Never too Small for Hope – Part II (Transport and Logistics)

Image Credit: FreePik

Respondent: Jhun Rodriguez / Resident of Quezon City- Tricycle Driver

Jhun Rodriquez’s day would start with morning commuters in Quezon City. He is one of 4.5 million drivers across the country who have left their vehicles in garages until quarantine conditions are lifted. Jhun has put a ‘Family Use – Private’ sign on his tricycle, “We are only allowed to use it for business purposes and personal family needs.” The lockdown has banned tricycle drivers from passenger transport since March 15, 2020. “I attempted to take my tricycle the day after the lockdown. The authorities had warned me that it would be impounded. My tricycle is leased so I did not want to take the risk.”

The rent for the tricycle is P200 per day. Jhun had previously earned enough to support the family of 11, “I would usually earn up to P24,000 a month.” Support comes from the family during the worst disasters. Jhun was able to rely on his brother when tropical storm Ondoy ravaged the city in 2009, “My brother is too old to work now so it is my turn to ensure his well-being. I do not have enough money to start a business and our savings have gone towards food and medicine.” Jhun and his brother’s family only eat lugaw, a rice porridge, most of the time. “Eating the same meal every day becomes really difficult for the children. I assure them that when I am able to resume working, we will eat like we used to again.”

The city was distributing P2,000 for tricycle drivers which Jhun was unable to collect, “I believe it is because my house is far from the collection point. The local government did provide us with rice and sardines on two occasions. We have also received grocery items from Gawad Kalinga.” Local organizations have become the most dynamic advocates during the pandemic.

Jhun’s tricycle has become an unexpected business tool: “I was able to borrow P5,000 from my friend and I used the money to buy and sell fish.” He uses the tricycle to take his supply to the local market. “Everyday kindness keeps me optimistic. My customers don’t haggle for lower prices and some do not even ask for their change. It has allowed me to pay back the loan within a week.” Jhun usually buys 20 kilograms of fish and was able to make a profit of P600 per day. Matters have gotten worse since the total lockdown has restricted him from selling at the marketplace.

Respondent: Edwin Cawit / Resident of Lagao, General Santos City – Food delivery service

The onset of social distancing and isolation steadily witnessed a decline in Edwin Cawit’s food delivery service, “We started to feel the effects of COVID-19 in the second week of March when many of our clients canceled their previous orders. Our services came to an immediate halt as of March 18. I understand that safety measures are necessary but the indefinite timelines put us in a dilemma.” His business was growing with profits of P60,000 to P80,000 a month. Although food delivery services make up a small portion of the industry, it has witnessed a steady increase with an expansion of 7.3% between 2016-2017.

Edwin’s passion project has always been on the plates, “I started the business after years of savings because I wanted to be my own manager and operator. Cooking meals was always a family affair so it was a natural career move. I am able to cope because I do not have to compensate for any employee’s salaries.” Edwin has savings to sustain his family but the uncertainty remains a concern. “The only way to prevent fines or penalties was the ‘wait-and-see’ option at the beginning of the lockdown. We listen to and follow updates from our local news outlets and social media pages. We are very careful because our services involve people’s consumption.”Inflation of necessary supplies during a disaster event makes business continuity an even greater challenge. Edwin’s main concern is procuring inventory, “We pick up essential ingredients from outside the local area because of lack of availability. The city’s clustering policy during the lockdown prevents vendors from sourcing some of the vegetables we need from Bukidnon.” The scarcity in supply and increase in price has forced Edwin to shut down despite being able to operate under COVID-19 safety guidelines. “The price of vegetables has inflated by 20 to 30%. Rice and grains have only gone up 10%. However, these cumulative prices make it impractical to continue operations.” The emerging caterer hopes that small businesses will receive the aid they need to carry on after the restriction, “We would appreciate logistical support, availability of supplies from the National Capital Region and other key cities, tax relief, and easing of local cluster market restrictions.”

Respondent: Shirly Erum / Lagao, General Santos City – Driving Instructor

Shirly Erum’s classroom is the road of General Santos City- “I believe that driving is in our blood. Five out of our nine family members are driving instructors.” The school of driving can be a promising career as instructors make an average of P235,451 annually. The number of students started to slow down in March. “We no longer have enrollees because of the transportation restrictions. Physical distancing also makes it impossible to hold practical sessions.” They would offer three package deals – a five day tutorial for P2,800, seven days for P3,800, or a monthly package between P10,000 to P20,000. Keeping their office is the biggest challenge, “Our maintenance cost fluctuates between P5,000 to P10,000 and the rental fee for the office is P7,000. We have used our savings to continue paying the rent and any vehicle maintenance that was necessary.” Shirly also has to consider the family expenses, “My sister works in Hong Kong and has sent us remittance of P20,000 during the lockdown. We were able to use the money for four months of household expenses. If we can resume operations soon, we would only need P5,000 to start functioning again.”

Respondent: Giselle Pastrano / Resident of Cebu City – Self-service Car Wash Business

The Pastranos anticipated that 2020 would be a year of new beginnings and opportunities. Giselle and Arnold welcomed a new baby, Arnold, in April. They had also opened a new business to provide for their growing family. Transforming their garage in front of their home as optimal for starting their venture. Giselle would be able to take care of her family and work, “Our space was large enough to situate a self-service car wash and food stall. We would earn around P9,000 to P12,000 from the car wash and P16,000 to P18,000 from the food stall.” Both businesses had minimal expenses because they were run by Giselle and Arnold, “We would spend P1,000 to P1,500 that was mostly for the water bill. The expenses for the food stall were P9,000 a month. The profits were more than enough to cover the P7,000 we would need for the household.”

They had only been operating for a month when they decided to shut down. Giselle’s immediate concern was her family’s safety, “Our business is in front of the house. Customers coming in and out expose my family. Compromising their health is never an option.” She also has a seven-year older son, Travis, who is currently unable to attend school. The food & beverage industry is expected to reach $415 million by 2024. Food stalls are becoming more popular as the younger generations opt to eat out. “Many of our ingredients have gone up by 40% to 50%. Our regular customers shared the same concerns and we started seeing a decline in customers when the lockdown started.” Commuter restrictions eventually led them to cease operations of the car wash. Multiple income-generating opportunities are a proven solution for many small businesses to sustain their needs. The COVID-19 restrictions have limited these prospects to entrepreneurs. Giselle currently works as a cashier for a university. It is the only stable income for the household. The lack of earnings has forced her to take loans, “My husband has a van that he would use for delivery operations. He would regularly work for Lazada but that has also stopped since March.” Loss of revenue sources has multifold consequences for microentrepreneurs. “We have lost around P19,000 a month since the lockdown. We also had an SUV that we would rent out through the Grab app. Unfortunately, we had to give it back to the dealership because we were unable to cover the monthly payment or the driver’s salary.”

At APP, we focus on the vulnerable sectors of our society in our development initiatives. MSMEs are among the priority sectors of our national chapter, Philippine Preparedness Partnership’s (PHILPREP) and its targets in local program activities. PHILPREP has developed these case stories to amplify the voices on the ground, especially during the COVID-19 pandemic. It seeks to amplify human stories to raise awareness on how disasters affect the most vulnerable communities.

For Part I of the series, click here.

This article was developed in partnership with the Asian Preparedness Partnership (APP). More information about APP may be found using this link: Asia Preparedness Partnership (APP).

Almost 4 in 10 nanoenterprises bounce back to pre-pandemic level

Update 10: SEDPI Rapid community assessment on the impact of COVID-19 to nanoenterprises

Two months after the government started easing lockdowns in most parts of the country, 36% of nanoenterprises reported to have bounced back to pre-pandemic level. In May, only 18% expected to bounce back within one month which may be a good sign of recovery if the spread of the virus is contained.

Nanoenterprise (NE) is a SEDPI-coined term that refers to unregistered livelihoods of self-employed individuals. They typically operate informal businesses alone or with the help of unpaid family members targeting their own immediate local communities.

Status of nanoenterprises

Those that bounced back report that they are already able to earn about the same income; and experience normal demand to their products and services. For the month of June, there were twice as many nanoenterprises reporting slowdown in sales compared to those that reported strong demand.

Access to supply on inputs needed to operate their livelihoods remain stable.

Financing options

Nanoenterprises typically access loans from informal sources which make them vulnerable to predatory financing practices. Most of them borrow money from cooperatives, rural banks, microfinance NGOs and pawnshops.

On average, nanoenterprises borrow a small sum of money ranging from PhP3,000 to PhP10,000 to finance their livelihoods such as sari-sari stores, carinderia, farmers, fisherfolks, dressmaking and vending. Microfinance institutions offer collateral-free loans to them payable in three to six months with interest rates ranging from 2% to 5% per month.

With microenterprises cautious on demand, they prefer not to access loans. Only two of three of those who finished their loans opted to renew their for another cycle. This is also a sign that nanoenterprise have the ability to weigh risks and returns.

For the month of June, when normal loan collections resumed, one in three nanoenterprises was able to repay in accordance with amortizations based on the Bayanihan Act’s loan deferment schedule. A majority are requesting for up to two months additional grace period to allow them more time to adjust and cope with the new normal.

Essential financial service to low income group

There are approximately 8 million low income households that access microfinance services in the Philippines. MFIs are frontliners in the delivery of financial services to low income groups who find it difficult to open deposit accounts and access loans from commercial banks.

SEDPI estimates that a PhP40B economic assistance to nanoenterprises channeled through MFIs will address their financing needs to jumpstart their livelihoods. This is based on 8 milion estimated number of microenterprises and PhP5,000 economic assistance package.

The proposed Philippine economic stimulus package contains a total of PhP245 billion budget to assist micro, small and medium enterprises. Only a small fraction of this is expected to reach nanoenterprises.

Prioritizing nanoenterprises

The negative impact of COVID-19 to nanoenterprises is undeniable. The research shows that nanoenterprises are showing positive signs of bouncing back faster.

Preferential option to those at the bottom of the pyramid should be extended first since these groups can bounce back quickly; only need a small amount of stimulus; will reduce need for cash dole outs; and will reach millions of Filipino low income households.

Note:

The research is part of a series of rapid community assessments that determines the economic impact of COVID-19 to microenterprises and the informal sector. SEDPI, a microfinance institution (MFI), conducted the survey from June 23-30 with 5,791 respondents located in Agusan del Sur and Surigao del Sur.

It is not a representative sample of the entire Philippines. It is highly localized but should be a good case study that reflects the situation in the countryside. SEDPI believes that the nationwide experience may not be far from our research results.

Previous updates:

The titles are hyperlinked. Click on the titles to full read article online.

• June 12 (Update 9): Microenterprises show signs of bouncing back as lockdown eases
• May 28 (Update 8): 8 out of 10 microenterprises open for business one month after GCQ
• May 22 (Update 7): Demand for microenterprise products remain weak amid COVID pandemic
• May 15 (Update 6): Demand slumps on microenterprise products 2 weeks after GCQ
May 8 (Update 5): Only 5% of microenterprises back to “normal” in first week of GCQ
• April 30 (Update 4): Two in three microenterprises hopeful to bounce back two months after lockdow – UPDATE 4
• April 24 (Update 3): Community assessment and recommendations for support to microenterprises and the informal sector during and after COVID-19 – UPDATE 3
• April 14 (Update 2): Community assessment and recommendations for support to microenterprises and the informal sector during and after COVID-19 – UPDATE 2
• April 6 (Update 1): Community assessment and recommendations for support to microenterprises and the informal sector during and after COVID-19 – UPDATE 1
• March 30: Immediate impact of COVID-19 lockdown to microenterprises

Plight of Microentrepreneurs in the Philippines Part 1 of 3 Sari-sari Stores

Never too Small for Hope- Part I

Doing business is largely a family affair in the Philippines – 80% of enterprises are family-owned or family-controlled. Microenterprises are the most intimate and the most common of these businesses. Nine of out of 10 MSMEs in the Philippines are microenterprises. Their kinship is the most deep-rooted because members of the community build these businesses around local needs.

Strength comes in numbers. Being small and having few employees put microenterprises in the most disadvantageous position. Most microenterprises are cottage industries, typically employing only family members. They are comprised of one to nine members and the very few largest ones have $6,000 in assets.

The Philippines is one of the countries with the highest economic damages as a result of disasters, having an Average Annual Economic Loss (AAL) of $284 million. Financial deficits hit the smallest enterprises the most. Economic losses have a ripple effect that magnifies and multiplies the challenges, especially for microenterprises. The COVID-19 pandemic has introduced lockdowns that prolong the hardships for many of these businesses.

The first part of our series explores the most inherent microenterprise in the Philippines. The sari-sari stores (mom and pop shops) are built into the DNA of every neighborhood and block across the national landscape. There are over 1.3 million sari-sari stores in the Philippines and 94% of consumers depend on them for everyday necessities.

Monalisa Maiquez, 41, Resident of Sta. Maria Kalamasig, Sultan Kudarat

Monalisa is the breadwinner in her family. It is a role that keeps her committed to maintaining her sari-sari store during the lockdown period. She lives with her brother, sister-in-law, and their two kids.

The family of five depends on local government assistance since the community quarantine that started on March 16, 2020, “We have received relief goods four times since the lockdown started. The local government unit of Kalamansig provided five kilograms of rice, two cans of sardines, three packs of instant noodles, 250 grams of sugar, and one pack of instant coffee.”

These rations are essential as Monalia’s revenue has been cut in half since the lockdown, “We would invest P8,000 to P10,000 every week for a profit of P1,000 to P1,500. We are only able to buy up to P5,000 of supplies for the store and our profits do not reach more than P500 weekly.” Her profits barely cover the P2,500 to P3,000 for household expenses.

Mobility restrictions introduce new obstacles for businesses as they lack supplies from the shortage of stocks. Monalisa is currently limited in procuring supplies, “I would travel to the market depending on what I needed. Now I am only allowed to make these trips once a week. We are also constrained to the number of purchasable items. For example, each business owner can only buy six-packs of instant noodles and six cans of sardine.”

Any form of financial assistance would promote the sustainability of Monalisa’s shop, “I have never experienced such a blow to my daily operations. I would need about P15,000 to recover. The business income is siphoned into funding our daily needs making savings nearly impossible.”

Mary Jane Selecia, 41, Resident of Tinungkaan, Maguindanao

The subsidy in income only reminds Mary Jane that her household needs to cut corners – “My shop is bringing in one-third of the profit. I would earn around P4,000 and now I am fortunate if I make P1,000 a week. We invest P3,000 a week to keep the store running.” She lives with her husband and five children. Their daily expenses come to P9,000 per month and were previously covered from the sari-sari store’s profits.

Borrowing money is becoming a vicious cycle for Mary Jane, “We have no savings and the income we make for our businesses go towards repaying our loans from relatives and friends. It seems like we are borrowing to pay over and over again.” Relief information is even more scarce when in the remote mountainous areas like Tinungkaan. The interventions in Mary Jane’s town were constrained to the Department of Social Welfare and Development (DSWD) conducting a survey to determine the poorest population in the village.

Mary Jane’s husband works as a Barangay Secretary and his work became an unexpected lifeline, “We did not need to apply for the Social Amelioration Program (SAP) because of my husband’s job. We are also beneficiaries of the Pantawid Pamilyang Pilipino Program (4Ps).” The SAP has given qualified families P5,000 to P8,000 per month for two months. “We bought one sack of rice. The remaining money is additional capital for our store.”

Her family’s coping mechanism is in her backyard, “Our alternative sources of income are planting vegetables and raising farm animals. The small farm supports us while providing us with food. We are often forced to consume supplies from the sari-sari store.” Stock in her store is already limited because of dwindling supply in Noro, where she buys her supplies. Transportation cost for each of the trips to Noro is now P100, which is an exacerbated cost during the lockdown.

Everyday expenses have become a challenge for her community, “There is a decline in sales because many of our neighbors and customers do not have work. I fear that we may have to shut down if this continues. I would feel more hopeful if I had P10,000 to replace the needed inventory.”

Marcia Mangubat, 53 years old, Resident of Tinagacan, General Santos City

The Mangubats are a persevering matriarch. Marcia Mangubat lives with her mother and two daughters. She runs her sari-sari store and the household with the mantra, “Maningkamot nalang gyud ta na mabuhi (we will work hard to survive).” The pandemic is no exception to this mind frame. Marcia’s store is the only source of income as her daughters look for jobs.

General Santos City is still under a curfew to prevent the spread of infections. Marcia makes sure that her family obeys the rules while trying to carry on with daily life, “The new regulations include wearing a mask whenever one steps out of the house. The first offense is a P3,000 penalty. The following offenses can lead to one-month imprisonment.”

She understands that safety measures are necessary and adapting to the challenges is the only way forward: “I go to the market myself to buy all of my supplies from the market at the center of the city. I would go at least once or twice a week. The lockdown conditions have led me to make this trip every two weeks.” The supply shortage has decreased Marcia’s revenue from P4,000 per day to P1,500. Her current profits do not cover the P7,000 she needs for the monthly household expenses.

The small bench and table for tea at the corner of Marcia’s shop is vacant these days. She has not experienced such a sales decline in 11 years, “I have been a member of Tinagacan Agrarian Reform Beneficiary Cooperative (TARBC) for six years so I was able to withdraw a savings amount of P5,000. I am afraid that I may reach a point where I will have to withdraw more of my savings.” TARBC teaches small business owners like Marica about how they can apply and access loans as well as create a savings scheme.

The local government has distributed rice, noodles, and canned goods to families like Marcia’s. It is one of the many sources of hope Marcia holds, “The supplies from the store sometimes meet our daily needs. I start the day grateful that all of us are in good health.”

Alejandra Cinco, 56, Resident of Lanao del Sur

Cassava was imported from Latin America through the Manilla Galleons over 400 years ago. It has become a staple across the Philippines since then. For Alejandra Cinco, the vegetable is a saving grace during the lockdown, “We grow cassava on our farm and I make homemade cakes to sell. Our harvest is not selling as much. I purchase sugar and the other ingredients for P100 and sell the cakes for P200. The cakes are the only profit I make some days.”

The virus outbreak may not affect everyone’s health but it deprives many of their basic needs. “I was able to stretch P20,000 towards household needs during the first month of the lockdown. The expenses included the P3,000 I need for asthma medication every two months. We have reduced our investment in the sari-sari store from P1,500 to P1,000 or P500. Buying food for our family is the top priority.”

Alejandra and her husband are housing her mother-in-law, brother-in-law, daughter, and two of their grandchildren during the lockdown period. The additions have raised her household expenses from P6,000 to P11,000 – “We have cut costs wherever we can. My husband delivers cassava to the Malabang area. He earns P700 per trip. I have started to accompany him during these trips to buy some of my supplies at competitive prices.”

Alejandra’s husband was the only one issued a quarantine pass when security measures were taken in April. She became unable to buy supplies from her local vendor: “I was referred to another grocery store but the prices were much higher. Our store sells basic goods such as sugar, coffee, soap, canned foods, and snacks. Some of these items have gone up to P10 more than before. It forces us to retail them at a higher price and lose the already dwindling number of customers.”

The higher prices and limited supplies have taken a toll on everyday operations. “I would have P500 to P1,000 in sales every day. Now I am fortunate if I make P300 on certain days,” states Alejandra.

She currently relies on her savings and one of her children for support, “My son lives in Cebu City and has sent financial support through the remittance center in the Malabang area. We are fortunate that he is able to provide a portion of his salary.”

This article was developed in partnership with the Asian Preparedness Partnership (APP). More information about APP may be found using this link: Asia Preparedness Partnership (APP).

ARBOs Remain Covid-free

Agrarian Reform Beneficiary Organizations (ARBO) in Sarangani, Sultan Kudarat, Maguindanao, and Lanao del Sur Provinces remain covid free. This is the result of the ARBO covid-19 quick assessment conducted by SEDPI on April 20-24, 2020.

While some ARBOs have completely stopped operations, 36% or ten (10) out of twenty-eight (28) participating ARBOs continue to provide services to farmers in their communities. These services include irrigation, farm machinery rental, catfish culture, animal dispersal, and farm monitoring.

ARBO farmer members still manage their individual farms. However, due to the strict implementation of the community quarantine, senior citizen farmers are unable to do so.

Pambansang Mananalon, Mag-uuma, Magbabaul, Magsasakang Pilipinas, Inc. Farmers Association (P4MP-FA) of Upper Katungal in Tacurong City, reported that they have temporarily stopped their microfinance services since members failed to pay their dues due to the lockdown. At the same time, the farmers’ economic activity is put on hold because of restrictions in selling produce and other goods in the market.

One ARBO in Sarangani, Alkikan Vegetables Growers Association (ALVEGA), continues to consolidate vegetables funnelling it to a local bagsakan and a huge grocery in General Santos City. On the other hand, Upper Biangan Farmers Association (UBFA) who offers micro insurance services has twice provided relief goods and cash assistance to their members. Only three (3) of the twenty-eight (28) ARBOs have received assistance as an organization from their local barangay and municipal government.

During this quarantine period, some ARBO members in Cotabato, Maguindanao, and Lanao del Sur have volunteered in the Bantay Covid initiatives of their barangays by manning border outposts.

Update 3: Community assessment and recommendations for support to microenterprises and the informal sector during and after COVID-19

SEDPI is a group of social enterprises that provide capacity building and social investments to development organizations and directly to microenterprises. We serve ~8,000 microenterprises in Agusan del Sur and Surigao del Sur, two of the poorest provinces in the Philippines.

Most of our members, about nine in 10, are women with an average age of 42. These women are typically into vending, farming, fishing, dress making, selling food, and livestock backyard raising.

Community assessments

Every week, since the community quarantine was imposed on March 15, 2020; SEDPI conducted community assessment research with its members. These were conducted on March 15, March 30, April 5 and April 14; through rapid survey via text messaging and calls with our members.

The rapid community assessment aims to determine the economic impact of COVID-19 on our members and to have a clearer picture of what transpires on the ground. We asked our members the following:

Status of their livelihood – unaffected, weakened or stopped
Experience symptoms of COVID-19
Access to government assistance
Support needed after the community quarantine

Impact of COVID-19 to microenterprises and informal sector

All microenterprises were negatively affected due to COVID-19. Immediately after the community quarantines were announced, 34% of microenterprises stopped their livelihood. After two weeks this spiked to 51% and slightly recovered to 41% after a month of lockdown.

Some microenterprises reopened their livelihood because they need to earn income to have enough budget to buy rice at the minimum. They sourced locally-available inputs to do this and were able to sell banana cue, camote cue, cassava cake and rice cakes among others.

Majority of microenterprises or 59% reported that their livelihood weakened. Of which, 59% and 31% reported significant and severe weakening of livelihoods resepectively.

Supply chain disruption; inability to deliver goods and services; and prohibition to open non-essential businesses were the main reasons given for stopping or weakning of their livelihoods. With families having to stay home and most business remain closed, there are very few buyers of their products and services. Most barangays prohibit entry of non-residents which prevent others from going to work.

Exposure to COVID-19

An encouraging finding in the rapid community assessment is that only 2 of the 6,071 respondents are persons under monitoring. This may be a positive sign that the community quarantine is effective in containing the rapid spread of the virus.

The quarantine period was extended to April 30 and the question now is how much longer can the poor endure its negative effects to their livelihoods. Many of them are saying that they might die first of hunger before getting infected with COVID-19.

Access to government assistance

It is important to consider the well-being of low-income groups and provide them with enough economic support and social safety nets during this quarantine period. The government’s cash assistance and emergency relief is very much needed on the ground to help them survive.

Only one of ten microenterprises or 11% were able to receive cash assistance; and 60% received relief goods from the government as of April 14. This is an improvement of 1% and 17% respectively from the previous week showing marginal improvement in access to government assistance.

Those who received cash assistance got PhP3,000 to PhP4,000. Most of them received PhP3,600 cash assistance through the 4Ps program of the Department of Social Welfare and Development.

Relief goods received were composed of rice, canned goods and soap. Most of those who received these said that the supply will only last them for 1-2 days. Most of the respondents or 82% also expressed that the PhP5,000 cash assistance will not be enough to cover their daily needs in the next two months.

Recommendations during community quarantine

Hasten government cash assistance and relief

The government needs to hasten release of cash assistance and relief goods to microenterprises and the informal sector. These will alleviate their burden and enable them to survive the community quarantine.

Prohibit interest accrual on MSEs loans

Interest accrual for loan of micro and small enterprises during the quarantine period should be prohibited. On April 3, Ateneo-SEDPI Microfinance Capacity Building program released a position paper regarding this.

The continued charging of interest during community quarantine is socially unjust since this gives additional burden to microenterprise and small enterprises at a time when they can barely survive. This is an unnecessary additional expenses that will make their lives even harder during the rebuilding and recovery phase.

Mass testing

Prioritize mass testing to suspect and probable COVID-19 individuals who belong to low income groups, especially in urban centers, where spaces are cramped and transmission could happen faster.

Free testing services should be provided to make sure that transmission in low-income groups is prevented and managed properly. Local government units should have isolation areas for PUIs and PUMs to prevent the spread of the disease in rural and urban poor communities.

Recommendations immediately after community quarantine

The rapid community assessment showed that 77% of respondents request for cash assistance to restart their livelihood after the community quarantine. Many of the members or 35% would still need relief goods, especially food, immediately after the quarantine and A few or 12% need work to have source of income.

Cash assistance to restart livelihoods through MFIs

Request for cash assistance to restart livelihoods should be coursed through microfinance institutions (MFIs) to eliminate dole-out mentality. The cash assistance should be given, at the minimum, as 0% loans to microenterprises and the informal sector.

MFIs are well positioned to provide this intervention since they would need to support the rebooting of the livelihoods of their client base. The cash assistance will be collected alongside restructuring of existing loans of clients so that financial service delivery will continue.

Bail out MFIs

MFIs access funds from commercial banks and government financial institutions that they extend as microcredit to low income groups. Based on the Consultative Group to Assist the Poor’s (CGAP) estimate, an 85% repayment rate in MFIs would only have sufficient cshflow to last in the ext six months.

The impact of the pandemic will surely negatively impact repayment rates of MFIs. Based on the figures of those negatively affected, SEDPI estimates that it repayment rates in the next three months after the quarantine period may hit as low as 20% to 30%. Due to this, most MFIs will experience liquidity problems.

Government should intervene and infuse capital in the form of equity to MFIs to fund the proposed cash assistance intended to restart microenterprise livelihoods. Another way of doing this is to temporarily convert debt obligations of MFIs from commercial banks and especially from government financial institutions to equity to ease pressure in debt repayments.

MFIs will eventually pay this equity back to the government, perhaps event at a premium, once they recover from the crisis. SEDPI strongly suggests moving away from debt-based development assistance since interest will ultimately be passed on as additional burden to microenterprises and the informal sector.

This strategy is similar to the bailout of governments to large financial institutions during the 2008 financial crisis. If governments are willing to bail out large corporations, they should also be willing to do the same to MFIs that directly help those at the bottom of the pyramid.

Pay for work programs

Development organizations and government should provide pay-for-work programs to spur local economic development. This will create temporary employment and give purchasing power that will augment efforts to restart of livelihoods.

0% SSS and Pag-IBIG calamity loans

Microenterprises and informal sector who are members of SSS and Pag-IBIG could benefit from the calamity loans offered. Per published policy of these two organizations, members are allowed to borrow calamity loans against their personal contributions.

The interest rate for calamity loan is 5.95% for Pag-IBIG and 10% for SSS. It is highly recommended to bring the interest on the calamity loans to 0%, since these are drawn from personal contributions of members anyway.

Recommendations for the long term

Ease in access to identity documents

Access to government basic services starts with identity. The Philippine Statistics Authority should streamline processes for low-income groups to get government identification documents such as birth certificates, marriage certificates, and licenses.

Greater financial inclusion

It is also important to focus more on financial inclusion to make sure that bank accounts are opened for all low-income families so that they can easily access cash transfers and cash relief in times of disaster. This will ensure that funds truly land in the pockets of low-income groups, and could potentially reduce corruption and patronage politics.

Universal disaster insurance

It is also high time to have universal disaster insurance since the Philippines ranks high in the World Risk Index. This will make us better prepared for disasters and pandemics in the future.

The scheme will provide funds to affected communities, especially low income groups, to cope with the disaster and to rebuild livelihoods. Having disaster insurance will eliminate the need for low income groups to beg for government assistance from politicians.

Tap vast network of MFIs

Microfinance institutions are rooted well in communities and have vast networks that penetrate even the most remote areas. This makes them suitable for information dissemination as well as for distribution of government assistance.

Prioritize support and assistance to the bottom of the pyramid

We may be already enjoying the positive effect of the commuity quarantine to prevent the sudden spread of COVID-19. However, its negative economic impact especially to vulnerable sectors such as microenterprises and the informal sector, is undeniable.

To sustain and complement the gains of the quarantine, priority and free mass testing to low income groups is needed. This will hopefully flatten and at the same time shorten the curve.

Government should hasten delivery of cash and relief assistance to low income groups to alleviate the burden of low income groups. MFIs could complement barangay level legwork for information dissemination and distribution of government assistance with its vast network and penetration in rural areas.

To ease the economic burden of low income groups, the government should stay true to the intent and spirit of the Bayanihan Act, that prohibit accrual of interest and other fees during the quarantine period.

Immediately after the quarantine period, to help jumpstart the economy, the government could provide pay for work programs; and provide cash assistance to microenterprises through MFIs. It could bailout MFIs to ensure continued delivery of much needed microfinance services to the poor.

The proposed 0% calamity loans of Pag-IBIG and SSS could provide much needed relief to microenterprises and the informal sector. In the longer term, structural challenges could be addressed through providing ease in access to identity documents, broader financial inclusion, and universal disaster insurance.

When we channel resources to help microenterprises and the informal sector, we make our nation better poised to recover faster from the negative effects of COVID-19.

Position Paper on Section 3.01 of the IRR of RA 11469 Section 4 (aa)

The COVID-19 pandemic continues to pose serious threats to health and has already disrupted the economy. This prompted the government to enact Republic Act No. 11469 otherwise known as the “Bayanihan to Heal As One Act,” declaring a state of national emergency in order respond to the urgent needs of the people.

It is in response to this urgent need and call that the Ateneo-SEDPI Microfinance Capacity Building Program (Ateneo-SEDPI MCBP) recognizes our role in aiding government to promote and protect the interests of the Filipino people, especially low income groups, in these challenging times. For the past 14 years, Ateneo-SEDPI MCBP provided training, research and consulting services to more than 2,000 microfinance institutions in the Philippines with a combined outreach of 10 million low income households.

SEDPI invests in 15 cooperatives and microfinance NGOs nationwide. It also directly provides financial services to more than 8,000 low income households in Mindanao. SEDPI works in partnership with Pag-IBIG, Social Security System, Land Bank of the Philippines and Development Bank of the Philippines to bring social protection and welfare services closer to low income groups.

Remaining true to our vision and mission, we commit to do our moral and lawful duty to provide a “grace period” for the loans of our microfinance clients.

In Section 4 (aa) of RA 11469, the law directs:

“ . . . all banks, quasi-banks, financing companies, lending companies, and other financial institutions, public and private, including the Government Service Insurance System, Social Security System and Pag-IBIG Fund, to implement a minimum of a thirty (30)-day grace period for the payment of all loans, including but not limited to salary, personal, housing, and motor vehicle loans, as well as credit card payments, falling due within the period of the enhanced Community Quarantine without incurring interests, penalties, fees, or other charges. Persons with multiple loans shall likewise be given the minimum thirty (30)-day grace period for every loan . . . ”

However, we noticed an inconsistency with the implementing rules and regulation (IRR) of RA 11469. In Section 3.01 of the IRR of RA 11469 where “Mandatory Grace Period” was discussed, it states that:

“ . . All Covered Institutions shall implement a 30-day grace period for all loans with principal and/or interest falling due within the ECQ Period without incurring interest on interest, penalties, fees and other charges. The initial 30-day grace period shall automatically be extended if the ECQ period is extended by the President of the Republic of the Philippines pursuant to his emergency powers under the Bayanihan to Heal as One Act . . . [emphasis added]”

The text of RA 11469 clearly provides in Section 4 (aa) that all loans falling due within the period of the enhanced community quarantine shall not incur interests, penalties, fees, or other charges. This provision of the law was not adhered to by the IRR when it said that “ . . . All Covered Institutions shall implement a 30-day grace period for all loans with principal and/or interest falling due within the ECQ Period without incurring interest on interest, penalties, fees and other charges . . .” [emphasis added]

Prohibiting financial institutions to impose “interest on interest” is far different from prohibiting them to impose “interest” on loans. The IRR provides that financial institutions are only mandated to cancel the additional interest that may be imposed due to late payment of the loan. This is different from what the law really provides which mandates financial institutions to totally cancel the interest of the loan for the duration of the quarantine period.

Many of our clients who have loans (microcredit) with us used this to finance their livelihood. In a community assessment we conducted on March 31, 2020, 40% of our members completely stopped their lovelihoods and another 40% reported weakened livelihoods. We were not able to reach the remaining 20% because they live in places where cellphone signal could not reach them.

This is why we, in the microfinance industry, applaud RA 11469 for canceling the interest of loans during the duration of the quarantine. In fact, as early as March 15, 2020 we already declared a moratorium on loan repayments to our clients. This means that interest on these loans for the quarantine period will not be charged.

However, if the IRR will be implemented, only “interest on interest” will be canceled and not the whole “interest” of loans during the quarantine period. This will create a huge problem for MFIs since most access loans through commercial banks. If the IRR will be implemented, MFIs will still have to pay the interest on loans from commercial banks even if MFIs already canceled the interest on the loans of our clients.

With the current IRR, MFIs will bear the brunt of the cost of interest which may endanger their financial sustainability. There is also a good chance that this interest will be passed on eventually to microfinance clients who are already bearing the biggest impact of the pandemic.

With this, we strongly urge the concerned agencies of our government – Bangko Sentral ng Pilipinas, Department of Finance and Securities and Exchange Commission – to review the IRR of RA 11469. We would like to the IRR to follow the spirit of RA 11469. Hence, we call for the revision of Section 3.01 of the IRR of RA 11469 for it to remain true to the provision of Section 4 (aa) of RA 11469.

We hope that this matter will be resolved soon. The spirit and purpose of the Bayanihan to Heal as One Act must be genuinely upheld. We call for the government to completely prohibit interest charging on loans during the enhanced community quarantine.

It is our fervent hope that this crisis will be put to an end soon. MFIs will remain a partner of the Filipino people in securing their livelihood, health, and safety all throughout this challenging times until we are able stand up again as a strong and progressive nation.

Thank you very much and may God bless our country.

In the spirit of Bayanihan and in service of the Filipino people.

SEDPI inks partnership with SSS to bring social safety nets to low income groups

“SEDPI believes that the marginalized sector should be the first to enjoy the benefits of government services,” Vince Rapisura, SEDPI President, said in a statement on the occasion of its Memorandum of Agreement signing with Social Security System (SSS). “Our partnership with SSS will realize this so that low income groups will benefit fron social safety nets of the government,” he added.

Social Security System (SSS), a government-owned and controlled corporation, provides social security protection to all self-employed persons and other qualified Filipino workers against hazards of disability, sickness, maternity, old age, death and other contingencies. On May 2019, SSS signed a memorandum of agreement with SEDPI to intensify the coverage of workers in the informal sector. SEDPI is now accredited and authorized to receive and screen non-collection and collection related transactions for SSS.

Members and their families are now provided easy and convenient access to SSS services through SEDPI. Previously, the service is extended only regular and associate members of SEDPI, as well as their family members, who are at the same time self-employed or voluntary members of the SSS. With the agreement, non-SEDPI members can now also course their voluntary contributions to SSS through SEDPI since it is an authorized collection agent of the institution.

SSS promotion thru SWePP

The Social Welfare Protection Program (SWePP) is the consolidated market-based and indigenous microinsurance and social security program of SEDPI which aims to provide security and financial safety net to members through adoption of various insurance schemes. With the agreement making SEDPI a collection agent, SSS now becomes one of the social security programs under SWePP. Through SWePP, SSS is further promoted to communities and individuals.

Membership to SWePP is open to Filipinos of legal age. Interested individuals should fill up an application form to become SEDPI members. Once filled up, SWePP services could be offered to them. The forms are available online or in SEDPI offices. These are also available during SWePP orientation programs in community gatherings and events of SEDP..

SEDPI members who avail of SWePP may course their voluntary contributions to SSS through SEDPI. It will also assist members in processing claims or benefits from SSS.

SSS promotion to Overseas Filipino Workers (OFWs)

As part of SEDPI’s commitment to promote SSS to marginalized sectors, the organization conducted training events with SSS representatives locally and abroad. Approximately 1,500 microenterprises attended training events promoting SSS in Agusan del Sur and Surigao del Sur. Abroad, around 2,230 participants, mostly domestic helpers, attended training events promoting SSS in Macau, Abu Dhabi, Dubai Doha, Bahrain, Egypt and Singapore. Recently, a series of trainings promoting SSS was held in different countries including Bahrain, Qatar, South Korea, Egypt, Spain, and Switzerland, where around 1,730 OFWs attended.

Most of the events abroad were in collaboration with the Philippine embassies, consulates, Philippine Overseas Labor Office (POLO) and Overseas Worker Welfare Administration (OWWA). The events became an opportunity to encourage Filipinos to patronize SSS and realize the benefits it offers.

Milestones and prospects on SEDPI’s partnership with SSS

At present, more than 800 individuals are registered with SSS thru SEDPI. Their contributions amount to more than PhP390,000.

Last June 2019, SEDPI conducted a training among its staff on the implementation of its SSS service. Targets on SSS registration were also set during the training.

SEDPI looks forward to register and make its members, especially OFWs and microenterprises, to become active members of SSS. With its 8,500 member microentrepreneurs and 500 member OFWs, it plans to register at least 3,000 of these member-clients and investors to remit a total of PhP1.0 million in contributions 2020.

Shelter for all: SEDPI partners with Pag-IBIG Fund to benefit more micro-entrepreneurs

“SEDPI’s partnership with Pag-IBIG Fund is a step closer to the organization’s vision of financial empowerment and financial inclusion for Filipinos,” Vince Rapisura, SEDPI President said when asked how the partneship is relevant to nation building.

The organization’s members consist of self-employed individuals in the informal sector with need for improved social protection and access to decent and affordable housing. This led SEDPI to agree to act as the conduit through which Pag-IBIG Fund membership shall be provided to its members.

“With this collaboration, decent and affordable housing is now reachable to all SEDPI members who belong to low income groups in Agusan del Sur and Surigao del Sur, two of the poorest provinces in the Philippines,” Vince Rapisura added.

Home Development Mutual Fund more popularly known as Pag-IBIG fund seeks to improve the quality of life of Filipinos by providing them sufficient shelter, an integrated nationwide provident savings, and housing through the mobilization of funds for shelter finance. It is mandatory for all Filipinos with monthly income of at least PhP1,000 to become Pag-IBIG Fund members. In addition, it is not only for formally-employed but also for self-employed and those from the informal sector.

SEDPI recognizes the value of Pag-IBIG Fund membership and the benefits of savings and home financing it provides for its members. Moreover. Pag-IBIG Fund and SEDPI agreed to jointly work in providing Pag-IBIG Fund membership for the self-employed members of SEDPI towards providing them access to provident savings and decent and affordable shelter financing through Pag-IBIG Fund’s programs.

Information dissemination

Since the agreement has been in place, Pag-IBIG Fund and SEDPI have been assisting each other in disseminating information and increasing awareness on the benefits of Pag-IBIG Fund membership. Pag-IBIG Fund has rendered orientations for the members, personnel and officers of SEDPI and has provided information materials such as leaflets, posters, tarpaulins, audio-visual presentation files and similar items on Pag-IBIG Fund membership and benefits.

SEDPI, on the other hand, displayed tarpaulins, posters and leaflets on Pag-IBIG Fund membership and benefits in conspicuous areas of its units and areas. It distributed and made available Pag-IBIG Fund program leaflets during its regular meetings and provided a timeslot in its meetings for the playing of audio-visual presentations on Pag-IBIG Fund membership and benefits, whenever feasible. SEDPI also made its own promotional materials for Pag-IBIG membership, which comes in various forms — articles, videos, etc.

Pag-IBIG also became part of SEDPi’s Social Welfare Protection Program (SWePP), a consolidated microinsurance and social security program which aims to provide security and financial safety net to members through adoption of various insurance schemes.

Interested members must fill out the SWePP application form at the SEDPI MF office or during SWePP orientation programs in community gatherings and events. SWePP with Pag-IBIG is available to SEDPI members who are existing Pag-IBIG members.

SEDPI conducted training events to promote Pag-IBIG locally and abroad. In partnership with Pag-IBIG Fund, approximately 1,500 microenterprises attended the events promoting Pag-IBIG in Agusan del Sur and Surigao del Sur. Abroad, 2.230 participants, mostly domestic helpers, attended financial literacy training that promotes Pag-IBIG in Macau, Singapore, Bahrain, Qatar and United Arab Emirates. The events became an opportunity to encourage Filipinos to patronize Pag-IBIG and realize the benefits it offers.

Registration and membership

Pag-IBIG Fund and SEDPI also assisted each other in the membership registration of SEDPI’s members to Pag-IBIG Fund. To facilitate this, Pag-IBIG Fund trained SEDPI’s authorized representatives in the membership registration process and conducted membership registration for SEDPI’s members.

In the agreement, Pag-IBIG Fund is to provide SEDPI members of their statement of membership savings (contributions) which include their contributions and the corresponding dividends earned annually.

Pilot housing project

A very exciting part of this partnership between SEDPI and Pag-IBIG Fund is the pilot housing project. SEDPI shall undertake a pilot housing project to benefit qualified SEDPI members. SEDPI shall provide or identify land that can be developed as its housing project for its member-beneficiaries capable of paying housing loan amortizations and who possess good moral character.

SEDPI will identify qualified members based on eligibility requirements provided in the Pag-IBIG Fund’s housing loan program and enter into a collection servicing agreement with Pag-IBIG Fund for the collection of the monthly housing loan amortization of the member-beneficiaries.

For its part, Pag-IBIG Fund shall extend individual housing loan to qualified SEDPI member-beneficiaries of the proposed housing project. It shall also enter into a collection servicing agreement with SEDPI for the collection of the monthly housing loan amortization of their member-beneficiaries and assist SEDPI in coordinating with other key shelter agencies for the successful implementation of the proposed housing project.

In 2019, SEDPI already procures a small lot in Rosario, Agusan del Sur that will serve as the pilot site. It is cureently undergoing negotiation for another lot in municipality of Veruela in the same province.

Advantages of the partnership

For those with maximum monthly compensation of PhP5,000, monthly savings with Pag-IBIG Fund is PhP100. With the partnership between SEDPI and Pag-IBIG Fund, however, members of both institutions only need to pay PhP20 per month or PhP5 per week. Contributions are paid during weekly group meetings held within the barangay where the members live; it saves them costs in visiting the nearest Pag-IBIG Fund branch, which is one town away, at best.

As members, they gain access to Pag-ibig Funds affordable housing program. This gives them the opportunity to avail housing loan as much as PhP450,000 with only 3% interest per annum. This loan amount will already give them enough funds for purchase of lot or house and lot, house construction, or home improvement which can be paid up to thirty (30) years.

Milestones and prospects

At present, SEDPI was able to register more than 2,500 member-beneficiaries with contributions amounting to around PhP400,000. SEDPI has now also already submitted several applications from its members for the availment of various Pag-IBIG benefits.

With the continued support of Pag-IBIG Fund, SEDPI anticipates more of its members and even non-members to be encouraged to become member of both Pag-IBIG and SEDPI. The organization looks forward to more microentrepreneurs benefiting from the programs of Pag-IBIG Fund.

SEDPI pioneers impact investing fora in 9 countries

“I found Vince Rapisura on Facebook and he constantly discusses being a social investor. Through him, I learned that investing can create more value than just mere profit. We can select investments that have a conscious goal of making a positive impact on society,” said a social investor in an online forum.

Impact investing are investments made to companies, organizations and funds with the intention to generate a measurable, beneficial social or environmental impact alongside a financial return. In 2019, SEDPI was able to facilitate several fora in different countries on impact investing. The fora provided alternative investments that have positive impact in the quality of life of marginalized communities in the Philippines.

Furthermore, it provided avenues on how Overseas Filipino Workers (OFWs) could participate in impact investing while protecting their wealth and achieve their financial dreams. Vince Rapisura, president of SEDPI, shared his investments in social enterprises and microfinance institutions and elaborated on how OFWs can participate in these investments. He also showed the financial performance, social impact and repayment history of each investment option.

SEDPI’s impact investing fora were able to reach more than 900 participants in major cities around the world including Hong Kong, Milan, Rome, Dubai, Abu Dhabi, Macau, Tokyo, Singapore, Doha, Madrid, and Barcelona. It was able to gain new social investors and supporters by helping OFWs focus their attention not only in making profits but also putting social and environmental indicators when makinh financial decisions.

Vince Rapisura always reminded social investors, “Impact investing is investing with a heart.” SEDPI will further its engagements with OFWs as well as with other organizations to reach more investors for its ventures that surely has positive impact in poor communities in the Philippines and in the society, in general.

SEDPI joins key financial stakeholders in Finovation 2019

Social Enterprise and Development Partnerships, Inc. (SEDPI) is the country’s premier capacity builder in the fields of social entrepreneurship, microfinance and financial literacy. SEDPI, represented by its founder and president Vincent Rapisura, joined eCompareMo’s Finovation 2019 to contribute to a clearer and more solid path towards greater financial inclusion.

He served as the moderator of the first roundtable discussion, which provided insights into the problems and solutions to increase financial inclusion. Panelists included Pia Roman-Tayag, BSP Managing Director, Center for Learning and Inclusion Advocacy (CLIA), Mags Surtida, Asia United Bank Group Business Head for Credit Cards and Acquiring First Vice President, Harvey Libarnes, Smart Communications Inc. Financial Service Head Vice President, Hamilton Angluben, Cashalo General Manager, and Stephanie Chung, eCompareMo Co-Founder and CEO. Each panelist shared their individual and organization’s efforts towards financial inclusion among consumers.

Speaking for SEDPI’s constituents which are microenterprises and microentrepreneurs, Vince Raoisura brought to the table a question on why microfinance loans are still not on the eCompareMo’s platform. To which Ms. Chung from eCompareMo answered, “We are actually prepared to work with microfinance. We are so happy that they’re here and we have already made steps towards reaching out to them. Our goal is not just education, but financial inclusion.”

Several topics were further discussed in the next discussions. These include working together to empower more consumers and the need to protect borrowers. In conclusion, the panelists all reiterated their commitment in pushing for the advocacy of financial inclusion and education, especially to the unbanked populations.