014b; Williams and Martinez, 2014; Benjamin et al., 2014; Dibben, Wood and Williams, 2015).

Olagboye (2021) defines nano-enterprises as non-employing registered and unregistered businesses operated by a single individual or with the assistance of family members. The author argues that formalizing such enterprises can enhance their legitimacy, promoting them as legitimate contributors to economic growth rather than characterizing them as elements of an illegal economy. In essence, the institutionalization of nanoenterprises, or informal economy enterprises (IEEs), presents an opportunity to shift the paradigm of enterprise development, moving away from a ‘one size fits all’ approach to one that acknowledges the socio-economic peculiarities of different contexts (Olagboye, 2021).

Nanoenterprise development and sustainable development goals

Nanoenterprises (NEs), owing to their unique characteristics and inherent agility, can play a pivotal role in the attainment of several United Nations Sustainable Development Goals (SDGs). Through their economic activities, NEs significantly influence poverty reduction, gender equality, decent work and economic growth, industry innovation, reduced inequalities, responsible consumption and production, and the establishment of global partnerships.

SDG 1: No Poverty

As entities often formed out of necessity, NEs directly contribute to poverty reduction (SDG 1). By creating income opportunities, particularly for those with limited access to formal employment, they provide a means of subsistence and financial independence. Although NEs generally function more as a survival option than as a poverty eradication mechanism, with appropriate support and interventions, they can evolve into sustainable businesses, potentially lifting their proprietors out of poverty.

SDG 5: Gender Equality

NEs also play a crucial role in advancing gender equality (SDG 5). Women constitute a significant proportion of nanoentrepreneurs, utilizing their enterprises to provide for their households and attain financial autonomy. By fostering an environment where women can take the reins of their own businesses, NEs promote gender equality and empower women, two critical aspects of SDG 5.

SDG 8: Decent Work and Economic Growth

SDG 8 calls for the promotion of sustained, inclusive, and sustainable economic growth, full and productive employment, and decent work for all. Although NEs often operate in the informal economy and may not offer the same security as formal employment, they provide a source of income and employment, even for those who might otherwise remain unemployed. With the right institutional and policy support, NEs could potentially transition into the formal economy, promoting decent work and contributing to economic growth.

SDG 9: Industry, Innovation, and Infrastructure

Despite operating with limited resources, NEs often demonstrate a high degree of innovation, a key component of SDG 9. This innovation can manifest in various ways, from novel methods of product delivery to creative ways of accessing markets or minimizing costs. While NEs may not contribute significantly to infrastructure development directly, their resilience and growth can spur the need for improved infrastructure, thereby indirectly influencing this aspect of SDG 9.

SDG 10: Reduced Inequalities

NEs inherently foster inclusivity, offering business opportunities to individuals regardless of their social or economic status. In doing so, they play a part in reducing inequalities (SDG 10) by providing avenues for income generation for individuals across the socioeconomic spectrum.

SDG 12: Responsible Consumption and Production

Given their size and scale, NEs can contribute to SDG 12 by promoting responsible consumption and production. They often source materials locally, reducing transport emissions, and due to their small-scale operations, they may generate less waste than larger companies. NEs also have the potential to foster responsible consumption habits within local communities, given their proximity to their customer base.

SDG 17: Partnerships for the Goals

Finally, NEs have the potential to contribute to SDG 17 by establishing partnerships with various stakeholders, including other businesses, non-profit organizations, and local governments. These partnerships can foster knowledge sharing, collaboration, and the pooling of resources, enhancing the capacity of NEs to achieve sustainable growth and contribute to other SDGs.

In conclusion, the development and support of NEs could serve as a multi-faceted strategy for achieving several of the SDGs. Although challenges exist, with the right policy and institutional support, NEs have the potential to contribute significantly to sustainable development.

Further research

The Imperative of State-led Social Safety Nets for Nanoenterprises: Directions for Further Research

As we delve further into the role and potential of Nanoenterprises (NEs) in socioeconomic development, a pertinent area that warrants in-depth exploration is the provision of social safety nets by governments. More specifically, the need for state-backed health and disaster risk mitigation measures for these enterprises. While private sector participation is crucial, the foundation of these safety nets must be laid and sustained by the state for several reasons.

Ensuring Equal Access and Coverage

State-led safety nets ensure universal access and coverage, particularly for NEs operating in remote or marginalized areas, or those run by individuals who may otherwise be excluded from private sector services due to factors such as low income or lack of collateral. Governments, unlike private organizations, are obligated to provide services to all constituents, ensuring that the most vulnerable NEs are not left unprotected.

Promoting Business Continuity and Resilience

Social safety nets, particularly in health and disaster risk mitigation, promote business continuity and resilience in the face of adversities. NEs, given their small scale and limited resources, are often the most affected by health crises or natural disasters. By providing support in these areas, governments can ensure that NEs can recover from setbacks more effectively and continue to contribute to the economy.

Reducing Financial Vulnerability

NEs are often financially vulnerable, and unexpected costs such as healthcare expenses or disaster-related losses can push them further into poverty. State-provided safety nets can reduce this financial vulnerability, allowing nanoentrepreneurs to invest in their businesses rather than spending their resources on coping with such shocks.

Encouraging Formalization

The provision of social safety nets by the state can serve as an incentive for NEs to formalize. This could, in turn, open doors for them to access other forms of support such as training, funding, and business development services, ultimately contributing to their growth and sustainability.

Future research should focus on the design and implementation of these social safety nets. How can they be made most effective for NEs? How should they be delivered to ensure maximum reach? What role can technology play in their deployment? How can they be financed sustainably? Answering these and other questions will help in devising policies and strategies that will ensure NEs, despite their size, can contribute significantly to the economy while also guaranteeing the welfare of those who run them.

Moreover, there should be a keen interest in studying the partnership dynamics between the state and the private sector in providing these safety nets. Such research would shed light on the potential synergies and areas of conflict, enabling a smoother and more effective collaboration between these two important stakeholders in supporting NEs.

Further research in this area is necessary to not only provide a deeper understanding of the needs and challenges of NEs but also to inform policy decisions and guide the development of programs aimed at supporting these vital economic entities.

Private Sector Intervention for Coordination and Consolidation

Another compelling area of inquiry concerns the role the private sector can play in fostering coordination and consolidation to enhance market access for both suppliers and buyers. Particularly, there’s an opportunity for large corporations to form partnerships with Nanoenterprises (NEs), focusing on local sourcing of raw materials rather than importation. These partnerships could reduce the carbon footprint of businesses, stimulate local economies, and foster sustainable development.

Despite the potential capital-intensive nature of these partnerships in the short-term, the long-term benefits to the local economy and the environment are undeniable. State intervention in the form of subsidies and incentives could be essential in promoting such partnerships.

Technology Transfer and Capacity Building

Large corporations often possess advanced technologies and technical know-how that can significantly enhance the productivity and efficiency of NEs. Partnerships between large corporations and NEs can provide an avenue for technology transfer and capacity building, leading to improved output and competitiveness of NEs.

Supply Chain Integration

NEs can be integrated into the supply chains of larger corporations, providing a steady and reliable market for their products or services. This can improve their financial stability, encourage growth, and create employment opportunities.

Financial Support and Investment

Larger corporations could provide much-needed financial support and investment to NEs. This could be in the form of direct funding, or indirectly through facilitating access to credit and other financial services. Such financial support can be crucial for NEs to scale up their operations and enter new markets.

Infrastructure Development

Partnerships with large corporations could also lead to infrastructure development in areas where NEs operate. This can include physical infrastructure like roads and utilities, as well as digital infrastructure like internet connectivity, which can open up new opportunities for NEs.

Further research is needed to understand the most effective ways of fostering these partnerships, the potential barriers and how they can be overcome, and the impact of such partnerships on the economic sustainability of NEs. It would also be beneficial to explore the role of government in facilitating these partnerships, and the types of policies and incentives that could encourage more large corporations to partner with NEs.

Moreover, future studies could also focus on the role of social enterprises and NGOs in bridging the gap between NEs and large corporations, and how these organizations can collaborate with governments to promote inclusive and sustainable economic growth.

Case Study of SEDPI’s Ethical Financing and Social Safety Nets: Opportunities for Research

A third potential area for research is an in-depth case study of the Social Enterprise Development Partnerships, Inc. (SEDPI) model of microfinance services to Nanoenterprises (NEs). SEDPI’s pioneering work in the field of ethical financing and social safety nets for NEs has led to reduced default rates, and the successful expansion of its branch network and outreach.

SEDPI operates under six foundational principles: financial education, capital infusion rather than loans, profit and risk sharing, loss follows capital, non-profit insurance product, and partnership and cooperation. These principles provide a solid basis for a transformative approach to microfinance that is equitable, empowering, and sustainable.

Impact of Financial Education

An investigation could assess the impact of intensive savings mobilization, universal insurance coverage, provision of investment opportunities, and liberation from oppressive loan products on the economic resilience and sustainability of NEs.

Capital Infusion versus Traditional Loans

Research could compare and contrast the effectiveness of capital infusion versus traditional loans in promoting the growth and sustainability of NEs. It could also examine the benefits and challenges of SEDPI’s co-ownership business partnership model.

Profit and Risk Sharing

An evaluation could be made of the impact of SEDPI’s profit and risk sharing mechanism on the viability of NEs, and how this approach differs from conventional loan systems where debtors shoulder all the risks.

Non-Profit Insurance Product:

A study could analyze the success of SEDPI’s non-profit insurance product, and how this approach to insurance contrasts with profit-oriented models.

Partnership and Cooperation

An exploration could be undertaken of SEDPI’s partnerships with government agencies, civil society, and other like-minded organizations. This research could analyze how these partnerships have contributed to the organization’s success, and what lessons can be learned for other organizations aiming to serve NEs.

In sum, this case study would provide valuable insights into how social safety nets can strengthen the capacity of NEs to cope with emergencies and disasters. By examining how SEDPI’s model has led to lower default rates and enabled the organization to expand its services, this research could inform the development of strategies and policies aimed at promoting sustainable and inclusive economic growth.

Reimagining Farmers as Partners: Leveraging Savings for Credit Risk Mitigation in the Agricultural Sector

Delivered on May 23, 2023 at the Agricultural Credit Policy Council event held at the PICC

Financial inclusion remains an essential factor for sustainable economic development, particularly in the realm of the agricultural sector. Having access to a broad range of financial services – which includes not only credit but also savings, insurance, and money transfer services – equips individuals with the necessary tools to weather financial shocks, invest in opportunities, and subsequently improve their livelihoods.

However, recent data reflects a concerning trend in this regard. Based on the Financial Inclusion Survey of 2021, the percentage of adults in the Philippines with savings sharply declined from 53% in 2019 to 37% in 2021. This dip may be partly attributable to the economic upheavals caused by the COVID-19 pandemic, which could have led to reduced household income or increased medical expenses.

Moreover, the utility of savings accounts reflected a similar downturn. In 2019, 76% of account holders actively used their savings accounts, but by 2021, this figure had plunged to a mere 56%. In raw numbers, this decline signifies a decrease of approximately 9.7 million savers, from 38.6 million in 2019 to just 28.9 million in 2021.

Among the sectors most affected by this trend is agriculture, forestry, and fishery (AFF), which, despite making significant contributions to the economy, remains financially underprivileged. The 2021 Financial Inclusion Survey disclosed that only about 30% of the 2.3 million workers engaged in AFF reported having any form of savings. This indicates that less than half (only 30%) of our colleagues in the agri-fishery sector are saving or have savings.

Delving deeper into the data, we find that of those AFF workers who are saving, a mere 27.2% or around 191,000 are saving through formal channels. A significantly larger portion, 82.2% or approximately 577,000 individuals, are resorting to informal means. These statistics illustrate that the sector is severely lagging in formal savings, with a disproportionately higher percentage of informal savers compared to the overall population.

The need for comprehensive financial inclusion strategies

The substantial decrease in the number of savers, especially in the agricultural sector, is indeed disheartening. The trend underscores that simply providing appropriate savings products, while a vital step, is insufficient in addressing the larger issue. Comprehensive strategies that extend beyond the financial sector are required. This means initiatives designed not just to promote savings, but also to increase income, as these two factors are intrinsically linked.

To this end, the proactive role of the Bangko Sentral ng Pilipinas (BSP) in driving financial inclusion is highly commendable. The BSP’s initiatives towards fostering innovations in savings products design, collaborating with various government agencies to enhance financial services delivery, and launching a financial education strategy to increase financial literacy are all notable steps in the right direction. The ultimate goal of these interventions is to empower individuals with financial capability, which involves not just understanding but also effectively using financial services to improve their lives.

Interconnectivity

While significant strides have been made towards financial inclusion, certain challenges persist. Much of the innovation in the banking sector relies heavily on internet-based technologies. Yet, connectivity remains a significant hurdle in rural areas, where a large portion of the agricultural workforce resides. Additionally, the cost of owning a smartphone, which is often required to access digital financial services, is prohibitive for many farmers.

These challenges, however, are not insurmountable. One potential solution is to increase the presence of agency banking in areas where internet connectivity is weak. Agency banking, which involves non-bank retail outlets providing banking services, can help bridge the gap between the banking sector and the rural populace.

Furthermore, promoting the interoperability of savings products among strong cooperatives within the banking system could also be beneficial. A prime example is the Cebu People’s Multipurpose Cooperative (CBMPC), with its demonstrated capability in managing savings products and five decades of service. By aligning savings products across different financial institutions, we can foster a more inclusive and interconnected financial ecosystem that caters to the needs of the agricultural sector.

Savings product design for financial inclusion

The paradigm within financial institutions must shift from perceiving the economically disadvantaged as unable to save, to recognizing that they indeed can, given appropriate financial products. The importance of this shift becomes evident when considering institutions like the Cebu People’s Multipurpose Cooperative (CBMPC) and the Rural Bank of Solano (RBS), both of which have successfully demonstrated this principle.

Both CBMPC and RBS have designed their savings products with minimal opening and maintaining balances, thereby reducing barriers to entry for those with limited income. By adopting such an approach, these institutions have successfully extended financial services to the unbanked populace.

A distinctive characteristic of these institutions’ approach is the integration of financial education within their product offering. Recognizing that financial literacy is crucial for their clientele, CBMPC and RBS offer resources and programs to enhance understanding of savings and other financial concepts among their customers. This strategy does not only ensure the proper utilization of their products, but it also empowers their customers to make informed financial decisions.

Further reflecting the flexible and customer-centric nature of their product design, CBMPC and RBS allow savings to be used as collateral for loans. This system enables customers to access credit that might have been unattainable otherwise due to lack of traditional collateral. Importantly, the savings used as collateral remain accessible in times of emergencies, sickness, death, or disasters, further enhancing the financial security of their customers.

Credit extension at these institutions is linked with agricultural insurance. This approach mitigates the risk of loan default due to crop loss or other agricultural setbacks. It provides a safety net for both the farmers, who might otherwise be unable to repay loans after a poor harvest, and for the institution, which reduces its credit risk.

The experiences of CBMPC and RBS highlight the potential of well-designed savings products to promote financial inclusion and resilience among disadvantaged groups, such as the agri-fishery sector. By adopting a customer-centric approach, emphasizing financial education, and leveraging insurance and flexible collateral options, financial institutions can support their customers’ financial wellbeing while also managing their own risk.

Enhancing financial resilience in the agricultural sector through savings-secured loans

Savings-secured loans represent a significant innovation in the field of financial services, especially in terms of offering a lifeline in times of emergencies. The unique feature of these loans is that they use a customer’s savings as collateral, which allows the borrower to maintain access to these funds in times of urgent need.

In the agricultural sector, a unique set of financial challenges exist due to the cyclical nature of farming activities and the susceptibility to various risks such as weather, pests, and market fluctuations. Savings-secured loans offer a potential solution to these challenges and could significantly enhance the financial resilience of farmers.

One of the key advantages of savings-secured loans is that they enable farmers to use their savings as collateral. This feature allows them to access larger loans, or loans with more favorable terms, which may have been out of reach otherwise. Given the financial requirements of agricultural activities – significant initial outlays for seeds, fertilizers, equipment, and labor – access to substantial credit is essential. The use of savings as collateral bridges this gap, offering farmers the much-needed financial leverage at the start of the farming season.

For financial institutions, the use of savings as collateral significantly reduces credit risk. In the event a borrower defaults on the loan, the institution has recourse to recover its funds from the savings held as collateral. This safeguard makes the issuance of larger loans to farmers, who are often seen as high-risk borrowers due to the unpredictability of their income, a more viable option.

Beyond immediate financial needs, savings-secured loans also offer long-term benefits. They allow farmers, especially those who are economically disadvantaged, to build a credit history. A robust credit history can enhance their credibility as borrowers and increase their chances of accessing more substantial loans in the future, thereby enabling further growth and investment in their farming activities.

Savings-secured loans also incentivize borrowers to practice financial discipline. The necessity to repay loans promptly to regain access to their savings can motivate farmers to manage their funds wisely and maintain regular repayment schedules. This habit, in turn, fosters financial resilience and stability.

The inclusion of such flexible savings products in the offerings of financial institutions not only serves the customers by providing a financial buffer but also benefits the institution. It reduces the risk of loan default and encourages consistent use of financial services, thus leading to a sustainable and financially inclusive growth model.

From risky clients to partners in development

Farmers are often seen as high-risk clients by financial institutions. This perception arises from a combination of factors that affect farmers more than most other sectors:

Income volatility: The farming sector is subject to the volatility of agricultural input costs and the instability of produce prices, which may fluctuate due to factors beyond a farmer’s control.
Susceptibility to external shocks: Farmers are at the mercy of weather conditions, pest infestations, diseases, and market changes, all of which can drastically impact income.
Lack of collateral: Many farmers lack the necessary assets to pledge as collateral for loans, limiting their access to credit.
Lack of credit history: Many farmers have not previously accessed formal financial services, and therefore lack a credit history that would demonstrate their creditworthiness to potential lenders.
Limited financial capability: Farmers often have limited financial knowledge and skills, reducing their ability to effectively manage financial products and services.

Despite these challenges, it is essential to acknowledge the crucial role that farmers play in society and the economy. They contribute significantly to food security, a fundamental aspect of any nation’s stability. Additionally, the agricultural sector serves as an economic driver for growth, providing employment opportunities and contributing to GDP.

Therefore, financial institutions need to reassess their view of farmers. They should be seen as partners in development, rather than risky clients. This shift in perspective is crucial in driving inclusive growth and development, especially in economies heavily reliant on agriculture.

To make this partnership successful, financial institutions can adopt the following strategies:

Integrating appropriate financial products in credit extension: Products like crop insurance can help mitigate the financial risks associated with farming. Also, savings-secured loans, which use savings as collateral but allow withdrawals in emergencies, can provide farmers with the flexibility they need to manage their financial lives.
Providing financial education: Providing financial literacy programs can help farmers better understand and manage financial products and services, improving their financial capability and making them more reliable borrowers.
Extending government support: Collaboration with government agencies, especially in areas such as disaster risk reduction, can provide additional safeguards against the inherent risks associated with farming. This collaboration can also facilitate the delivery of financial services to the agricultural sector.

Government support

Active participation of the government in supporting farmers is crucial, especially in providing subsidies and assistance that the private sector may find challenging to cover. For instance, the government can step in to subsidize the cost of farming equipment, high-quality seeds, fertilizers, and irrigation facilities, to reduce the burden on farmers. The government can also subsidize crop insurance, which can serve as a safety net against the loss due to unpredictable events like natural calamities, pest infestations, or market fluctuations.

Furthermore, the government’s role is paramount in implementing disaster risk mitigation strategies and providing post-disaster relief and recovery support. This assistance can ensure the continued delivery of financial services to the agricultural sector, even in the face of adverse events. Such government interventions not only shield farmers from severe financial distress but also make farming a more viable and sustainable profession, encouraging economic growth and food security.

In sum, viewing farmers as partners in development necessitates a change in perspective from financial institutions, along with the provision of appropriate financial products and support mechanisms. This partnership not only promotes financial inclusion among farmers but also contributes to a more resilient and sustainable agricultural sector.

The Maharlika Investment Fund (MIF): A critical examination of the Philippines’ proposed sovereign wealth fund

Sovereign Wealth Funds (SWFs) are state-owned investment funds that are used by countries to benefit their economies and citizens. They consist of various types of assets such as stocks, bonds, real estate, or other financial instruments, often derived from a nation’s surplus reserves.

The concept of SWFs originated in the mid-20th century, pioneered by countries with surplus revenues primarily from commodities like oil. For instance, the Kuwait Investment Authority, established in 1953, is often cited as the first SWF. Over time, many other countries

SWFs significantly contribute to economic stabilization. They invest surplus revenues, thereby providing a cushion against economic downturns. For instance, during periods of low oil prices, oil-rich countries can utilize their SWFs to balance any decrease in revenue.

It stands out for their long-term investment strategies. Unlike private investors who might focus on short-term gains, SWFs have the advantage of a long-term perspective, enabling them to undertake investments that, despite potential short-term risk or unprofitability, could yield substantial returns in the future.

SWFs can profoundly influence a nation’s strategic objectives. By channeling investments into specific sectors or industries, they can promote national priorities, such as infrastructure development, technological progress, or economic diversification. In practice, several oil-rich nations use their SWFs to invest in industries outside of oil, aiming to diversify their economies and reduce oil revenue dependency.

Different types of sovereign wealth funds

Sovereign Wealth Funds (SWFs) can be classified into four primary types, each reflecting the specific economic goals and policy objectives of their respective countries. These include savings funds, stabilization funds, pension reserve funds, and strategic development SWFs.

Savings funds are designed to transform non-renewable assets, such as oil or minerals, into a diversified portfolio of international assets. These funds aim to conserve wealth for future generations once these non-renewable resources are depleted. For instance, the Government Pension Fund Global of Norway falls under this category, as it invests oil revenues to secure future generations’ welfare.

Stabilization funds are typically used to insulate the economy from commodity price volatility and other economic shocks. They collect surplus revenue during periods of high commodity prices and release funds into the budget during downturns to help stabilize government revenues and counteract economic cycles. An example is the Russian National Wealth Fund, established to support Russia’s pension system and balance the federal budget in times of oil price volatility.

Pension reserve funds are not sources of pension contributions but serve as a buffer to assist the funding of future pension liabilities. These funds are typically invested in a diversified portfolio of assets to generate a steady return over time. The Australian Future Fund is an example of a pension reserve fund.

Lastly, strategic development SWFs aim to fulfill specific domestic economic and policy objectives, such as developing certain sectors, promoting economic diversification, or increasing employment. These funds often invest in domestic industries and infrastructure. The Ireland Strategic Investment Fund, for instance, targets sectors that will deliver economic and employment benefits to Ireland.

How SWFs are funded

The funding sources for Sovereign Wealth Funds can be traced back to a variety of economic activities and reserves depending on the fund’s nature and the country’s economic structure. Common sources of funding include commodity exports, foreign exchange reserves, transfer of assets from other funds, and fiscal surpluses.

Commodity exports, particularly of oil and gas, are a significant source of funding for many SWFs. For countries rich in these resources, the revenues generated from their exports can result in significant budget surpluses, which are then channeled into their respective SWFs. Notable examples include the Abu Dhabi Investment Authority funded by oil exports, and the Government Pension Fund Global of Norway funded by oil and gas revenues.

Foreign exchange reserves are another crucial source of funding for SWFs. Countries with substantial foreign exchange reserves, often due to a large volume of exports or a significant influx of foreign direct investment, can allocate a portion of these reserves to establish or bolster their SWFs.

Some SWFs are also funded through the transfer of assets from other government funds or entities. For instance, an initial corpus for the fund might be sourced from a country’s central bank reserves or a public pension fund.

Lastly, fiscal surpluses arising from prudent economic management and strong economic growth can also be channeled into SWFs. Countries that consistently run budget surpluses may choose to invest these funds for future needs or economic stabilization. For example, Singapore’s Government Investment Corporation is funded in part by the country’s budget surpluses.

Countries with SWF best practices

‘Best practices’ in the context of Sovereign Wealth Funds usually refers to effective and ethical management practices that have proven successful across a range of funds. Some of these practices include establishing clear objectives for the fund, which can guide its investment strategy and help stakeholders understand its purpose. Implementing robust governance and operational frameworks is another key best practice. This involves having clear lines of responsibility and control, as well as efficient processes for decision-making and execution. Finally, transparency and accountability are crucial for maintaining public trust in SWFs. This can involve regular public reporting, independent audits, and strong oversight mechanisms.

Several countries are recognized for their adherence to best practices in the management of their SWFs. Among them, Norway, with its Government Pension Fund Global, is frequently lauded for its high transparency and robust governance structure. Singapore’s two SWFs, Temasek Holdings and GIC, are also acknowledged for their clear investment strategies, sound governance, and significant contribution to the country’s economy. Similarly, the Abu Dhabi Investment Authority (ADIA) in the United Arab Emirates, one of the largest SWFs in the world, is recognized for its diversified investment portfolio and prudent risk management strategies.

Norway’s Government Pension Fund Global, one of the largest sovereign wealth funds in the world, is primarily funded by the country’s oil revenues. The fund is intended to finance public pensions and prevent the Norwegian economy from overheating due to excessive spending of oil revenues. A standout aspect of the Norwegian fund is its high degree of transparency. It regularly publishes detailed reports about its operations and investments, and it’s known for its strict ethical investment guidelines, which prohibit investments in companies involved in activities such as tobacco production, certain types of weapons manufacturing, and severe environmental damage.

Singapore manages two sovereign wealth funds: Temasek Holdings and GIC. These funds are primarily funded by Singapore’s foreign reserves. Their overall goal is to strengthen Singapore’s economy and ensure the well-being of future generations. Temasek Holdings and GIC are renowned for their strong governance structures and clear investment strategies. They are recognized for their strategic investments in a variety of sectors, both domestically and internationally, contributing to the robustness of Singapore’s economy.

The Abu Dhabi Investment Authority (ADIA) is primarily funded by Abu Dhabi’s oil surplus. Its main objective is to diversify income sources away from oil and stabilize the economy. ADIA is known for its wide-ranging investment portfolio, which spans numerous sectors and asset classes across various countries. This diversified approach helps to spread risk and increases the potential for returns. Additionally, ADIA has a reputation for prudent risk management, which includes a thorough evaluation of potential investments and careful monitoring of its portfolio.

Advantages of SWFs

Sovereign Wealth Funds serve as an important mechanism for smoothing the impact of volatile commodity prices or trade surpluses, providing economic stability. For instance, when a country experiences a surge in oil prices, it can channel the extra revenue into its SWF. During times of lower prices or economic downturns, the country can use the SWF to compensate for the shortfall, thereby stabilizing the economy. Furthermore, SWFs allow countries to diversify their income sources by investing in various asset classes and industries across different countries, reducing the economic risk associated with over-reliance on a single volatile revenue source, such as oil in the case of many Middle Eastern countries.

As state-owned entities, SWFs can afford a longer-term investment horizon than most private investors. This long-term perspective provides SWFs with the advantage of investing in riskier or less liquid assets that may offer higher returns over a longer period, like infrastructure or private equity. Furthermore, their ability to remain patient and hold onto their investments during periods of market volatility allows them to benefit from long-term economic trends and potentially realize higher returns compared to short-term investments.

SWFs often invest in sectors that align with their country’s strategic objectives, promoting national development and growth. For instance, a SWF might invest in infrastructure projects, thereby facilitating economic development and job creation. In the case of technology or renewable energy, investments by SWFs can drive innovation and help transition the economy towards a more sustainable model. This alignment of investments with national goals is another crucial advantage of SWFs.

The concept of intergenerational equity is central to many SWFs, particularly those funded by revenue from depletable resources like oil. By setting aside and investing a portion of the income derived from these resources, SWFs can ensure that the wealth benefits future generations and not just the current populace. For example, the Norwegian Government Pension Fund Global, one of the world’s largest SWFs, was established to invest the profits from Norway’s oil and gas resources, securing the welfare of future generations long after these resources are exhausted.

Disadvantages of SWFs

One significant concern surrounding Sovereign Wealth Funds is the potential for mismanagement and corruption. Especially in countries where transparency and oversight mechanisms are lacking, there is a risk that SWFs could be susceptible to such practices. For instance, there have been allegations of corruption and mismanagement in Malaysia’s 1MDB fund, where billions of dollars were reportedly misappropriated. In countries with weak institutional frameworks and regulatory oversight, the large amounts of money managed by SWFs can be prone to misuse, which could lead to significant economic and social implications.

Another disadvantage of SWFs is the potential concentration of economic power. With their enormous assets, SWFs have the ability to wield significant influence over markets and corporations, leading to concerns about market manipulation or exerting undue influence. For example, a large investment by a SWF in a particular sector could potentially distort market prices. Additionally, SWFs’ investments could have implications for national security, particularly when they invest in strategic industries of other countries.

Large-scale investments by SWFs, particularly in domestic markets, could potentially lead to economic overheating and asset price inflation. By pumping significant amounts of money into specific sectors or asset classes, SWFs could contribute to overvaluation, which can lead to asset bubbles and exacerbate economic instability. For instance, excessive investment in the real estate sector could drive up property prices, making housing unaffordable for many citizens and potentially leading to a property bubble. Thus, while SWFs can contribute to economic growth and stability, they also need to manage their investments carefully to avoid contributing to economic instability.

Controversies surrounding SWFs

Sovereign Wealth Funds are often criticized for a lack of transparency and opacity in their operations. For example, the Libyan Investment Authority (LIA) has faced several allegations and legal actions related to mismanagement and corruption due to its lack of transparency. Similarly, China’s Investment Corporation (CIC) has faced criticism over the lack of clarity surrounding its investment strategy and performance.

There is also the risk of political interference in SWFs. The Russian Direct Investment Fund (RDIF) has been viewed as a tool of state policy for geopolitical influence rather than an independent financial institution for profit maximization. Similarly, the Qatar Investment Authority (QIA) has been closely tied to the ruling family, raising questions about its independence.

Large SWFs can also pose a risk to global financial stability. For instance, the Norwegian Government Pension Fund Global (GPFG) is one of the world’s largest SWFs and its investment decisions can have a significant impact on global markets. Similarly, the Saudi Arabian Monetary Authority (SAMA) controls a large SWF whose investments can significantly influence global financial markets.

The Proposed Maharlika Investment Fund of the Philippines

House Bill No. 6398, also known as the Maharlika Investment Fund (MIF) bill, was certified as urgent by President Ferdinand “Bongbong” Marcos Jr. The bill’s primary aim is to stimulate economic activity and development in the Philippines through strategic and high-impact infrastructure projects, serving as a new growth catalyst.

The proposed Maharlika Investment Fund (MIF) is primarily intended to stimulate the economy in the face of downgraded global growth projections. This comes at a time when the world economy is dealing with several challenges, including debilitating inflation, fluctuating and unstable prices of crude oil and other fuel products due to the ongoing conflict between Ukraine and Russia, and continuing interest rate hikes in the international financial sector. By supporting strategic and high-impact infrastructure projects, the MIF is envisioned to act as a new catalyst for growth, accelerating economic activity and development in the Philippines.

Maharlika Investment Corporation

The proposed Maharlika Investment Fund (MIF) will be managed by the Maharlika Investment Corp. (MIC). However, the management and governance of the MIF have come under scrutiny, particularly with the provisions in the Senate MIF bill that would allow foreigners to sit on the board of MIC. Critics, including Rep. Arlene Brosas, argue that this could lead to foreign control over local resources. There are also worries about the potential for “money laundering” due to the discretionary powers given to the Board of Directors, as voiced by Rep. France Castro.

President Ferdinand “Bongbong” Marcos has certified the Maharlika Investment Fund bill as urgent, expressing the need for a wealth fund to counter the impact of several economic challenges, including inflation, fluctuating oil prices, the Russian invasion of Ukraine, and interest rate hikes. The president believes the fund could stimulate the economy by accelerating the implementation of large infrastructure projects. The urgent certification allows the bill to bypass the normal legislative process, which entails readings and deliberations on three separate days. As a result, the bill could be passed more quickly, but at the risk of lawmakers not having ample time to read and study the proposed measures.

Funding MIF

The proposed Maharlika Investment Fund (MIF) is expected to receive initial capital from major financial institutions such as the Land Bank of the Philippines (LBP), the Development Bank of the Philippines (DBP), and the Bangko Sentral ng Pilipinas (BSP). However, there are concerns that diverting funds from LBP and DBP to the MIF might affect the availability of funds for farmers and microenterprises, which are the primary clientele of these banks.

In addition, the Senate bill reintroduces pension funds such as the Government Service Insurance System (GSIS), Social Security System (SSS), and Pag-IBIG as potential investors in the MIF. It should be noted, however, that the participation of these pension funds is voluntary and not mandatory.

Moreover, the bill proposes annual contributions from the Philippine Amusement and Gaming Corporation (PAGCOR) and other government-owned gaming operators to boost the fund’s capital. It should be noted that these are profits from gaming operations, and diverting them to the MIF could have implications for other sectors funded by these entities.

The MIF is expected to raise additional capital through an Initial Public Offering (IPO) on the Philippine Stock Exchange. This implies that the fund will be listed on the stock exchange and shares of the fund will be made available to the public. This move is intended to democratize access to the fund and encourage public participation in the fund’s growth and profits.

MIF concerns and criticisms

Senator Risa Hontiveros, a vocal critic of the Maharlika Investment Fund (MIF) bill, has expressed several concerns about its quick passage and potential implications. She pointed out the depletion of income from the Malampaya oil and gas fields and the yet-to-be-passed law aimed at boosting the government’s income from mining operations. She also warned against the use of highly profitable funds of government financial institutions like Land Bank and Development Bank of the Philippines, which she argues could negatively impact farmers and small businesses. Additionally, Hontiveros raised concerns about the potential risks of using Bangko Sentral funds, highlighting their role in safeguarding against peso depreciation, price increases, and loan interest rate hikes.

The Makabayan Bloc in the House of Representatives, a coalition of left-leaning legislators, has not been silent about their concerns surrounding the proposed Maharlika Investment Fund (MIF). A central theme of their criticism is the potential for the MIF to have transparency issues, given the amount of public funds it will manage and the potential for the fund to fall under the influence of political interests. They also questioned the necessity of creating a new fund, suggesting that existing national agencies could be restructured or optimized to fulfill similar goals. Additionally, the Bloc has expressed fears that the MIF might be used as a tool for political patronage, potentially leading to corruption as large sums of public funds could come under the control of a select few individuals.

Recommendations

The Maharlika Investment Fund (MIF), recently proposed in the Philippines, has stirred a mix of hope and concern among stakeholders. The MIF, designed to stimulate economic growth through strategic infrastructure projects, could serve as a new catalyst for development amidst global economic uncertainties. However, the proposed fund has been met with skepticism and criticism due to a variety of issues, such as concerns over governance, transparency, the source of funding, and the lack of clear investment guidelines. Despite these concerns, the bill has been certified as urgent by President Ferdinand “Bongbong” Marcos Jr., signifying the need to kick-start this initiative for the economic future of the nation.

Strong governance structures should be at the heart of the Maharlika Investment Fund (MIF) and its managing entity, the Maharlika Investment Corporation (MIC). These structures should foster a culture of professionalism, transparency, and accountability while incorporating robust checks and balances to mitigate the potential for mismanagement or misuse of funds. This foundational recommendation, when well implemented, would pave the way for confidence, both domestically and internationally, in the operations of the MIF.

Enhanced transparency is a key necessity for the MIF, considering the high stakes involved and the significant public interest. The fund should be mandated to provide regular, comprehensive, and publicly accessible reports of its activities, investments, and returns. These transparency measures will serve as a deterrent against corruption and engender a sense of public trust and accountability in the fund’s management.

To alleviate concerns surrounding the source of funds, the MIF should primarily draw from the General Appropriations Act and contributions from the private sector. Existing financial institutions, such as the Land Bank, Development Bank of the Philippines, Bangko Sentral ng Pilipinas, and the surplus of GOCCs, are already serving their respective mandates and may not possess the surplus funds to sustainably contribute to the MIF. Therefore, it’s crucial to diversify and clarify the fund’s financial structure to ensure its viability and reassure stakeholders.

Establishing clear investment guidelines is another critical step for the MIF. These guidelines should be detailed, aligning with the country’s overarching economic goals and sustainability principles. To ensure effective and timely execution, the MIF should ideally concentrate on a maximum of three specific investment areas per year. Such focus will minimize the risk of spreading resources too thinly and not being able to bring projects to completion.

The implementation of MIF should be gradual, allowing for continual refinements based on real-time learning and feedback. This cautious approach can help mitigate risks, manage unintended consequences, and increase the fund’s adaptability in a dynamic economic landscape.

The inclusion of regular external audits and oversight in the MIF’s operational structure can provide an additional layer of checks and balances. These audits should be carried out by reputable external entities and serve to reinforce good governance and transparency in the management of the fund.

Existing government institutions be strengthened to more effectively fulfill their mandates. This approach helps to avoid duplication of efforts and allows resources to be directed more efficiently. The MIF should refrain from investing in areas where other government institutions are already capable of delivering results, preventing redundancy and fostering greater efficiency in the allocation of public funds.

The establishment of the Maharlika Investment Fund (MIF) represents a significant and necessary step forward for the Philippine economy, particularly in the face of current economic challenges. This initiative, however, should be balanced with the implementation of robust safeguards to ensure the maintenance of financial stability and the protection of public interest.

Success of the MIF hinges on more than its mere establishment; prudent and transparent management is crucial. This fund will need to navigate a complex economic landscape while maintaining trust and demonstrating fiscal responsibility. A series of recommendations have been provided with this balance in mind, aimed at guiding the MIF towards achieving its economic goals and maintaining public trust.

The success of MIF will not only be a testament to its management’s acumen but also to the fund’s foundational principles of governance, transparency, and accountability. These guiding principles will be essential to ensuring that the MIF can effectively stimulate economic activity and development, whilst also safeguarding public interest and financial stability. This holistic approach to the MIF’s establishment and operation is fundamental to its ability to serve as a new catalyst for growth within the Philippines.

Philippine microfinance industry estimates

The Bangko Sentral ng Pilipinas (BSP) defines microfinance as the provision of a broad range of financial services such as deposits, loans, payment services, money transfers and insurance products to the poor and low-income households, for their microenterprises and small businesses, to enable them to raise their income levels and improve their living standards.^[1] It is also defined as the provision of financial services to low-income clients, including the self-employed.

Who is a microfinance client?

Typical microfinance clients are low-income persons that do not have access to formal financial institutions. Microfinance clients are typically self-employed, often household-based entrepreneurs.

In rural areas, they are usually small farmers and fisher folk, as well as others who are engaged in small income-generating activities such as food processing and petty trade. In urban areas, microfinance activities are more diverse and include shopkeepers, service providers, artisans, street vendors, and others.^[2]

Microfinance products

Financial products of microfinance used to be limited to savings and credit. Several financial services have sprung up in the past decade to address the other financial services needs of microfinance clients like insurance, remittance and even housing services.

Loans that are up to PhP150,000 used for consumption or productive purposes are classified as microfinance loans as stated in government’s Social Reform Agenda or Republic Act 8425 of 1997. The same amount is set as the maximum capitalization for microenterprises.

For microhousing loans, the Bangko Sentral ng Pilipinas (BSP) set the ceiling to PhP300,000 although the Housing and Land Use Regulatory Board (HLURB) classifies socialized housing at PhP450,000.

Government policy

The National Strategy for Microfinance envisions a viable and sustainable microfinance market that will help provide poor households and microentrepreneurs with greater access to microfinance services.

It calls for a greater role for the private sector and the non-participation of government line agencies in the provision of credit and guarantee programs. Emphasis is on the adoption of market oriented financial and credit policies to ensure viability and sustainability.^[3]

It is worthy to note that the Philippines closed the gender gap in terms of financial inclusion^[4] which is largely attributed to microfinance institutions.

Players, portfolio and number of clients

There are approximately 6,183 microfinance institutions in the Philippines.

Microfinance institution	Number
Banks (2022)^[5]	139
Cooperatives (2020)^[6]	2,762
Microfinance NGOs (2022)^[7]	27
Financing companies (2017)^[8]	673
Lending companies (2017)^[9]	2,582
Total	6,183

The microfinance industry in the Philippines has grown into a PhP406 billion industry in terms of loan portfolio as of March 2022.^{^[10]} This would be larger if the portfolio from financing and lending companies that also mostly qualify as microfinance loans are added. the figure also

Microfinance institution	Amount of portfolio in billion pesos
2022 1Q	2021	2020	2019	2018	2017	2016
Banks	26.8	27.7	26.6	27.2	22.6	17.1	13.7
Cooperatives	327.1*	327.1*	327.1	315.8	315.8	194.1	167.4
MF NGOs	52.8	52.8	50.4	41.9	30.9	28.6	20.6
Total	406.7	407.6	404.1	384.9	369.3	239.8	201.7

* Carried over from 2020 figures, due to lack of updated data from the Cooperative Development Authority, to come up with a reasonable estimate of the total outstanding loans of the industry.

There are 18.2 million recorded microfinance clients in the banking system, Microfinance NGO and cooperative sectors.^[11] In SEDPI’s research with various microfinance institutions, it is common for a client to have multiple memberships. In fact, a typical microfinance client has average membership in two to three microfinance institutions.

To estimate the number of microfinance clients served, the total number is multiplied by a factor 0f 50% to account for multiple memberships. This would bring the estimated number of microfinance clients in the industry to 9.1 million as of the first quarter of 2022.

Microfinance institution	Number of clients/members
2022 1Q	2021	2020	2019	2018	2017	2016
Banks	1,985,422	1,978,394	1,996,657	2,410,677	1,986,683	1,956,276	1,686,152
Cooperatives	9,900,000*	9,900,000 *	9,900,000	9,800,000	9,500,000	9,400,000	8,000,000
MF NGOs	6,400,000	6,200,000	6,400,000	6,200,000	5,200,000	4,300,000	3,900,000
Total	18,285,422	18,078,394	18,296,657	18,410,677	16,686,683	15,656,276	13,586,152
50% of total	9,142,711	9,039,197	9,148,329	9,205,339	8,343,342	7,828,138	6,793,076

* Carried over from 2020 figures, due to lack of updated data from the Cooperative Development Authority, to come up with a reasonable estimate of the number of microfinance clients in the industry.

Based on the above figures, the average loan size per client in the industry is PhP22,000 as of the first quarter of 2022. Microfinance NGOs have the lowest average loan size at PhP8,250 which makes them reach the bottom of the pyramid. Cooperatives have the highest average loan size at PhP33,000 since most cater to salaried workers as well as farmers and microenterprises that require larger loan amounts. The average loan size for rural banks is PhP13,500.

Industry growth

Growth in microfinance portfolio was robust from 2017 to 2019, the pre-pandemic period, which registered 14% to 37% loan portfolio growth rate and 11%-16% member growth rate. Slight growth in loan portfolio was recorded in 2020 at 7% and remained flat in 2021 that registered only 1% loan portfolio growth.

Microfinance institution	Growth in microfinance portfolio
2021	2020	2019	2018	2017
Banks	4%	-2%	20%	32%	25%
Cooperatives	0%	6%	11%	42%	16%
MF NGOs	5%	20%	36%	8%	39%
Total	1%	7%	14%	37%	19%

Number of clients had healthy growth rates from 2017 to 2019 which is ranged from 11% to 16%. On 2020 to 2021, the peak of the pandemic period, negative growth were recorded in terms of number of clients at -1% for each year.

Microfinance institution	Growth in number of clients
2021	2020	2019	2018	2017
Banks	-1%	-17%	21%	2%	16%
Cooperatives	0%	1%	4%	18%	11%
MF NGOs	-3%	3%	19%	21%	10%
Total	-1%	-1%	11%	16%	11%

^[1] BSP Circular No. 272, 30 January 2001

^[2]Salonga, Edwin, “Microfinance: An Empowerment Tool for the Enterprising Poor,” October 8, 2003.

^[3] Frequently Asked Questions on Microfinance, Bangko Sentral ng Pilipinas website

^[4]https://public.tableau.com/views/MGIGendertableau/Dashboard1GPS?:embed=y&:showVizHome=no&:display_count=y&:display_static_image=y&:bootstrapWhenNotified=true

^[5] bsp financial inclusion dashboard 220331

^[6] bsp financial inclusion dashboard 220331

^[7] list of sec accredited microfinance ngos 2022 221027

^[8] list of financing companies with certificate of authority 171231

^[9] list of lending companies with certificate of authority 171231

^[10] Dashboard: Financial Inclusion in the Philippines, Bangko Sentral ng Pilipinas, December 2020

^[11] Based on BSP financial inclusion dashboard and SEDPI multiple membership estimates

SEDPI at Opisina ni Senator Risa Hontiveros Nag-abot ng Tulong sa mga Nasalanta ng Bagyong Vicky

“Sagol nerbyos hadlok lagi kay basi manganaod kay paspas kaayo ang pag taas sa tubig og sulod kaayo.”

“Magkahalong nerbyos at takot dahil baka maanod kasi mabilis ang pagtaas ng tubig at pumapasok talaga.”

Ito ang naramdaman ni Roxanne Amigo habang rumaragasa ang baha na dala ng bagyong Vicky.

Kasama sa binaha at na-landslide ang mga residente ng Agusan del Sur at Surigao del Sur, kung saan mayroong microfinance operations ang SEDPI Development Finance, Inc.

Mula sa 10,000 SEDPI members, 1,884 ang apektado sa mga bayan ng Trento, Santa Josefa, Barobo, at Rosario sa Agusan del Sur at Lingig at Bislig sa Surigao del Sur. Dalawa ang inanod ng baha ang bahay. Isa naman ang na-landslide.

Agad nakapagbigay ng relief goods noong December 2020 ang SEDPI at ang Office ni Senator Risa Hontiveros sa nasalanta ng bagyong Vicky.

Hindi man madalas na mabagyo ang Mindanao, naging handa ang SEDPI sa pagtulong sa mga members dahil sa Social Welfare Protection Program (SWEPP) nito.

SWEPP ay ang hybrid microinsurance program ng SEDPI na pinagsasama ang “damayan” o pagtutulungan ng kapwa; formal life insurance mula sa CLIMBS Life and General Insurance Cooperative; at social safety nets mula sa gobyerno na binibigay ng SSS at Pag-IBIG Fund.

Maliban sa regular contributions sa SSS at Pag-IBIG, nagcocontribute ang mga members ng PhP360 every six months para ma-cover ng SWEPP.

Ang bahagi ng kontribusyon ay linalaan para sa “damayan”. Ginagamit ang naiambag ng mga members para tulungan ang kamember nila sa panahon ng kamatayan, pagkakasakit, sunog, o kalamidad.

Ito ang naging pondo para makabigay ng relief goods sa mga nabaha at dagdag na PhP5,000 sa tatlong na-wipe out ang bahay.

Bawat pack ng relief goods ay naglaman ng limang kilong bigas at ilang groceries na good for one week para sa pamilya na may limang miyembro.

“Naibsan ang pag-aalala ko dahil may makakain na kami kahit papano. Dumating ang aming pinapanalangin,” masayang nasabi ni Roxanne.

Naging malaking tulong ang donasyon na 134 sakong bigas na galing sa Liwanag at Lingap Program ng opisina ni Senator Risa Hontiveros.

Ang programang ito ay nagsimula noong bagyong Rolly bilang isang typhoon relief effort. Sinundan pa ito ng tulong sa mga apektado ng mga bagyong Ulysses at Vicky.

Mensahe ni Senator Risa Hontiveros, “Tuloy-tuloy ang pagpapadala natin ng Liwanag at Lingap sa mga kababayan nating naapektuhan ng kalamidad at nawalan ng kabuhayan. Umaasa akong sa munting paraan ay makatulong ang relief operations na ito para matugunan ang immediate needs gaya ng pagkain.”

Naging maganda ang pagtutulungan ng komunidad, SEDPI at ng opisina ni Senator Risa Hontiveros. Sa unang linggo matapos ang bagyo at baha ay nakatuon ang mga nasalanta sa pag-aayos sa kanilang mga bahay at gamit at hindi sa paghahanap ng kanilang makakain.

Ani ng Vince Rapisura, Presidente ng SEDPI, “Systemic and institutionalized safety nets talaga ang kailangan natin. Kailangan po talaga ay hindi lang yung sarili natin yung nag-eeffort pero nandyan ang private sector, nandyan ang public sector, nandyan ang community.”

SEDPI at Ambagan PH Tumulong sa mga Nasalanta ng Bagyong Vicky

Agad na nag-abot ng tulong ang SEDPI at Ambagan PH sa 1,884 na nasalanta ng bagyong Vicky sa Agusan del Sur at Surigao del Sur.

Matapos ang tuloy-tuloy na ulan na dulot ng bagyong Vicky sa Mindanao nagdulot ito ng pagbaha at landslide.

Kasama sa naapektuhan ay ang mga residente ng Agusan del Sur at Surigao del Sur, kung saan mayroong microfinance operations ang SEDPI Development Finance, Inc.

Bago pa mabagyo ang Mindanao, naging handa ang SEDPI sa pagtulong nito sa mga nasalanta dahil sa Social Welfare Protection Program (SWEPP).

SWEPP ay ang hybrid microinsurance program ng SEDPI na pinagsasama ang “damayan” o pagtutulungan ng kapwa; formal life insurance mula sa CLIMBS Life and General Insurance cooperative; at social safety nets mula sa gobyerno na binibigay ng SSS at Pag-IBIG Fund.

Maliban sa regular contributions sa SSS at Pag-IBIG, nagcocontribute ang mga members ng PhP360 every six months para ma-cover ng SWEPP.

Ang bahagi ng kontribusyon ay linalaan para sa “damayan”. Ginagamit ang naiambag ng mga members para tulungan ang kamember nila sa panahon ng kamatayan, pagkakasakit, sunog, o kalamidad.

Pondo mula sa SWEPP Damayan ang pinagkuhanan para sa relief goods sa mga nabaha at dagdag na PhP5,000 sa tatlong na-wipe out ang bahay.

Ani ng Vince Rapisura, Presidente ng SEDPI,“Ito ay isang patunay na ang mahihirap ay kaya nilang tulungan ang mga sarili nila kung merong maayos na sistema at hindi kinukurakot.”

Nadagdagan ang pondo para sa relief operation nung nag-donate ang Ambagan PH sa SEDPI Foundation, Inc. ng PhP20,000.

Ang Ambagan PH ay isang network ng volunteers at initiatives na nabuo para tumugon sa mga krisis, tulad ng bagyong Vicky. Donasyon at crowdsourcing ang pangunahing pinagmumulan ng kanila resources.

Sa karanasan nila mula ng October 2020 na-realize nila na, “Walang maliit o malaking ambag. Sa panahon ng krisis, lahat ng ambag ay dakila.”

Bawat pack ng relief goods na napamigay ng SEDPI at Ambagan PH ay naglaman ng limang kilong bigas at ilang groceries na good for one week para sa pamilya na may limang miyembro.

Pasalamat ng SEDPI member na si Dondon Ocsema, “Malaking tulong iyon para suportahan ang ilang araw na kakainin lalo na ilang araw akong hindi nakapamasada.”

Dahil meron na silang makakain para sa isang linggo mas nabigyang tuon ng mga nasalata, tulad ni Dondon, ang pag-aayos sa kanilang mga bahay at gamit.

Isa itong full-circle experience para kay Angelica Reyes o Anj na SEDPI Senior Program Officer at Co-Founder at Spokesperson din ng Ambagan PH.

Nagsimula ang 2020 nang mag-interview si Anj, kasama ang iba pang taga SEDPI, ng members sa Agusan del Sur at Surigao del Sur para malaman ang impact ng microfinance program.

Anj Reyes kasama ang ilang SEDPI members nung February 2020

Nagtapos ang taon na pinagtagpo ni Anj ang SEDPI at ang sinimulan niyang grupo na Ambagan PH para tumulong sa mga taong minsan ay nakadaupang-palad niya.

“Malaki ang pasasalamat ko sa SEDPI dahil marami sa organizational at administrative skills ko ay natutunan ko mula sa pagiging program officer ng SEDPI. Higit sa lahat, lalong napatibay ng SEDPI ang advocacy ko na makatulong sa kapwa.” – Angelica Reyes

Para sa mga gustong mag-ambag, pumunta lang sa facebook.com/ambaganph at i-click ang sign up link.

Microinsurance: Abot-kayang klase ng insurance

Pinaka-essence ng insurance ang pooling of risks over a large number of similar units such as households, persons or businesses. Inispread natin ang risk para yung financial loss ay hindi lang sa atin tatama.

Insurance should not be treated as an investment

Hindi dapat pinagkakakitaan ang insurance dahil hindi ito investment. Para itong bayanihan, you are protecting against financial loss. Hindi financial gain ang habol dito kundi protection from financial losses. Nagbibigay ng proteksyon ang insurance ng katumbas na halaga sakaling mawala ang isang bagay.

Ang insurance ay involved with exchanging the uncertain prospect of large losses for the certainty of small, regular premium payments. Nagbabayad ang maraming tao at pino-pool natin. Ibig sabihin, nagbabayad tayo ng malilit para kapag may tinamaang isa sa pool na ‘yon ay may matatanggap to compensate for the loss.

Sa mga pagkakataong may biglang mangyari sa‘yo na hindi maiiwasan, kahit paano ay makakatulong sa mga mahal mo na may pagkuhanan sila sa ganyang pagkakataon. Yan ang insurance. Sana malinaw na malinaw yan.

Microinsurance defined

Ang microinsurance ay nakapaloob sa batas natin under RA 10607, otherwise known as the Amended Insurance Code. Ito ang definition na nakapaloob sa ating batas. It meets the risk protection needs of the poor. Ang target nito ay iyong mga nasa laylayan, mga low-income households kaya micro ang tinatawag diyan.

Ayon sa batas, ang premiums, fees and charges ng microinsurance does not exceed 7.5% of the current daily minimum wage. Sa PhP570 na daily minimum wage dito sa NCR, PhP42.75 ang katumbas nito. Kung gagamitin ang 260 days na average number of annual working days, hindi dapat lalagpas sa PhP11,115 kada taon.

Ito ang sinasabi sa ating batas na mga benefits na makukuha sa microinsurance: ang guaranteed benefits should not exceed 1,000 times of the current daily minimum wage. Katumbas ito ng PhP570,000 kung gagamitin ang parehong rate sa itaas.

Microinsurance for OFW family members

Very relevant ang microinsurance sa mga OFWs, dahil ginagawa silang “insurance” ng mga kamag-anak dito sa Pilipinas. Puwedeng ikuha sila ng microinsurance para hindi mga OFWs ang gagawing insurance policy.

Mas mura kasi ito. Magbabayad ng maliit na premium ang OFW para icover ang kanilang family members. Kapag may nangyari sa kanila, yung insured amount ay makukuha ng mga beneficiaries mula sa insurance company. Mapuputol ang dependency of family members sa OFWs.

Microinsurance for protection

So, there mga besties, ito ang detalyadong discussion ng microinsurance. Laging tandaan na nag pagpaplano ng maaga ay isa sa pinakamagandang decision para kinabukasan mo at ng iyong mga mahal sa buhay.

Forms of insurance

May apat na forms ang insurance – formal, informal, public at hybrid.

Pooling of risks over a large number of similar units such as households, persons or businesses ang insurance. Inispread ang risk para ang financial loss ay hindi pasan lamang ng iisa kundi ng marami.

Formal insurance

Galing sa corporations and cooperatives ang formal insurance. Formal insurance ang tawag sa kanila dahil sila ay regulated ng Insurance Commission.

A cooperative is owned by members. Ang corporation on the other hand is a capitalist at profit-led. Mayroon ding Mutual Benefit Association (MBA) under formal insurance. Ito ay mga non-profit forms ng insurance companies sa Pilipinas.

Para sa akin, ang gusto ko talaga ay MBA o di kaya’y cooperative kasi hindi profit ang nauuna. Iyong kapakanan ng tao ang nangunguna.

Informal Insurance

“Damayan-based” scheme ang informal insurance. In Ilocano, damayan means “saranay”. Sa mga Bisaya, ito ay “dayong”. Sa mga Muslim brothers and sisters natin, ang tawag dito ay “takaful.”

Mahaba na talaga ang kasaysayan ng insurance dito sa Pilipinas. Dahil ingrained sa ating mga Pilipino ang damayan. Ginulo lang ito nga mga Westerners dahil ang ginawa nila itong for profit na siyang mas namamayagpag ngayon. Sa akin, ang insurance ay hindi dapat for profit.

Public Insurance

Idinagdag ko ito dahil ito ang mga social safety nets o social insurance schemes na ibinibigay ng gobyerno para sa atin. Examples nito ay ang mga insurance benefits – health, sickness, disability, unemployment, death etc. mula sa Pag-IBIG, PhilHealth at SSS.

Hybrid Insurance

Combination of both formal and informal forms ang hybrid insurance. Pinaghalo ang dalawa. May mga programa ding bukod sa formal at informal ay idinadagdag ang public insurance tulad ng Social Welfare Protection Program (SWEPP) ng SEDPI.