Rosario, Agusan del Sur – In a significant step towards enhancing their long-standing partnership, SEDPI hosted a comprehensive field visit for representatives from the Land Bank of the Philippines (LBP) at their KaNegosyo Bayugan branch. This visit, involving key personnel from both organizations, served as a platform for collaborative discussion and strategic planning.
The day began early with the LBP team, including Account Officer Kaye Dacanay and Assistant Vice President Nel Almario, being warmly welcomed at the Bayugan branch. The morning meeting set the tone for a day of insightful exchanges and mutual learning.
A pivotal part of the visit was the enlightening orientation and presentation session, where SEDPI detailed their Joint Venture portfolio, KaTambayayong, KaIpon and KaBalai programs. This session, led by SEDPI KaNegsyo’s Operations Manager, Elysil Claudel, showcased the organization’s operational expansion and portfolio, eliciting positive feedback from the LBP representatives.
The visit to the Cortes Center was particularly noteworthy. It allowed the LBP lending team to observe SEDPI’s effective payment collection processes and suggest improvements, reflecting a shared commitment to continuous improvement and member satisfaction.
The trip then proceeded to SEDPI’s headquarters in Rosario, Agusan del Sur, where informal discussions and a lunch meeting fostered deeper conversations and relationship-building. Vince Rapisura, leading the discussion, emphasized SEDPI KaBalai’s unique approach in comparison to organizations like Habitat for Humanity and Gawad Kalinga. He highlighted the integration of livelihood interventions, skill training, and strategic partnerships in their model.
The visit, which concluded with a cordial photo session, marked a successful and fruitful exchange between SEDPI and LBP. It not only reinforced the existing relationship but also paved the way for future collaborations aimed at sustainable community development and empowerment.
About SEDPI: SEDPI, a client of LBP since 2012, has been at the forefront of nanoenterprise development financing in Mindanao, offering innovative solutions for sustainable development and empowerment.
About LBP: The Land Bank of the Philippines, a long-term partner of SEDPI, plays a crucial role in supporting various development initiatives across the country, fostering economic growth and community development.
Mr. Manuel Ray Almario, Assistant Vice President of the Land Bank of the Philippines, observes transactions in Cortes Center at SEDPI KaNegosyo’s Bayugan branch.
From left to right: Vince Rapisura, SEDPI President; Elysil Claudel, SEDPI KaNegosyo Operations Manager; Edwin Salonga, SEDPI Chairperson; and visiting delegation of Land Bank of the Philippines – Angelli Ehimplar, Allan Glendale Cabaña, Manuel Ray Almario, Kaye Dacanay, Joana Demonteverde, Dindo Dinopol and Chilla Mantilla.
I am Vince Rapisura, 20 years with Ateneo, and proudly co-founding the Social Enterprise Development Partnerships, Inc. or SEDPI in 2004 with Edwin Salonga. I stand before you to propose strategic partnership with the Ateneo School of Public Health and Medicine. Our group, spanning 8 organizations, envisions empowered Filipinos globally, championing nanoenterprise development through microfinance, social entrepreneurship, and financial literacy.
The SEDPI Group of Social Enterprises
In two decades with Ateneo, I inadvertently became a financial “GURO” to 382K Facebook and 373K YouTube subscribers, navigating the digital landscape with a blend of financial expertise and occasional internet humor. This unexpected online journey reinforces SEDPI’s vision, weaving financial literacy and social entrepreneurship into the fabric of global Filipino empowerment.
SEDPI, while digital in its reach, is deeply rooted in the tangible, on-ground impact across our beloved nation. Operating through 15 branches scattered in the heart of Agusan del Sur, Davao de Oro, Davao del Norte, Surigao del Sur, and Zamboanga City, our arms extend to approximately 19,000 nanoenterprise members, each one a testament to our unwavering mission to stand as a stalwart leader in nanoenterprise development.
Our offerings are as diverse as they are impactful. “SEDPI KaNegosyo” extends a financial lifeline to nanoenterprises, while “SEDPI KaTambayayong” embodies our damayan spirit, providing a safety net during times of death, sickness, accidents, and calamities. “SEDPI KaIpon” encourages a culture of savings amongst our members, “SEDPI KaBalai” dreams of building adaptive, livable, affordable, and inclusive housing communities, and “SEDPI KaLusog” symbolizes our commitment to community health.
Each product, meticulously crafted, not only serves a practical purpose but also intertwines with our vision of a future where every Filipino, especially those at the lowest socio-economic status, is empowered, self-sufficient, and secure. Thus, I stand here, inviting Ateneo School of Public Health and Medicine to join hands with SEDPI, intertwining academic excellence with practical impact, and together, let’s craft a future that befits our shared vision and values.
Onground track record
In the particular journey of “SEDPI KaNegosyo,” we’ve channeled 102.7 million pesos into livelihood capital, utilizing a model anchored in joint ventures as opposed to the traditional creditor-debtor relationship found in conventional finance. Our members are not mere transactional partners; they are our allies in a collective pursuit of development and empowerment. Consequently, when life’s unpredictables, such as familial sickness or vulnerability to disasters, impede their capacity to repay, we do not accrue interest earnings. Our compass is directed by a principle that supersedes financial gain: to elevate our members out of poverty. SEDPI staunchly refrains from profiting from their misfortune. Since 2017, we have mobilized 38 million pesos in savings through SEDPI KaIpon, an emblem of our members’ trust and our commitment to safeguarding their financial wellbeing while catalyzing their socio-economic upliftment.
Addressing our members’ vulnerability to disasters, SEDPI launched a venture into socialized housing through “SEDPI KaBalai,” aiming to build adaptive, livable, affordable, and inclusive communities. Our strategy is twofold: acting as a disaster management strategy and simultaneously relocating our members away from hazard and danger zones, thereby safeguarding their physical and financial wellbeing.
In September, we broke ground with an ambitious and hopeful heart. Our blueprint for 2023 involves the construction of 12 housing units, with a visionary expansion to 200 units by 2025. To further this initiative, we’ve strategically land-banked 17 hectares across four municipalities, laying a solid foundation upon which our vision for secure, sustainable living for our members can materialize.
SEDPI KaLusog
As we strive to fortify the resilience of our members further, we cast our sights on the imminent implementation of “SEDPI KaLusog,” our flagship community-based public health program. Envisioned to be a beacon of wellness and support, KaLusog is committed to providing a spectrum of services, including clinical and laboratory offerings, among others, to envelop our members in a mantle of holistic health care.
The Ateneo de Manila University has been a steadfast ally in our endeavors, notably through the Development Studies Program and the Ateneo Center for Social Entrepreneurship, which have been nurturing our initiatives such as KaNegosyo, KaTambayayong, and KaIpon since 2006. As we forged ahead with SEDPI KaBalai, initial dialogues have been held with Ateneo de Davao and Xavier University, ensuring that the foundations we lay are robust and in harmony with local contexts and needs.
Today, as we explore the horizons of “SEDPI KaLusog,” it is with great anticipation and hope that we extend an invitation to the Ateneo School of Public Health and Medicine to bring your expertise, research, and passion onboard. Together, we can co-create a program that doesn’t merely respond to immediate health needs but preemptively builds a healthier, more resilient community, ensuring that each member not only survives but thrives.
In this partnership, we see a confluence of practicality and academia, of on-ground experience and research-backed strategies. Together, we can amplify our impact, weave a tighter safety net for our members, and sculpt a future where every Filipino stands empowered, healthy, and secure in their socio-economic stature.
Diving deeper into “SEDPI KaLusog,” we pivot towards providing preventive health care through a robust community health program, seamlessly aligning with the Universal Health Care Law. Our timeline is both ambitious and meticulously planned to ensure our members have access to essential, quality healthcare.
In 2023, our focus is twofold: Conducting research to rigorously assess our members’ access to health services and securing PhilHealth accreditation for our clinic. Moving into 2024, we will establish an annual physical exam as a baseline for our members and roll out our community healthcare program, ensuring a holistic, preventive, and supportive healthcare environment for our community.
SEDPI Head Office
In a significant stride towards realizing these objectives, last July, we inaugurated our head office in Rosario, Agusan del Sur, where we have thoughtfully allocated spaces for a clinic and laboratory that the Ateneo School of Public Health and Medicine (ASMPH) can utilize. This allocation, an 110-square meter space, is our tangible commitment and counterpart to this venture, with the flexibility to expand as the program burgeons.
Our choice of Rosario is strategic. As the most central location among our 15 branches and a fourth-class municipality, our presence not only facilitates our operations but also contributes significantly to local socio-economic development. It’s here, in the confluence of need and opportunity, that we envision “SEDPI KaLusog” blossoming, providing essential healthcare services while simultaneously nurturing the local socio-economic landscape.
Envisioning a comprehensive and inclusive approach, “SEDPI KaLusog” is designed to weave a tapestry of healthcare services that are not only accessible but also tailored to the unique needs of our community. The envisioned services under this program encapsulate:
Mobile annual physical exams, ensuring consistent health monitoring,
A dedicated laboratory, providing crucial diagnostic services,
A clinic, acting as a nexus for healthcare in the community,
Teleconsultations with specialists, bridging geographical barriers,
Home visits by healthcare professionals, ensuring no member is left behind, and
A pharmacy, safeguarding access to essential medications.
In order to navigate the manifold aspects of community health, we’ve allocated a budget to on-board 2 General Practitioner doctors and 7 nurses, dedicated to community health maintenance. This team will act as the backbone of “SEDPI KaLusog,” ensuring our members have consistent, reliable access to professional healthcare.
In this light, our collective journey forward, in partnership with the Ateneo School of Public Health and Medicine, is not just a fusion of academia and practicality but a symbiotic relationship, where we leverage each other’s strengths to uplift, empower, and safeguard the health and prosperity of our communities.
Benefits to ASMPH
The proposed collaboration with the Ateneo School of Public Health and Medicine (ASMPH) transcends mere cooperation; it is an investment in synergizing academia and practical, on-ground applications to forge a future that is both sustainable and impactful.
But what does ASMPH stand to gain from this amalgamation of knowledge and fieldwork?
Students will immerse themselves in real-world experiences, an invaluable complement to theoretical learning, while enhancing interdisciplinary collaboration and networking. Engaging with the community and understanding the nuances and challenges of public health from an on-ground perspective will mold them into professionals with both expertise and empathy.
Research and Publication Opportunities will be abundant, as our diverse and rich community contexts provide a plethora of scenarios to explore, analyze, and document, contributing to the academic and global health discourse.
Implementation of Health Innovations will be direct and immediate, as our communities become living laboratories where theories are tested, refined, and implemented, ensuring that innovations are not confined to paper but see the light of day, impacting real lives.
And most paramount, Cultivating Social Responsibility and Community Engagement among the students and faculty. Engaging with SEDPI ensures that every research, every innovation, and every interaction leaves a tangible, positive imprint on the community, embedding a spirit of social responsibility and active community engagement in the hearts of future healthcare leaders.
Together, with SEDPI’s pragmatic approach and ASMPH’s academic prowess, we weave a future where healthcare is not a privilege but a right, accessible to all, irrespective of socio-economic stature. This partnership symbolizes a future where every Filipino, regardless of their socio-economic status, has access to quality healthcare, a future sculpted by our collective efforts, expertise, and unwavering commitment to social responsibility.
Sustainability
In our endeavors with “SEDPI KaTambayayong,” our damayan program, we’ve witnessed firsthand the inspiring spirit of collective responsibility and willingness among our members to contribute to shared objectives. Since its inception in 2017, we have extended 23.86 million in cash assistance to our members. This is a resonating testament that our members are not seeking handouts, but are earnestly willing to provide a counterpart, actively participating in initiatives that uplift not only themselves but also their fellow community members.
Fast forward to the present year, as of August 2023, our KaTambayayong program has disbursed 4.72 million pesos in financial assistance, delineated as follows:
3.3M for death assistance, benefitting 132 members
0.8M for hospitalization assistance, aiding 1,069 members
0.3M for accident assistance, supporting 177 members
0.2M for credit insurance claims, assisting 49 members
0.1M for calamity assistance, reaching 221 members
This breakdown is more than mere numbers; it is a tangible reflection of our active and empathetic community, where every peso contributes to alleviating the burdens of life’s unforeseen challenges for our members. It is a clear demonstration that, when structured effectively, community members are more than willing to contribute towards mutual support systems that provide security and assistance in times of need.
The spirit of “damayan,” or communal unity and support, runs deep within our initiatives, and it is this spirit that we hope to encapsulate and further with “SEDPI KaLusog” in collaboration with ASMPH. By harnessing this inherent willingness to contribute and support one another within the community, we stand poised to craft a future where health and wellbeing are not only universally accessible but are also sustained and fortified by the very community they seek to serve.
SEDPI-ASMPH partnership
In conclusion, esteemed colleagues, the path that stretches before us is not merely a collaboration; it is a confluence of visions, resources, and aspirations, all converging towards a future that embodies inclusivity, empowerment, and holistic well-being for our communities. With SEDPI’s on-ground insights and expansive reach, combined with the academic excellence and innovative drive of the Ateneo School of Public Health and Medicine, we stand on the brink of something truly transformative. Our collective journey is not just about healthcare provision; it’s about sculpting a future where every individual, regardless of their socio-economic status, is enveloped in a safety net that encompasses not just physical well-being but also social, economic, and emotional stability. As we embark on this exciting venture, our guide will be the spirit of ‘damayan’, which has perpetually fueled our initiatives, and the unwavering belief that through cohesive action, research, and empathy, we can manifest a future where prosperity, health, and empowerment are not just ideals but lived realities for every Filipino. With unbridled optimism and steadfast resolve, let us step forward together, crafting a narrative that transcends our individual capacities and scribes a future that stands testament to the indomitable spirit of collective endeavor, empathy, and social responsibility. Thank you.
In the wake of soaring rice prices, the Philippines has found itself in the midst of a contentious debate over the imposition of a rice price ceiling. As the staple food of the nation, rice plays an integral role in the daily lives of millions, making its affordability and accessibility crucial.
President Bongbong Marcos, wearing dual hats as the President and Concurrent Agriculture Secretary, implemented a price cap on this essential commodity, setting the stage for a series of events that have highlighted economic disparities, government intervention mechanisms, and the intricacies of market dynamics.
With Executive Order No. 39, the government set price ceilings for both regular milled rice and well-milled rice. While this move was intended to counteract alleged illegal activities like hoarding and to mitigate external global pressures, it has elicited various responses from different sectors.
Finance officials have resigned, economists have voiced concerns over potential shortages, and retailers grapple with the economic realities of the decision. As the country navigates this complex scenario, the repercussions of this policy extend beyond just the rice fields and markets, influencing broader conversations about governance, economics, and the welfare of the Filipino populace.
Price Cap in Economics: A Primer
A price cap, as defined in economic terms, refers to the maximum price set by a governing authority on a specific good or service to ensure that it remains affordable and accessible to the general population. It is an interventionist measure typically instituted in situations where market dynamics are perceived to fail, either due to external pressures or alleged illicit activities.
In the context of the Philippines’ recent rice crisis, President Bongbong Marcos introduced a price cap to counteract two primary concerns:
Alleged illegal price manipulation attributed to hoarding by traders and suspected collusion among industry cartels.
External global pressures beyond the Philippines’ control, such as the Russia-Ukraine conflict, India’s ban on rice exportation, and fluctuations in global oil prices.
By imposing a price ceiling on rice, the government aimed to stabilize the commodity’s price in the face of these challenges, ensuring that Filipinos could afford this staple food item.
Price Cap and the Filipino Consumer
The introduction of the rice price cap in the Philippines came as a direct response to the mounting concerns over rising prices and allegations of illegal price manipulation. This move was primarily aimed at favoring the Filipino consumer. However, like any economic measure, it presents both advantages and unintended challenges.
The most immediate positive outcome is making essential goods like rice more affordable. Given that rice is a foundational food for Filipinos, its affordability directly influences the well-being of the majority. By mandating a price cap, the government attempts to ensure that even when faced with market fluctuations, the cost of rice remains accessible to the typical Filipino consumer. Moreover, the price cap serves as a protective shield for consumers against price gouging and speculative behaviors. The decision to implement this measure was partially influenced by concerns about illicit price manipulations, including hoarding and collusion amongst industry magnates. With a cap in place, the objective is to maintain price stability, ensuring fairness for all consumers.
However, this intervention isn’t without its potential pitfalls. One of the most cited concerns is the risk of a shortage if the set price falls below the market equilibrium. When price ceilings are artificially lower than what the market would naturally dictate, it can cause a surge in demand while simultaneously diminishing supply. An economist has voiced concerns suggesting that the price cap’s sustained enforcement might lead us directly into these shortages. This perspective aligns with the insights of Finance Undersecretary Shelo Magno, who emphasized the law of supply. According to this economic principle, as the price of a commodity drops, the quantity supplied might also see a decline.
Furthermore, there’s the looming risk tied to product quality. Given the price constraints, retailers, especially those who procured rice at steeper prices, might face losses. This economic pinch could then drive suppliers and retailers to find shortcuts to uphold their profit margins. Such shortcuts could detrimentally impact the rice’s quality. In trying to maintain profitability, some retailers might prioritize cheaper rice variants or opt for blending different grades of rice.
While the rice price cap is rooted in the noble intention of shielding the Filipino consumer, its extensive repercussions continue to be a point of debate among economists, retailers, and government bodies. The true challenge is striking a balance—ensuring immediate relief for consumers without compromising the long-term stability of the market and the quality of goods.
Impacts of the Price Cap on Rice Farmers
Rice farmers, as the primary producers of this staple, bear the brunt of any market fluctuations and policy shifts. The recent institution of a price cap has raised questions about its implications for these farmers, who are often at the mercy of volatile market dynamics. How does this price regulation support or challenge their livelihoods? This section seeks to provide insights into the impact of the price cap on the farmers, capturing both the potential opportunities and the inherent risks.
On the brighter side, the price cap provides rice farmers with a degree of financial predictability. They can be somewhat comforted by the fact that there’s a guaranteed floor price for their harvest. This assurance protects them against the potential pitfalls of drastically plummeting market prices. Furthermore, if consumers find the capped price appealing and affordable, it could generate increased demand. Such a surge in demand would translate to higher sales volumes for farmers, thereby amplifying their market presence and revenue.
However, every silver lining has a cloud, and in this context, the potential challenges farmers face under the price cap are manifold. Experts, including the likes of Punong Bayan, point out a significant concern: the price cap might not necessarily align with the escalating production costs. If these costs outpace the fixed selling price, farmers could grapple with financial losses. This discrepancy between production costs and selling price is especially concerning in scenarios where external factors, such as climatic changes or global market shifts, hike up production expenses.
Moreover, the very essence of a price cap might inadvertently stifle innovation among farmers. When there’s a ceiling on potential revenue, the incentive for farmers to embrace advanced farming techniques or to channel investments into productivity-boosting mechanisms diminishes. After all, if the return on investment appears bleak in the light of the price cap, why would they venture into uncharted territories of innovation?
The intricate balance of ensuring affordability for consumers while maintaining profitability for producers is a challenging act. For rice farmers, the price cap brings both opportunities and uncertainties. As the Philippine government navigates this complex issue, continuous engagement with farmers and understanding their concerns will be pivotal to ensuring that policy decisions genuinely benefit the broader Filipino community.
Price Cap from the Perspective of Rice Traders
Rice traders operating at the heart of the rice distribution system, play a crucial role in ensuring that this staple reaches Filipino tables. As they grapple with the new pricing regulations, it becomes essential to understand the potential benefits and challenges they face.
One clear advantage is the predictability in pricing. With a price cap in place, rice traders can anticipate the maximum price at which rice can be sold. This can help them strategize their buying, storage, and selling decisions. As President Bongbong Marcos mentioned, this price cap is a temporary measure, which may offer some traders a sense of solace knowing it’s not a permanent market condition.
Additionally, there’s a possible surge in the volume of sales. If consumers perceive the capped price as fair and affordable, they may be more inclined to buy rice. This could potentially lead to increased sales volumes, compensating, to some extent, for the reduced price per kilo.
However, on the flip side, the price cap brings with it certain undeniable challenges. As highlighted by the news from ANC, some rice retailers experienced losses immediately after the implementation of the price cap. One retailer noted a loss of P9,000 on the first day, and the Grain Retailers Confederation indicated that an average retailer selling 20 sacks of rice per day might lose up to 49,000 pesos of potential profit per week.
If the capped price is too close to or even below the cost of acquiring and selling rice, traders could face significant challenges in covering their operational costs. This is especially concerning for retailers who had bought rice at a higher price before the cap and now have to sell at a lower price. Such concerns were echoed by the president when he acknowledged that some retailers bought rice at a higher price and would now be obligated to sell it at a reduced price due to the cap.
The economic perspective provided suggests that if the price cap is set below the equilibrium, it can lead to shortages. This imbalance where demand exceeds supply could strain traders, potentially causing them to run out of stock prematurely. Economists like Punongbayan have cautioned about the implications of such price ceilings, emphasizing the potential disincentive for producers to sell rice, which can directly impact the traders who rely on these producers.
The Rice Tariffication Law and its Implications
The Philippine agricultural landscape underwent a significant transformation with the introduction of the Rice Tariffication Law. Aimed at liberalizing the rice industry, this law was intended to meet the country’s rice consumption needs while attempting to make the sector more competitive. However, the resulting changes sparked debates over its implications, especially concerning local rice producers and market dynamics.
The Rice Tariffication Law replaced quantitative restrictions on rice imports with tariffs, thus allowing private sectors to import rice. It aimed to stabilize prices and supply, benefiting Filipino consumers through potentially lower rice prices.
By lifting the quantitative restrictions, the Philippines saw an influx of rice imports. The newfound ease of importing rice meant that local demand could be quickly met by rice from international sources, often at cheaper prices.
The influx of cheaper imported rice posed challenges for local rice producers, as they struggled to compete with these prices. The absence of a protective barrier resulted in local farmers facing the pressure of reduced prices for their produce.
Given the backdrop of the Rice Tariffication Law, the challenges faced by local producers and the price volatility in the market were exacerbated. Factors such as the Russia-Ukraine conflict, India’s rice export ban, and fluctuating global oil prices further added to the market instability. This environment, coupled with alleged illegal activities like hoarding, created a situation that seemingly necessitated government intervention, leading to the rice price cap.
The Rice Tariffication Law, while designed with the intent to provide Filipinos with affordable rice, has demonstrated the intricacies and unforeseen challenges of market liberalization. As the Philippines grapples with ensuring food security, the rice price cap’s institution stands as a testament to the delicate interplay between policy decisions, market dynamics, and the livelihoods of thousands of rice farmers.
PhP20 Price of Rice: Political Promise or Practical Solution?
The price of rice has always held significant importance in the Filipino household, with any fluctuation having widespread ramifications on both the economy and daily living. The promise of bringing down the rice price to PhP20 per kilo was a political pledge that captured much attention. However, with the changing dynamics in the rice market and the various challenges, achieving this mark becomes a topic of debate.
The PhP20 price point is not a new phenomenon. In previous years, there have been instances where affordable rice prices have been achieved, with Rep. Rhea Vergara recalling a time when the cost was as low as PhP27 per kilo. This has set a precedent for the public, increasing the expectation for the government to regulate and maintain affordable rice prices.
According to Congresswoman Rhea Vergara, while there were initial meetings suggesting that the PhP20 per kilo price wasn’t attainable, she believes that under certain conditions, it might be possible. Vergara opines, “If the DA can provide the inputs, which is the most expensive part of farming, if we give our farmers the right seeds, support them 100 percent with fertilizer…then, yes, 20 pesos is achievable.” However, she also expressed doubts about its sustainability, suggesting a more realistic price point to be between PhP38 to PhP40 per kilo.
While a PhP20 price point would be welcomed by consumers, its ramifications go beyond just affordability. Such a price regulation can pose challenges for traders and retailers who would need to adjust their profit margins. Moreover, it places pressure on the government and associated bodies like the NFA to intervene, which can lead to significant economic decisions, such as providing subsidies. On the political front, while fulfilling the PhP20 promise could boost the government’s popularity, failing to do so might lead to public discontent.
Promising a PhP20 per kilo price for rice is a compelling political pledge, reflecting the government’s commitment to ensuring affordable living for its citizens. However, as elucidated by Rep. Rhea Vergara and the ongoing developments, achieving and maintaining this price point requires strategic interventions, a robust agricultural support system, and a consideration of its broader implications. Whether a political promise or a practical solution, it is a testament to the intricate relationship between economics, politics, and the Filipino way of life.
Moving Forward: Recommendations and Solutions
With the complex interplay of economics, politics, and agriculture at the forefront, ensuring affordable rice prices and a sustainable rice industry in the Philippines requires strategic solutions. Reflecting on the insights shared, particularly by Congresswoman Rhea Vergara, this section presents several recommendations to address the challenges currently faced by the rice sector.
Direct support to farmers can play a pivotal role in ensuring the rice industry’s viability. Congresswoman Vergara suggests implementing measures like a minimum support price, which considers production costs and other associated expenses. This ensures that farmers receive fair compensation for their produce. In addition, introducing subsidies or grants can also provide the much-needed financial buffer, protecting farmers from volatile market prices.
Investing in research can pave the way for improved yields, cost-effective farming practices, and resilient crops. By focusing on R&D, the Philippines can develop high-yielding varieties, better farming techniques, and innovative solutions to tackle challenges like pests and changing climatic conditions. As Vergara highlights the need for government support, providing farmers with the right seeds and comprehensive fertilizer assistance can significantly reduce production costs.
Given the ongoing challenges, there’s a clarion call to reassess the rice tariffication law. Vergara strongly believes in amending the law, suggesting reintroducing NFA’s role in stabilizing the rice market during emergencies. By allowing NFA to flood the market with affordable rice, it can counteract the manipulations by potential cartels and unscrupulous traders.
Promoting local production is crucial for the country’s food security and economic stability. By offering incentives, the government can motivate farmers to boost production and reduce dependency on imports. Additionally, linking farmers directly to end-users, as suggested by the Kadiwa initiative mentioned by Vergara, can eliminate middlemen, ensuring both farmers and consumers get a fair deal.
Addressing the rice industry’s challenges requires a holistic approach, encompassing direct farmer support, research investments, legislative amendments, and promoting local production. As the country navigates the intricate dynamics of rice production, prices, and market forces, these recommendations serve as potential pathways to ensure that both the producer and consumer benefit, ultimately leading to a self-sufficient and robust rice industry in the Philippines.
Navigating the Rice Terrain: Challenges and Opportunities
The intricate landscape of rice pricing and production in the Philippines has seen a series of ups and downs. The introduction of the rice price cap, alongside the broader discussions on rice tariffication and market dynamics, has only added to the complexities. This section will summarize the overarching challenges and opportunities stemming from these measures.
The price ceiling was introduced as a measure to control soaring rice prices. It brought about a guarantee for producers and potential increased demand from consumers at the capped price. However, as Congresswoman Rhea Vergara pointed out, while it addressed a price hike, it was merely “half the solution.” Challenges have emerged, such as the potential for costs to surpass production expenses and reduced incentives for innovation. Nevertheless, the ceiling also presented an opportunity: a clear signal against unbridled profiteering and a testament to the government’s commitment to consumer welfare.
The rice situation in the Philippines is not isolated to prices alone. It’s intertwined with global events, as seen with the impacts of the Russian-Ukraine war and local typhoons, the changing roles of agencies like NFA, and the evolving dynamics between farmers, traders, and consumers. As Vergara emphasized, addressing just one aspect will not yield the desired stability. Instead, a comprehensive approach is essential — one that takes into account the welfare of farmers, ensures fair pricing for consumers, promotes research and development, and creates avenues for direct links between producers and consumers.
Rice, as a staple in the Philippines, sits at the nexus of nutrition, economics, politics, and culture. The discussions on price caps, tariffication laws, and farmer welfare are emblematic of the challenges of ensuring food security in an increasingly complex global landscape. As the nation moves forward, the lessons from these episodes serve as crucial guideposts. A cohesive strategy that addresses each facet of the rice industry, backed by collaborative efforts from all stakeholders, will be instrumental in charting a stable and prosperous path for the Philippines’ rice sector.
Housing in the Philippines is a topic that doesn’t just hit close to home – it IS home. Sadly, it’s a topic also rife with serious issues. As of 2018, there were over 6 million units of housing backlog in our country, a staggering statistic stemming from the twin demons of unaffordable housing and inadequate access to housing funds.
Housing deficit crisis
To better comprehend the gravity of the situation, it’s important to first understand what “socialized housing” means. These are homes priced at a maximum of PhP580,000, an attempt to accommodate those of us who may not have much leeway in our budgets.
But here’s the rub: data from the HLURB, HUDCC, and Center for Research and Communication paint a bleak picture. The demand for housing in the socialized and economic segments outstrips supply, resulting in deficits of over 663,283 and a staggering 1,962,077 units, respectively. The story isn’t much better in the low-cost segment, with a deficit of 462,160. the housing crisis in the Philippines
Market segment
Housing demand
Housing supply
Surplus (Deficit)
Socialized
1,143,048
479,765
(663,283)
Economic
2,503,990
541,913
(1,962,077)
Low-cost
704,406
242,246
(462,160)
Mid-cost
72,592
322,995
250,403
High-cost
18,235
242,246
224,011
Why the discrepancy? Simply put, it’s business. Developers are more attracted to the mid and high-end market segments, where profits are more lucrative. Low-cost and socialized housing come with thinner margins, making the recovery of costs for essential infrastructure challenging.
Beyond construction: Comprehensive solutions to the housing crisis
Coming to terms with the scale of our housing problem can be daunting, to say the least. However, as a social development worker who has seen these challenges unfold over the past 20 years, I believe that seeking market-based solutions alone won’t cut it. The scale of the problem is so vast that it calls for concerted, strategic efforts from both public and private sectors.
The good news? The government has already taken steps towards bridging the housing gap. With a target of constructing one million new houses every year from 2022 to 2028, the journey towards providing homes for every Filipino family has already begun.
However, this ambition should be complemented with strategic initiatives that go beyond just construction of houses. Government subsidies should be extended towards building essential infrastructure for socialized, economic and low-cost housing, such as roads, drainage systems, and more. This not only aids in the development of the housing units but also ensures that these communities are livable and sustainable in the long run.
Furthermore, incentives should be extended to developers and other market players who are willing to venture into the socialized and low-cost housing market. These incentives could be in the form of tax breaks and less stringent document requirements for subdivision development, encouraging more participation in these crucial market segments.
Lastly, financing subsidies should be extended to first-time homebuyers. For instance, Pag-IBIG has a 3% interest rate for socialized housing. Banks and other financial institutions could also extend this same rate, with the balance compared to the prevailing market rate subsidized by the government. This financial assistance could be the key to unlocking the doors of homeownership for many Filipinos.
Turning dream into reality: A call for coordinated effort
The road to providing homes for every Filipino family is a long one, and fraught with many challenges. But with coordinated efforts from the government, civil society, private sector, and each one of us, we can turn this dream into a reality. It’s not just about owning a house, but about building a home, a community, and ultimately, a nation.
Microfinance has emerged as a critical tool for poverty alleviation and financial inclusion in the Philippines. The government has recognized its potential and has enacted several laws and regulations to promote and regulate the sector (Llanto & Fukui, 2015). This paper examines the key regulations governing microfinance in the Philippines and their implications for the sector.
Covered institutions
In the Philippines, microfinance services are provided mainly by banks (mainly rural and thrift), non-governmental organizations (NGOs), cooperatives, financing companies and lending companies. The focus of regulation is on portfolio quality, outreach, efficient and sustainable operations, and transparent information.
Banks with microfinance operations are under the regulation and supervision of the Bangko Sentral ng Pilipinas (BSP), cooperatives are under the supervision and the regulation of the Cooperative Development Authority (CDA) and microfinance NGOs, financing companies and lending companies are regulated by the Securities and Exchange Commission (SEC).
Regulatory framework
The regulatory framework for microfinance in the Philippines is multi-faceted, involving several laws and regulatory bodies. The Republic Act No. 8425, also known as the Social Reform and Poverty Alleviation Act, is a landmark legislation that recognized microfinance as a key strategy for poverty alleviation (Congress of the Philippines, 1997). It mandated government financial institutions to allocate a portion of their loan portfolio for microfinance.
Republic Act No. 10693, or the Microfinance NGOs Act, provides a regulatory framework for non-governmental organizations engaged in microfinance activities (Congress of the Philippines, 2015). It established the Microfinance NGO Regulatory Council, which oversees the accreditation, regulation, and supervision of microfinance NGOs.
The Bangko Sentral ng Pilipinas (BSP), the central bank of the Philippines, has issued several circulars related to microfinance. For instance, Circular No. 272 provides guidelines for the establishment of banks’ microfinance operations, while Circular No. 744 provides the framework for microfinance products and services (Bangko Sentral ng Pilipinas, 2001; 2013).
In 2010, an amendment to circular 694 was approved which recognizes from PhP150,001 to PhP300,000 to still be categorized as a microfinance loan (Bangko Sentral ng Pilipinas, 2010). This was done to accommodate the increasing demand for higher loan amounts from growing microenterprises. This policy increased the scope of those who can be microfinance clients, consequently increasing the potential market.
Sector-specific regulations
In addition to these general regulations, there are also sector-specific laws that mandate banks to allocate a portion of their loanable funds for specific sectors. The Republic Act No. 10000, or the Agri-Agra Reform Credit Act of 2009, requires banks to allocate at least 25% of their total loanable funds for agriculture and agrarian reform credit (Congress of the Philippines, 2009). Similarly, Republic Act No. 8550, or the Philippine Fisheries Code of 1998, mandates banks to set aside a portion of their loanable funds for fisheries development, which includes microfinance services for small fisherfolk (Congress of the Philippines, 1998).
Recent developments
The recent Republic Act No. 11494, or the Bayanihan to Recover as One Act, passed in response to the COVID-19 pandemic, includes provisions for low-interest loans for micro, small, and medium enterprises (MSMEs) and cooperatives, as well as loan payment grace periods (Congress of the Philippines, 2020). This act underscores the government’s recognition of the role of microfinance in economic recovery and resilience.
References
Bangko Sentral ng Pilipinas. (2001). Circular No. 272. Bangko Sentral ng Pilipinas.
Bangko Sentral ng Pilipinas. (2010). Circular No. 694. Bangko Sentral ng Pilipinas.
Bangko Sentral ng Pilipinas. (2013). Circular No. 744. Bangko Sentral ng Pilipinas.
Congress of the Philippines. (1997). Republic Act No. 8425. Official Gazette of the Republic of the Philippines.
Congress of the Philippines. (1998). Republic Act No. 8550. Official Gazette of the Republic of the Philippines.
Congress of the Philippines. (2009). Republic Act No. 10000. Official Gazette of the Republic of the Philippines.
Congress of the Philippines. (2015). Republic Act No. 10693. Official Gazette of the Republic of the Philippines.
Congress of the Philippines. (2020). Republic Act No. 11494. Official Gazette of the Republic of the Philippines.
The SEDPI Group of Social Enterprises is a Philippines-based organization that operates with the aim of alleviating poverty among Filipinos worldwide. Since its inception in 2004, it has grown to include eight collaborative organizations executing three key programs: SEDPI KaSosyo, SEDPI KaNegosyo, and Usapang Pera. These programs focus on social investments, nanofinancing, and financial education respectively.
SEDPI programs
The SEDPI KaSosyo program attracts social investors who prioritize people and the environment over profit. These investors support nanoenterprises, social enterprises, and development organizations through a profit-sharing scheme known as Joint Venture Savings (JVS).
The SEDPI KaNegosyo program provides sustainable finance for nanoenterprise development. This includes providing livelihood capital, promoting a savings culture, providing social safety nets, and even creating affordable and inclusive housing communities through various sub-programs.
Usapang Pera, the financial education program, provides a comprehensive suite of financial empowerment services that include online trainings, live events, and publications. The program uses real-life examples and practical applications to improve personal financial habits and foster positive social change. Over the years, SEDPI and its founders have received several recognitions and awards for their work. They remain committed to their vision of empowering Filipinos worldwide to support sustainable nanoenterprises.
Social and solidarity economy: The SEDPI approach
Social and Solidarity Economy (SSE) encompasses a range of organizations and enterprises that prioritize social objectives and uphold principles of solidarity, mutual aid, and social justice. In the Philippines, one of the organizations embodying these values is the SEDPI Group of Social Enterprises (SEDPI). Their model provides a roadmap for implementing Social and Solidarity Economy principles in practice.
Empowering Nanoenterprises through KaNegosyo
SEDPI’s KaNegosyo program follows six foundational principles that reflect a commitment to the values and practices of the Social and Solidarity Economy. Financial Education: SEDPI prioritizes intensive savings mobilization, universal insurance coverage, provision of investment opportunities, and liberation from oppressive loan products. By offering financial education, SEDPI empowers nanoenterprises to make informed decisions and contribute to a more equitable economy. Capital Infusion, Not Loans: SEDPI forms joint ventures with nanoenterprises, establishing a co-ownership business partnership, offering an alternative to loans that require perpetual interest and penalty charges. This innovative approach fosters economic resilience and promotes shared prosperity. Profit and Risk Sharing: SEDPI’s strategy includes a profit-sharing mechanism that favors labor and participation. Risks are equally shared, fostering collaborative problem-solving and economic resilience, central tenets of the SSE model. Loss Follows Capital: SEDPI’s model ensures that losses, defined as bankruptcy or the nanoenterprise’s decision to liquidate assets, are proportionate to the party’s capital contribution. This system upholds the principles of mutual aid and fairness central to the SSE. Non-Profit damayan:SEDPI provides a non-profit insurance product that places solidarity and protection above income generation. This model strengthens collective resilience and reflects the ethos of SSE. Partnership and Cooperation: SEDPI aims to establish partnerships with government agencies and like-minded organizations. This collaboration aims to bring basic services closer to low-income groups and advances the SSE’s mission of poverty eradication. Social Protection through KaTambayayong
SEDPI’s KaTambayayong (KT) program addresses the unique needs and challenges faced by nanoenterprises, emphasizing the importance of providing adequate, accessible, affordable, and efficient social safety nets. This approach reflects a deep commitment to social protection, a key element of the SSE framework. Understanding the vulnerability of nanoenterprises to natural disasters and the growing impact of climate change, SEDPI KT aims to provide a robust support system. The program offers benefits that cover basic costs or assist in disaster recovery, ensuring that these small businesses can withstand crises and remain operational. SEDPI KT departs from the often tedious and lengthy claims processing typical of traditional for-profit insurance companies. Instead, the program is dedicated to providing near same-day delivery of benefits through a simplified documentation process, ensuring efficient and prompt support. In keeping with the principle of solidarity, SEDPI KT is committed to offering social safety nets that are affordable and within the financial reach of nanoenterprises. This enables more businesses to access the program and enjoy its benefits, enhancing their resilience and stability. SEDPI KT complements existing government social insurance programs – SSS, PhilHealth and Pag-IBIG, bridging gaps in coverage and providing additional support where needed. This cooperative approach underscores the core SSE values of partnership and mutual aid. Fostering a new economic paradigm
SEDPI’s programs embody the principles of the Social and Solidarity Economy, demonstrating that social objectives can be pursued alongside economic goals. By prioritizing mutual aid, shared prosperity, and social justice, SEDPI is contributing to the creation of a more equitable and resilient economy. Their work offers an inspiring model for other organizations seeking to implement SSE principles in their operations.
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.
It fills me with immense joy and gratitude to stand before you on this significant occasion – the 19th anniversary of the SEDPI Group and the inauguration of our new headquarters in Rosario, Agusan del Sur. It’s wonderful to see so many familiar faces and new ones alike, as we come together to celebrate nearly two decades of dedication, progress, and shared accomplishments.
In reflecting on the history of the SEDPI Group, one cannot help but marvel at the extraordinary growth we have experienced. Since our inception in 2004, we have strived to make a significant impact in our communities, and the fruit of our labor is evident today. In just six years, since 2017, we have grown from 2 branches to a remarkable 15. A testament to the effectiveness of our mission and the unwavering commitment of our teams on the ground.
This growth is not merely in terms of our physical presence, but also in the size of the SEDPI family. Today, our membership stands close to 18,000 strong – a number that symbolizes not only the trust our members place in us but also our collective potential to effect change. Each of these members is a testament to our purpose, a driving force behind our mission to uplift lives and to champion sustainable and ethical financing, social investments, and financial education among Filipinos worldwide.
At the heart of our operations are our center chiefs, whose dedication and service have been instrumental in bringing our mission to life. Your tireless efforts, undying spirit, and constant dedication have made what SEDPI is today. It’s your commitment to our cause that has made it possible for us to achieve this feat. You are the backbone of our operations, and without you, SEDPI would not be what it is today. We salute your hard work and dedication.
We would not be where we are today without our esteemed institutional partners. From the world of academia, Ateneo de Manila University has been a valuable partner, providing us with a strong theoretical framework and research support to ground our work in science and evidence. In the banking sector, Land Bank and BPI have been instrumental in our financial operations, offering steadfast and dependable services that have allowed us to grow and serve our communities better. From the government sector, Pag-IBIG, SSS, and our newest partner, PhilHealth, have helped us secure access to social safety nets for our members, enhancing our services and creating a holistic approach to poverty alleviation.
Our staff is the lifeblood of SEDPI Group. You are the ones who bring our vision to life every day, facing challenges with creativity and resilience, and bringing compassion, professionalism, and dedication to your work. Each one of you plays a pivotal role in making SEDPI a beacon of hope for many. Your unwavering dedication and commitment are the life force that propels our organization forward.
As we look back on our journey, it’s essential to remind ourselves of the principles that form the cornerstone of SEDPI. Our six foundational principles – financial education, capital infusion instead of loans, profit and risk sharing, loss follows capital, non-profit insurance product, and partnership and cooperation – have been the guiding compass of our journey.
Financial education has been at the forefront of our initiatives. We believe that an informed individual is an empowered individual. By prioritizing intensive savings mobilization, universal insurance coverage, provision of investment opportunities, and liberation from oppressive loan products, we’ve been able to arm our members with the knowledge to make sound financial decisions and build a secure future.
Instead of offering traditional loans, we’ve introduced a novel approach to funding – capital infusion through joint ventures. This approach has enabled us to foster a mutually beneficial relationship with nanoenterprises. By adopting a cost-plus basis for our capital contribution, we’ve presented an alternative to the conventional loan systems that often burden the borrower with interest and penalty charges.
Our model of profit and risk sharing ensures an equitable distribution of profits and risks. Unlike traditional loan systems where the debtor bears all the risks, our shared approach fosters a culture of collective problem-solving and mutual support. This has led to a more resilient and empowered nanoenterprise ecosystem.
The principle of ‘loss follows capital’ ensures that losses are proportionate to each party’s capital contribution. This approach is more equitable and just, significantly differing from traditional loan systems where the debtor often bears the brunt of the losses.
Our non-profit insurance product is designed with the primary goal of solidarity and protection. By treating service delivery costs as expenses and accumulating surplus premium payments to strengthen the fund, we’ve ensured that the insurance serves its true purpose of providing protection and not income generation.
Our commitment to partnership and cooperation has led us to establish collaborations with government agencies, bringing basic services closer to low-income groups. We’ve joined hands with civil society and like-minded organizations in our fight against poverty, reinforcing our belief that collective efforts can bring about significant change.
The essence of our principles aligns seamlessly with the UN Sustainable Development Goals (SDGs), transforming our local efforts into a contribution to a global cause. Our initiatives address a wide range of SDGs – from eradicating poverty to ensuring decent work and economic growth, reducing inequalities, promoting sustainable cities and communities, and ensuring good health and well-being.
Through our initiatives, we’ve made significant strides towards achieving these global goals. By providing capital and financial education, we’ve uplifted numerous entrepreneurs from the shackles of poverty. By facilitating job creation and sustainable microenterprises, we’ve fostered economic growth and reduced inequalities. Our housing initiative, KaBalay, has contributed to creating sustainable cities and communities, while KaLusog, our health initiative, has promoted good health and well-being.
Our approach to finance, marked by capital infusion and profit-sharing rather than traditional loans, promotes responsible consumption and production. By fostering partnerships and cooperation with government agencies, we’re reinforcing strong institutions. Most significantly, by targeting primarily women, SEDPI is making significant strides towards achieving gender equality in financial inclusion and economic empowerment.
As we stand at this juncture, celebrating our past and looking forward to our future, we’re filled with a sense of optimism and determination. We’re ready to tackle new challenges, seize opportunities, and continue our mission to uplift lives. We’re eager to expand our outreach, strengthen our services, and make a more significant impact.
Thank you all for your unwavering support and commitment to our cause. The journey we’ve traversed and the journey that lies ahead are both testaments to our shared vision, collective efforts, and our belief in making a difference. As we embark on the next chapter of our journey, let’s continue to aspire, inspire, and make an impact.
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.
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.
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.
