| Sovereign Wealth Funds (SWFs) are state-owned investment funds that are used by countries to benefit their economies and citizens. They consist of various types of assets such as stocks, bonds, real estate, or other financial instruments, often derived from a nation’s surplus reserves. The concept of SWFs originated in the mid-20th century, pioneered by countries with surplus revenues primarily from commodities like oil. For instance, the Kuwait Investment Authority, established in 1953, is often cited as the first SWF. Over time, many other countries SWFs significantly contribute to economic stabilization. They invest surplus revenues, thereby providing a cushion against economic downturns. For instance, during periods of low oil prices, oil-rich countries can utilize their SWFs to balance any decrease in revenue. It stands out for their long-term investment strategies. Unlike private investors who might focus on short-term gains, SWFs have the advantage of a long-term perspective, enabling them to undertake investments that, despite potential short-term risk or unprofitability, could yield substantial returns in the future. SWFs can profoundly influence a nation’s strategic objectives. By channeling investments into specific sectors or industries, they can promote national priorities, such as infrastructure development, technological progress, or economic diversification. In practice, several oil-rich nations use their SWFs to invest in industries outside of oil, aiming to diversify their economies and reduce oil revenue dependency. Different types of sovereign wealth funds Sovereign Wealth Funds (SWFs) can be classified into four primary types, each reflecting the specific economic goals and policy objectives of their respective countries. These include savings funds, stabilization funds, pension reserve funds, and strategic development SWFs. Savings funds are designed to transform non-renewable assets, such as oil or minerals, into a diversified portfolio of international assets. These funds aim to conserve wealth for future generations once these non-renewable resources are depleted. For instance, the Government Pension Fund Global of Norway falls under this category, as it invests oil revenues to secure future generations’ welfare. Stabilization funds are typically used to insulate the economy from commodity price volatility and other economic shocks. They collect surplus revenue during periods of high commodity prices and release funds into the budget during downturns to help stabilize government revenues and counteract economic cycles. An example is the Russian National Wealth Fund, established to support Russia’s pension system and balance the federal budget in times of oil price volatility. Pension reserve funds are not sources of pension contributions but serve as a buffer to assist the funding of future pension liabilities. These funds are typically invested in a diversified portfolio of assets to generate a steady return over time. The Australian Future Fund is an example of a pension reserve fund. Lastly, strategic development SWFs aim to fulfill specific domestic economic and policy objectives, such as developing certain sectors, promoting economic diversification, or increasing employment. These funds often invest in domestic industries and infrastructure. The Ireland Strategic Investment Fund, for instance, targets sectors that will deliver economic and employment benefits to Ireland. How SWFs are funded The funding sources for Sovereign Wealth Funds can be traced back to a variety of economic activities and reserves depending on the fund’s nature and the country’s economic structure. Common sources of funding include commodity exports, foreign exchange reserves, transfer of assets from other funds, and fiscal surpluses. Commodity exports, particularly of oil and gas, are a significant source of funding for many SWFs. For countries rich in these resources, the revenues generated from their exports can result in significant budget surpluses, which are then channeled into their respective SWFs. Notable examples include the Abu Dhabi Investment Authority funded by oil exports, and the Government Pension Fund Global of Norway funded by oil and gas revenues. Foreign exchange reserves are another crucial source of funding for SWFs. Countries with substantial foreign exchange reserves, often due to a large volume of exports or a significant influx of foreign direct investment, can allocate a portion of these reserves to establish or bolster their SWFs. Some SWFs are also funded through the transfer of assets from other government funds or entities. For instance, an initial corpus for the fund might be sourced from a country’s central bank reserves or a public pension fund. Lastly, fiscal surpluses arising from prudent economic management and strong economic growth can also be channeled into SWFs. Countries that consistently run budget surpluses may choose to invest these funds for future needs or economic stabilization. For example, Singapore’s Government Investment Corporation is funded in part by the country’s budget surpluses. Countries with SWF best practices ‘Best practices’ in the context of Sovereign Wealth Funds usually refers to effective and ethical management practices that have proven successful across a range of funds. Some of these practices include establishing clear objectives for the fund, which can guide its investment strategy and help stakeholders understand its purpose. Implementing robust governance and operational frameworks is another key best practice. This involves having clear lines of responsibility and control, as well as efficient processes for decision-making and execution. Finally, transparency and accountability are crucial for maintaining public trust in SWFs. This can involve regular public reporting, independent audits, and strong oversight mechanisms. Several countries are recognized for their adherence to best practices in the management of their SWFs. Among them, Norway, with its Government Pension Fund Global, is frequently lauded for its high transparency and robust governance structure. Singapore’s two SWFs, Temasek Holdings and GIC, are also acknowledged for their clear investment strategies, sound governance, and significant contribution to the country’s economy. Similarly, the Abu Dhabi Investment Authority (ADIA) in the United Arab Emirates, one of the largest SWFs in the world, is recognized for its diversified investment portfolio and prudent risk management strategies. Norway’s Government Pension Fund Global, one of the largest sovereign wealth funds in the world, is primarily funded by the country’s oil revenues. The fund is intended to finance public pensions and prevent the Norwegian economy from overheating due to excessive spending of oil revenues. A standout aspect of the Norwegian fund is its high degree of transparency. It regularly publishes detailed reports about its operations and investments, and it’s known for its strict ethical investment guidelines, which prohibit investments in companies involved in activities such as tobacco production, certain types of weapons manufacturing, and severe environmental damage. Singapore manages two sovereign wealth funds: Temasek Holdings and GIC. These funds are primarily funded by Singapore’s foreign reserves. Their overall goal is to strengthen Singapore’s economy and ensure the well-being of future generations. Temasek Holdings and GIC are renowned for their strong governance structures and clear investment strategies. They are recognized for their strategic investments in a variety of sectors, both domestically and internationally, contributing to the robustness of Singapore’s economy. The Abu Dhabi Investment Authority (ADIA) is primarily funded by Abu Dhabi’s oil surplus. Its main objective is to diversify income sources away from oil and stabilize the economy. ADIA is known for its wide-ranging investment portfolio, which spans numerous sectors and asset classes across various countries. This diversified approach helps to spread risk and increases the potential for returns. Additionally, ADIA has a reputation for prudent risk management, which includes a thorough evaluation of potential investments and careful monitoring of its portfolio. Advantages of SWFs Sovereign Wealth Funds serve as an important mechanism for smoothing the impact of volatile commodity prices or trade surpluses, providing economic stability. For instance, when a country experiences a surge in oil prices, it can channel the extra revenue into its SWF. During times of lower prices or economic downturns, the country can use the SWF to compensate for the shortfall, thereby stabilizing the economy. Furthermore, SWFs allow countries to diversify their income sources by investing in various asset classes and industries across different countries, reducing the economic risk associated with over-reliance on a single volatile revenue source, such as oil in the case of many Middle Eastern countries. As state-owned entities, SWFs can afford a longer-term investment horizon than most private investors. This long-term perspective provides SWFs with the advantage of investing in riskier or less liquid assets that may offer higher returns over a longer period, like infrastructure or private equity. Furthermore, their ability to remain patient and hold onto their investments during periods of market volatility allows them to benefit from long-term economic trends and potentially realize higher returns compared to short-term investments. SWFs often invest in sectors that align with their country’s strategic objectives, promoting national development and growth. For instance, a SWF might invest in infrastructure projects, thereby facilitating economic development and job creation. In the case of technology or renewable energy, investments by SWFs can drive innovation and help transition the economy towards a more sustainable model. This alignment of investments with national goals is another crucial advantage of SWFs. The concept of intergenerational equity is central to many SWFs, particularly those funded by revenue from depletable resources like oil. By setting aside and investing a portion of the income derived from these resources, SWFs can ensure that the wealth benefits future generations and not just the current populace. For example, the Norwegian Government Pension Fund Global, one of the world’s largest SWFs, was established to invest the profits from Norway’s oil and gas resources, securing the welfare of future generations long after these resources are exhausted. Disadvantages of SWFs One significant concern surrounding Sovereign Wealth Funds is the potential for mismanagement and corruption. Especially in countries where transparency and oversight mechanisms are lacking, there is a risk that SWFs could be susceptible to such practices. For instance, there have been allegations of corruption and mismanagement in Malaysia’s 1MDB fund, where billions of dollars were reportedly misappropriated. In countries with weak institutional frameworks and regulatory oversight, the large amounts of money managed by SWFs can be prone to misuse, which could lead to significant economic and social implications. Another disadvantage of SWFs is the potential concentration of economic power. With their enormous assets, SWFs have the ability to wield significant influence over markets and corporations, leading to concerns about market manipulation or exerting undue influence. For example, a large investment by a SWF in a particular sector could potentially distort market prices. Additionally, SWFs’ investments could have implications for national security, particularly when they invest in strategic industries of other countries. Large-scale investments by SWFs, particularly in domestic markets, could potentially lead to economic overheating and asset price inflation. By pumping significant amounts of money into specific sectors or asset classes, SWFs could contribute to overvaluation, which can lead to asset bubbles and exacerbate economic instability. For instance, excessive investment in the real estate sector could drive up property prices, making housing unaffordable for many citizens and potentially leading to a property bubble. Thus, while SWFs can contribute to economic growth and stability, they also need to manage their investments carefully to avoid contributing to economic instability. Controversies surrounding SWFs Sovereign Wealth Funds are often criticized for a lack of transparency and opacity in their operations. For example, the Libyan Investment Authority (LIA) has faced several allegations and legal actions related to mismanagement and corruption due to its lack of transparency. Similarly, China’s Investment Corporation (CIC) has faced criticism over the lack of clarity surrounding its investment strategy and performance. There is also the risk of political interference in SWFs. The Russian Direct Investment Fund (RDIF) has been viewed as a tool of state policy for geopolitical influence rather than an independent financial institution for profit maximization. Similarly, the Qatar Investment Authority (QIA) has been closely tied to the ruling family, raising questions about its independence. Large SWFs can also pose a risk to global financial stability. For instance, the Norwegian Government Pension Fund Global (GPFG) is one of the world’s largest SWFs and its investment decisions can have a significant impact on global markets. Similarly, the Saudi Arabian Monetary Authority (SAMA) controls a large SWF whose investments can significantly influence global financial markets. The Proposed Maharlika Investment Fund of the Philippines House Bill No. 6398, also known as the Maharlika Investment Fund (MIF) bill, was certified as urgent by President Ferdinand “Bongbong” Marcos Jr. The bill’s primary aim is to stimulate economic activity and development in the Philippines through strategic and high-impact infrastructure projects, serving as a new growth catalyst. The proposed Maharlika Investment Fund (MIF) is primarily intended to stimulate the economy in the face of downgraded global growth projections. This comes at a time when the world economy is dealing with several challenges, including debilitating inflation, fluctuating and unstable prices of crude oil and other fuel products due to the ongoing conflict between Ukraine and Russia, and continuing interest rate hikes in the international financial sector. By supporting strategic and high-impact infrastructure projects, the MIF is envisioned to act as a new catalyst for growth, accelerating economic activity and development in the Philippines. Maharlika Investment Corporation The proposed Maharlika Investment Fund (MIF) will be managed by the Maharlika Investment Corp. (MIC). However, the management and governance of the MIF have come under scrutiny, particularly with the provisions in the Senate MIF bill that would allow foreigners to sit on the board of MIC. Critics, including Rep. Arlene Brosas, argue that this could lead to foreign control over local resources. There are also worries about the potential for “money laundering” due to the discretionary powers given to the Board of Directors, as voiced by Rep. France Castro. President Ferdinand “Bongbong” Marcos has certified the Maharlika Investment Fund bill as urgent, expressing the need for a wealth fund to counter the impact of several economic challenges, including inflation, fluctuating oil prices, the Russian invasion of Ukraine, and interest rate hikes. The president believes the fund could stimulate the economy by accelerating the implementation of large infrastructure projects. The urgent certification allows the bill to bypass the normal legislative process, which entails readings and deliberations on three separate days. As a result, the bill could be passed more quickly, but at the risk of lawmakers not having ample time to read and study the proposed measures. Funding MIF The proposed Maharlika Investment Fund (MIF) is expected to receive initial capital from major financial institutions such as the Land Bank of the Philippines (LBP), the Development Bank of the Philippines (DBP), and the Bangko Sentral ng Pilipinas (BSP). However, there are concerns that diverting funds from LBP and DBP to the MIF might affect the availability of funds for farmers and microenterprises, which are the primary clientele of these banks. In addition, the Senate bill reintroduces pension funds such as the Government Service Insurance System (GSIS), Social Security System (SSS), and Pag-IBIG as potential investors in the MIF. It should be noted, however, that the participation of these pension funds is voluntary and not mandatory. Moreover, the bill proposes annual contributions from the Philippine Amusement and Gaming Corporation (PAGCOR) and other government-owned gaming operators to boost the fund’s capital. It should be noted that these are profits from gaming operations, and diverting them to the MIF could have implications for other sectors funded by these entities. The MIF is expected to raise additional capital through an Initial Public Offering (IPO) on the Philippine Stock Exchange. This implies that the fund will be listed on the stock exchange and shares of the fund will be made available to the public. This move is intended to democratize access to the fund and encourage public participation in the fund’s growth and profits. MIF concerns and criticisms Senator Risa Hontiveros, a vocal critic of the Maharlika Investment Fund (MIF) bill, has expressed several concerns about its quick passage and potential implications. She pointed out the depletion of income from the Malampaya oil and gas fields and the yet-to-be-passed law aimed at boosting the government’s income from mining operations. She also warned against the use of highly profitable funds of government financial institutions like Land Bank and Development Bank of the Philippines, which she argues could negatively impact farmers and small businesses. Additionally, Hontiveros raised concerns about the potential risks of using Bangko Sentral funds, highlighting their role in safeguarding against peso depreciation, price increases, and loan interest rate hikes. The Makabayan Bloc in the House of Representatives, a coalition of left-leaning legislators, has not been silent about their concerns surrounding the proposed Maharlika Investment Fund (MIF). A central theme of their criticism is the potential for the MIF to have transparency issues, given the amount of public funds it will manage and the potential for the fund to fall under the influence of political interests. They also questioned the necessity of creating a new fund, suggesting that existing national agencies could be restructured or optimized to fulfill similar goals. Additionally, the Bloc has expressed fears that the MIF might be used as a tool for political patronage, potentially leading to corruption as large sums of public funds could come under the control of a select few individuals. Recommendations The Maharlika Investment Fund (MIF), recently proposed in the Philippines, has stirred a mix of hope and concern among stakeholders. The MIF, designed to stimulate economic growth through strategic infrastructure projects, could serve as a new catalyst for development amidst global economic uncertainties. However, the proposed fund has been met with skepticism and criticism due to a variety of issues, such as concerns over governance, transparency, the source of funding, and the lack of clear investment guidelines. Despite these concerns, the bill has been certified as urgent by President Ferdinand “Bongbong” Marcos Jr., signifying the need to kick-start this initiative for the economic future of the nation. Strong governance structures should be at the heart of the Maharlika Investment Fund (MIF) and its managing entity, the Maharlika Investment Corporation (MIC). These structures should foster a culture of professionalism, transparency, and accountability while incorporating robust checks and balances to mitigate the potential for mismanagement or misuse of funds. This foundational recommendation, when well implemented, would pave the way for confidence, both domestically and internationally, in the operations of the MIF. Enhanced transparency is a key necessity for the MIF, considering the high stakes involved and the significant public interest. The fund should be mandated to provide regular, comprehensive, and publicly accessible reports of its activities, investments, and returns. These transparency measures will serve as a deterrent against corruption and engender a sense of public trust and accountability in the fund’s management. To alleviate concerns surrounding the source of funds, the MIF should primarily draw from the General Appropriations Act and contributions from the private sector. Existing financial institutions, such as the Land Bank, Development Bank of the Philippines, Bangko Sentral ng Pilipinas, and the surplus of GOCCs, are already serving their respective mandates and may not possess the surplus funds to sustainably contribute to the MIF. Therefore, it’s crucial to diversify and clarify the fund’s financial structure to ensure its viability and reassure stakeholders. Establishing clear investment guidelines is another critical step for the MIF. These guidelines should be detailed, aligning with the country’s overarching economic goals and sustainability principles. To ensure effective and timely execution, the MIF should ideally concentrate on a maximum of three specific investment areas per year. Such focus will minimize the risk of spreading resources too thinly and not being able to bring projects to completion. The implementation of MIF should be gradual, allowing for continual refinements based on real-time learning and feedback. This cautious approach can help mitigate risks, manage unintended consequences, and increase the fund’s adaptability in a dynamic economic landscape. The inclusion of regular external audits and oversight in the MIF’s operational structure can provide an additional layer of checks and balances. These audits should be carried out by reputable external entities and serve to reinforce good governance and transparency in the management of the fund. Existing government institutions be strengthened to more effectively fulfill their mandates. This approach helps to avoid duplication of efforts and allows resources to be directed more efficiently. The MIF should refrain from investing in areas where other government institutions are already capable of delivering results, preventing redundancy and fostering greater efficiency in the allocation of public funds. The establishment of the Maharlika Investment Fund (MIF) represents a significant and necessary step forward for the Philippine economy, particularly in the face of current economic challenges. This initiative, however, should be balanced with the implementation of robust safeguards to ensure the maintenance of financial stability and the protection of public interest. Success of the MIF hinges on more than its mere establishment; prudent and transparent management is crucial. This fund will need to navigate a complex economic landscape while maintaining trust and demonstrating fiscal responsibility. A series of recommendations have been provided with this balance in mind, aimed at guiding the MIF towards achieving its economic goals and maintaining public trust. The success of MIF will not only be a testament to its management’s acumen but also to the fund’s foundational principles of governance, transparency, and accountability. These guiding principles will be essential to ensuring that the MIF can effectively stimulate economic activity and development, whilst also safeguarding public interest and financial stability. This holistic approach to the MIF’s establishment and operation is fundamental to its ability to serve as a new catalyst for growth within the Philippines. |
SEDPI, Tumutugon sa Kalamidad: Relief Operations at Pagsusulong ng Resilient Housing sa Davao del Norte at Agusan del Sur
Nitong ika-16 ng Marso, 2023, nagsagawa ang Social Enterprise Development Partnerships Inc. (SEDPI) ng relief operations sa mga lugar na apektado ng Low Pressure Area sa Carmen, Davao del Norte at Prosperidad, Agusan del Sur. Ang organisasyon ay tumugon sa mga pangangailangan ng mga tao sa mga apektadong lugar sa pamamagitan ng SEDPI KaTambayayong na isang uri ng damayan system.
Batay sa datos na nakalap ng SEDPI, apektado ang 193 sa 1,097 members sa Carmen, Davao del Norte, habang sa Prosperidad, Agusan del Sur ay 38 sa 1,251 members ang apektado ng Low Pressure Area. Ayon sa mga members sa lugar, umabot ang tubig hanggang bewang at leeg. Karamihan sa mga residente ay pansamantalang tumira sa mga kalsada at sa municipal gymnasium bilang evacuation center.
Nagbibigay ang SEDPI KaTambayayong ng life, sickness, calamity, fire, funeral, at accident assistance benefits. Kasama sa calamity benefit ang relief goods at PhP250 cash. Ang mga benefits na ito ay karaniwang naibibigat sa mga members sa loob lamang ng isa o dalawang araw, na labis na mas mabilis kumpara sa 3 hanggang 6 na buwan na claims processing ng karaniwang insurance company. Ang mga benepisyong ito ay eksklusibo lamang sa SEDPI members at maaring nagbabago depende sa nakolektang pondo. Noong 2021 at 2022, umabot sa PhP4.6M at 5.9M ang kabuuang naipamigay na benepisyo sa mga SEDPI KaTambayayong members.
Bagaman umabot na ang relief operations sa mga lugar na ito, hindi pa rin sapat ang mga tulong na ipinagkakaloob upang tugunan ang lahat ng pangangailangan ng mga apektadong residente. Kailangan ng mga solusyong tumutugon sa pinagmumulan mismo ng problema. Una na rito ang paglipat sa mga residente mula sa mga hazard prone areas papunta sa mga safe zones. Pangalawa, ang pagbibigay ng abot-kayang pabahay sa mga residente. At pangatlo, ang pagkakaroon ng disenyo ng bahay na angkop sa lugar at sa kalamidad.
Upang matulungan ang mga miyembro nito, ang SEDPI ay kasalukuyang nagsasagawa ng socialized housing, SEDPI Building Adequate Livable Affordable and Inclusive (BALAI) communities, na naglalayong magbigay ng maayos at disaster resilient housing sa mga low-income members. Ang organisasyon ay nakikipagtulungan din sa pamahalaan, social investors, at civic organizations upang magbigay ng abot-kayang pabahay sa mga nangangailangan.
Fragile recovery persists among nanoenterprises post pandemic
Update 18 of SEDPI’s Rapid Community Assessment (RCA)
October – December 2022
As the world slowly recovers from the pandemic, the economic landscape remains uncertain, especially for nanoenterprises. A recent survey conducted by our organization, Social Enterprise Development Partnerships, Inc. (SEDPI), reveals that 99% of nanoenterprises have resumed operations as of December 2022, indicating a promising recovery for this crucial sector of the economy.
Despite the positive news, recovery remains fragile with 52% of nanoenterprises surveyed experiencing weak demand. Access to supplies has been a continuing concern with 27% of nanoenterprises still reporting difficulties in obtaining the necessary supplies.
SEDPI’s latest self-rated poverty survey reveals that the impact of the pandemic on poverty levels remains significant. For 2022, 54% of respondents rated themselves at the poverty line, a decrease from 81% in 2021. The number of respondents who rated themselves as poor is steady at 3% and 4%. On a positive note, the number of respondents who no longer consider themselves poor nearly tripled from 16% in 2021 to 41% in 2022.
According to the Social Weather Stations, which conducts the survey at the national level, self-rated poverty was recorded at 48% in 2021 and 51% in 2022. The considerably elevated self-rated poverty at the national level suggest that a greater number of nanoenterprises that SEDPI serves experienced better economic conditions.
Over the past three years, SEDPI has conducted an impact assessment to evaluate its support for nanoenterprises through self-evaluation or perception surveys. The results are as follows:
| Dec 19 | Dec 21 | Dec 22 | |
| Help in growing business | 82% | 100% | 98% |
| Education of children | 70% | 85% | 98% |
| Improve housing | 67% | 99% | 98% |
| Improve nutrition | 81% | 100% | 100% |
| Increase income | 82% | 100% | 97% |
The perception survey suggests that SEDPI’s assistance plays a crucial role in alleviating hardships among nanoenterprises in areas such as business growth, education, housing, nutrition, and income. This may be the reason why the highly significantly lower self-rated poverty data among SEDPI nanoenterprises compared to the national survey. Additional interventions and strategies in the areas of disaster risk reduction, housing and health are necessary to enable a more comprehensive and lasting escape from poverty.
The majority of respondents are nanoenterprises (45%), owned and operated by women, with an average age of 43 and 73% being married. Of these nanoenterprises, 40% rely on other sources of income, such as employment, while 12% are unpaid family members, and 2% are unemployed.
SEDPI is a microfinance institution dedicated to providing ethical financing to nanoenterprises in Agusan del Sur, Davao de Oro, Davao del Norte, and Surigao del Sur. Their efforts have led to significant improvements in various aspects of the beneficiaries’ lives, such as business growth, education, housing, nutrition, and income.
- November 27, 2022 (Update 17): 77% of nanoenterprises recover from the pandemic
- April 27, 2022 (Update 16): Only 26% of nanoenterprise resume normal operations from the pandemic
- February 8, 2022 (Update 15): Poverty among nanoenterprises worsens amid the pandemic
- October 23, 2021 (Update 14): Nanoenterprise resuming normal operations slumps
- July 25, 2021 (Update 13): Nanoenterprise recovery almost doubles to 63% a year after lockdowns
- April 22, 2021 (Update 12): 1 out of 4 nanoenterprises adopted online selling in response to lockdowns
- January 20, 2021 (Update 11): Typhoon hampers bounce back of nanoenterprises in CARAGA
- July 17, 2020 (Update 10): Almost 4 in 10 nanoenterprises bounce back to pre-pandemic level
- June 12, 2020 (Update 9): Microenterprises show signs of bouncing back as lockdown eases
- May 28, 2020 (Update 8): 8 out of 10 microenterprises open for business one month after GCQ
- May 22, 2020 (Update 7): Demand for microenterprise products remain weak amid COVID pandemic
- May 15, 2020 (Update 6): Demand slumps on microenterprise products 2 weeks after GCQ
May 8, 2020 (Update 5): Only 5% of microenterprises back to “normal” in first week of GCQ - April 30, 2020 (Update 4): Two in three microenterprises hopeful to bounce back two months after lockdow – UPDATE 4
- April 24, 2020 (Update 3): Community assessment and recommendations for support to microenterprises and the informal sector during and after COVID-19 – UPDATE 3
- April 14, 2020 (Update 2): Community assessment and recommendations for support to microenterprises and the informal sector during and after COVID-19 – UPDATE 2
- April 6, 2020 (Update 1): Community assessment and recommendations for support to microenterprises and the informal sector during and after COVID-19 – UPDATE 1
- March 30, 2020: Immediate impact of COVID-19 lockdown to microenterprises
Resilience and Recovery: A Chronological Analysis of Nanoenterprises Amidst the COVID-19 Pandemic
The COVID-19 pandemic has had a profound impact on nanoenterprises (NEs) worldwide, with various stages of recovery, demand trends, and access to supplies experienced throughout the course of the pandemic. This article examines the chronological analysis of NEs’ recovery, demand trends, and access to supplies from March 2020 to December 2022, based on the Rapid Community Assessment conducted by the Social Enterprise Development Partnerships, Inc. (SEDPI). By analyzing these trends, we can better understand the challenges faced by NEs and the factors contributing to their resilience and adaptability.
March 2020: Initial Pandemic Impact, Demand Shift, and Supply Chain Disruptions
At the beginning of the COVID-19 pandemic in March 2020, 34% of NEs stopped their operations due to lockdowns and social distancing measures, while 66% resumed operations. Demand was characterized by 8% of NEs experiencing no buyers, 78% experiencing weak demand, and 13% witnessing strong demand, as consumers’ priorities shifted towards essential goods and services. Supply chain disruptions affected NEs, with 36% facing difficult access to supplies and 64% having access to necessary resources.
June 2020: Early Recovery, Persistent Weak Demand, and Supply Chain Struggles
In June 2020, the recovery of NEs continued, with 91% resuming operations and only 9% remaining closed. However, demand remained weak, with 7% of NEs having no buyers, 72% facing weak demand, and 21% enjoying strong demand. Access to supplies was a significant challenge, as 81% of NEs had adequate access while 19% faced difficulties due to ongoing supply chain disruptions caused by the pandemic.
December 2020: Relief, Recovery, Improved Demand, and Better Supply Access Amid Typhoon Vicky’s Impact
By December 2020, government relief packages and easing of lockdown restrictions helped many NEs recover, with 3% remaining closed and 96% resuming operations. Demand improved slightly, with 4% of NEs having no buyers, 75% facing weak demand, and 21% enjoying strong demand. The holiday season likely contributed to increased consumer spending. Access to supplies significantly improved, with 90% of NEs having access and only 10% experiencing difficulties.
However, during this period, Typhoon Vicky hit the region, causing agricultural production losses in rice, corn, high-value crops, and livestock. The typhoon also triggered floods and landslides, resulting in damaged or destroyed homes in coastal areas. The natural disaster added challenges to the recovery process of nanoenterprises, particularly those in the affected areas and those dependent on agricultural production. Although the overall trend in December 2020 indicated progress in recovery, improved demand, and better access to supplies for nanoenterprises, the recovery would have been even more significant if not for the added challenges brought about by Typhoon Vicky.
March 2021: Steady Recovery, Increased Strong Demand, and Improved Supply Access
By March 2021, the situation for NEs had improved, with 97% resuming operations and only 3% remaining closed. Demand patterns shifted, with only 1% of NEs having no buyers, 52% experiencing weak demand, and 47% enjoying strong demand, likely due to the easing of restrictions and ongoing vaccination campaigns. Access to supplies improved, with 73% of NEs having adequate access and 27% still facing difficulties.
June 2021: Full Recovery, Diverse Demand, and Enhanced Access to Supplies
By June 2021, 100% of NEs resumed operations, marking a full recovery in this period. Demand varied, with 2% of NEs having no buyers, 64% facing weak demand, and 34% experiencing strong demand. Access to supplies continued to improve, with 82% of NEs having adequate access and only 18% facing difficulties.
September 2021: Delta Variant Surge, Granular Lockdowns, and Nanoenterprise Adaptation
In September 2021, the Delta variant surged in the Philippines, prompting the government to implement granular lockdowns as opposed to the general lockdowns previously imposed. This new approach aimed to prevent the wholesale disruption of jobs and livelihoods while still addressing the public health crisis. Despite the surge and the implementation of granular lockdowns, 96% of NEs continued to operate, while only 4% temporarily stopped their operations.
Demand patterns during this period fluctuated, with 12% of NEs having no buyers, 66% experiencing weak demand, and 22% witnessing strong demand. As the granular lockdowns targeted specific areas with high infection rates, many nanoenterprises had to quickly adapt to the changing circumstances and market conditions. Access to supplies remained relatively stable, with 77% of NEs having adequate access and 23% facing difficulties.
The September 2021 period demonstrated the resilience of nanoenterprises in the face of new challenges posed by the Delta variant and the government’s shift in lockdown strategy. Despite the hurdles, the sector continued to adapt and maintain its operations, contributing to the nation’s economic recovery.
December 2021: Continued Recovery, Increased Strong Demand, and Moderate Access to Supplies
By December 2021, widespread vaccination campaigns allowed for more relaxed social distancing measures and a resurgence in consumer demand. The percentage of stopped NEs remained at 3%, while 97% resumed operations. Demand for NE products and services further improved, with 9% of NEs having no buyers, 65% facing weak demand, and 26% experiencing strong demand. Access to supplies became more moderate, with 77% of NEs having access and 23% facing difficulties.
March 2022: Steady Operations, Persistent Weak Demand, and Improved Access to Supplies
By March 2022, the status of operations remained consistent, with 4% of NEs stopped and 96% resumed operations. Demand continued to lean towards weakness, as 8% of NEs had no buyers, 67% faced weak demand, and 26% experienced strong demand. However, access to supplies significantly improved, with 85% of NEs having access and only 15% facing difficulties.
September 2022: Temporary Setbacks, Fluctuating Demand, and Slightly Reduced Access to Supplies
In September 2022, the temporary increase in stopped NEs to 4% could be attributed to localized outbreaks and new COVID-19 variants. Despite these setbacks, 96% of NEs remained operational. However, demand patterns fluctuated, with 15% of NEs having no buyers, 36% experiencing weak demand, and 49% witnessing strong demand. Access to supplies slightly declined, with 73% of NEs having access and 27% facing difficulties.
December 2022: High Inflation Impact on Nanoenterprises, Demand Patterns, and Purchasing Power
In December 2022, the Philippines’ headline inflation increased to 8.1 percent, as reported by the Philippine Statistics Authority (PSA). The high inflation rate led to a decrease in purchasing power, resulting in reduced consumer spending, particularly among low-income households. Despite the inflationary pressures, 99% of NEs remained operational, while only 1% stopped their operations, showcasing the resilience of the sector.
Compared to September 2022, when 36% of NEs faced weak demand, the percentage increased to 52% in December 2022, illustrating the heightened challenges for these enterprises due to reduced consumer spending amid high inflation. The decreased purchasing power of consumers, especially in low-income households, contributed to the fluctuations in demand patterns for nanoenterprises.
Access to supplies remained relatively stable, with 73% of NEs having access to necessary resources and 27% facing difficulties in acquiring them. The December 2022 period highlighted the challenges faced by nanoenterprises due to high inflation and its impact on consumer spending, while also demonstrating the adaptability of the sector in sustaining operations amid economic challenges.
Conclusion:
Throughout the COVID-19 pandemic and various external challenges, such as natural disasters and high inflation, nanoenterprises have consistently demonstrated resilience and adaptability in maintaining operations, responding to fluctuating demand, and navigating supply chain disruptions. As of December 2022, the sector has reached a near full recovery, with stabilizing demand patterns and steady access to supplies. The findings from SEDPI’s Rapid Community Assessment underscore the importance of continued support and empowerment for nanoenterprises, as they play a crucial role in local economies and communities. As the world moves forward from the pandemic’s impact, fostering collaboration between government, business, and community organizations will remain vital in ensuring the sustained success and growth of nanoenterprises in the face of ongoing and future challenges.
Respondents:
In December 2022, the Rapid Community Assessment (RCA) conducted by SEDPI garnered responses from 1,398 respondents across the provinces of Agusan del Sur, Davao de Oro, Davao del Norte, and Surigao del Sur. The profile of respondents in this edition of the survey was similar to that of previous editions. The majority of respondents were female (86%), with an average age of 43, and 73% of them were married. When it came to sources of income, 40% were employed, 45% were nanoenterprise owners, 12% were unpaid family members contributing to the family business, and 2% were unemployed.
Nanoenterprise status
| Mar’20 | Jun ’20 | Dec ’20 | Mar’21 | Jun ’21 | Sep ’21 | Dec 21 | Mar ’22 | Sep’ 22 | Dec 22 | |
| Stopped | 34% | 9% | 3% | 3% | 0% | 4% | 3% | 4% | 4% | 1% |
| Resumed | 66% | 91% | 96% | 97% | 100% | 96% | 97% | 96% | 96% | 99% |
Market demand for NE products and services
| Mar’20 | Jun ’20 | Dec ’20 | Mar’21 | Jun ’21 | Sep ’21 | Dec 21 | Mar ’22 | Sep’ 22 | Dec 22 | |
| No buyers | 8% | 7% | 4% | 1% | 2% | 12% | 9% | 8% | 15% | 6% |
| Weak demand | 78% | 72% | 75% | 52% | 64% | 66% | 65% | 67% | 36% | 52% |
| Strong demand | 13% | 21% | 21% | 47% | 34% | 22% | 26% | 26% | 49% | 42% |
Access to supplies for NE livelihood operations
| Mar’20 | Jun ’20 | Dec ’20 | Mar’21 | Jun ’21 | Sep ’21 | Dec 21 | Mar ’22 | Sep’ 22 | Dec 22 | |
| With access | 64% | 81% | 90% | 73% | 82% | 77% | 77% | 85% | 73% | 73% |
| Challenge in access | 36% | 19% | 10% | 27% | 18% | 23% | 23% | 15% | 27% | 27% |
Profile of nanoenterprises
Nanoenterprises are typically unregistered livelihoods of self-employed individuals or informal solo-preneurs with asset size ranging from PhP3,000 to PhP150,000. They operate businesses alone or with the help of unpaid family members targeting their immediate local communities. Microenterprises are mostly registered enterprises able to hire employees albeit on a minimum wage rate. There are approximately 8.1 million nanoenterprises in the Philippines as of 2022.[1]
Most government programs and private sector engagement fall under the banner of microenterprises, that grossly misrepresents the needs and largely excludes the magnitude of nanoenterprises. Making nanoeterprises visible means more effective and customized policies and programs that should provide them the opportunity to grow into a more sustainable enterprise that would lift them out of poverty.[2]
There are 30 million Filipinos considered as poor based on a survey the Department of Social Welfare and Development conducted in 2022.[3] Directly addressing the needs of the 8.1 million estimated nanoenterprise will reduce this number by 27% which is a great leap forward for a truly inclusive Philippine economic development.[4]
The table below is a brief summary that compares and contrasts nanoenterprises from microenterprises.[5]
| Nanoenterprise | Microenterprise | |
| Assets | PhP3,000 to PhP150K | >PhP150K to PhP3M |
| Employees | 0 | 1 to 9 |
| Approximate number | 8,100,000 | 1,000,000 |
| Enterprise registration | Mostly unregistered | Mostly registered |
| Economic status | Mostly poor | Mostly non-poor |
This paper attempts to provide a more comprehensive profile of nanoenterprises in terms of the following: livelihood characteristics, access to finance, market participation, coping mechanisms in times of emergencies – climate crisis and disasters, digital inclusion, and access to government programs and services.
Livelihood characteristics
Examples of nanoenterprises include sari-sari stores operators, carinderia, small holder farmers and fisherfolks, dressmakers, and ambulant vendors. Those who participate in the gig economy are also largely considered as nanoenterprises such as delivery riders, and ride share drivers. Freelancers could also be considered as nanoenterprise such as graphic artists, video editors, content creators, writers etc.
Nanoenterprises use rudimentary and obsolete equipment in manufacturing products or delivering services or they may have more advanced equipment that they lease. Microenterprises typically have better equipment and have ownership of these.
Most nanoentarprises are individuals who typically have low educational levels and hardly maintain bookkeeping records. Microenterprises typically have higher educational levels compared to nanoenterprises and could maintain some level of record keeping. Microenterprises also pay business permits and taxes that nanoenterprises hardly pay since they are mostly unregistered.
Both nano and microenterprises lack managerial and technical skills to grow their livelihood and are forced to be entrepreneurs due to lack of employment opportunities. They also have limited access to technology, information and financing that leads to low productivity and low product quality.
Access to finance
Nanoenterprises heavily rely on loans to afford basic needs – food, education, shelter utilities – and recover from a disaster. Loans are also typically used to grow their livelihoods and to finance major life events such wedding, anniversaries and death.
NEs typically access loans from informal sources which make them vulnerable to predatory financing practices. Aside from this, most of them also borrow money from cooperatives, rural banks, microfinance NGOs and pawnshops. Majority also borrow from family and friends albeit in limited amounts.
This goes to show how NEs are trapped in debt. There are very few savings and insurance products available in the market that cater to their needs and preferences – simple, fast, accessible and affordable. Savings and insurance products are more appropriate for disaster risk mitigation and financing major life events. Microfinance institutions, in their continuous drive for growth and profitability, aim to increase their loan portfolio. It is also far simpler for MFIs to offer loans and gain profit to address NE needs compared to designing savings and insurance products for profit that address the same. This are the reasons why most MFIs use loans as the financial product to address livelihood needs, coping in times of emergencies and financing major life events.
It has been shown that low-income individuals can save and will pay premium for insurance if these financial products are designed according to their needs and preferences.[6] Most NEs have extremely limited savings and insurance coverage due to the lack of financial product that directly cater to their needs and preferences.
On average, nanoenterprises borrow a small sum of money ranging from PhP3,000 to PhP20,000 to finance their livelihoods. Although in the proposed definition of naneoneterprises, their loans could be up to PhP150,000.[7]
Microfinance institutions offer them short-term, collateral-free loans to them usually payable in three to six months with interest rates ranging from 2% to 5% per month. SEDPI, a microfinance institution, has a loan portfolio composed of 95.7% with less than PhP20,000 in terms of loan size. Four percent (4%) of loans extended are greater than Php20,000 but less than PhP50,000. A miniscule 0.3% have loans greater than PhP50,000.
Market participation
High cost of raw materials, labor, limited market access, lack of market information, outdated technology, inadequate services and infrastructure hampers overall business environment of NEs. The poor are more than mere victims of circumstance. They are creative individuals. A major barrier preventing NEs from exiting poverty is the problematic market environment. An effective development strategy is to remove the barriers that stand in the way of NE’s ability to help themselves and enhance their ability to participate in markets.
Developing markets and improvements in market linkages and market infrastructure will strengthen the participation of NEs in value chains. The government and development organizations should design programs that lead to sustainable solutions. These interventions should be designed using the following development principles – achieves high impact, specific and focused interventions, sustainable, cost-effective and market-driven.[8]
Coping mechanisms in times of emergencies
The Philippines topped the world disaster risk index in 2022. The Philippines scored high in its exposure, vulnerability, susceptibility, lack of coping capacities, and lack of adaptive capacities in the face of disasters.[9] Impacts of climate change and the global economic crisis are compounding the threats faced by people living in poverty around the world.[10]
The top coping mechanisms, pre-pandemic, of NEs in times of extreme natural events are accessing loans, finding additional work, asking for help from family members, assistance from government and charitable institutions, and selling of assets. Other coping mechanisms mentioned were saving, praying, damayan ang insurance.[11]
Loans topping the coping mechanisms is not surprising but a lot are not aware that this is not good for one’s financial health. Loans should be used for productive purposes only, a cardinal rule when borrowing money. In times of emergencies, loans will be used for consumption – to buy food, rebuild or repair houses, medicines for the sick etc. The loan purpose is not bad but the financial product used is incompatible with the purpose. There is no return from the loan use and loans accessed in times of emergencies typically have high interest rates.
The appropriate financial tool used should be insurance and savings. It is a stark contrast that these two are at the bottom of the coping mechanism strategies of the poor while accessing loans is on top. Insurance is specifically design as a protection strategy against emergencies and external shocks. Savings on the other hand provides a cushion or a buffer to smoothen the impact of financial shocks.
The pandemic made matters worse for NEs since this added to their vulnerabilities – extreme natural events due to the effects of climate crisis. During this period, the coping mechanisms of NEs changed. This time the top coping mechanism used was getting assistance from the government. This was followed by insurance, savings, accessing loans, damayan and distress selling of assets.[12] When strict lockdowns were enforced, NEs could not operate their livelihoods that’s why they did not seek loans as a top coping mechanism. Finding additional work was not mentioned as a coping mechanism unlike before the pandemic. Mobility restrictions imposed during lockdowns prevented NEs from working.
Insurance and savings ranked higher in the coping strategies during the pandemic which is an improvement when these two were at the bottom before the pandemic. This is because microfinance institutions offering savings and insurance products have already penetrated all municipalities in the Philippines. There was less market penetration a decade earlier that made these products inaccessible then.
Although access to savings and insurance products already improved, there are still opportunities for improvement to make these more effective. For example, microfinance institutions should promote savings mobilization rather than provision of higher loan amounts to finance the growth of NEs. MFIs should not merely treat savings from its borrowers as collateral to loans but also a means to smoothen expenditures especially in times of emergencies.
Insurance products for NEs could be improved by offering coverage for disasters that would enable them to restart their livelihoods so that NEs need not be too dependent on loans. Turnaround time in processing claims could also be improved from current practices which takes months due to voluminous documentary requirements. These all could be simplified through streamlining processes and procedures.
Digital inclusion
The Philippines has been dubbed as the social media capital of the world. Meltwater, an Oslo-based social listening and social media analytics company, ranks the Philippines as second in the world in terms of social media use.[13]However, this social media use does not seem to translate to positive economic changes, especially to the poor.
Digital Inclusion refers to the activities necessary to ensure that all individuals and communities, including the most disadvantaged, have access to and use of Information and Communication Technologies (ICTs).[14] Internet access and ownership of gadgets are therefore important in order to take advantage of opportunities in the digital age. This is where the challenge starts for NEs since only 40% of them have access to the internet, 52% of have smart phones and only 8% have laptops.[15] Aside from this, there is also the challenge of the cost of smart phones and internet subscription. NEs, especially in the rural areas, have difficulty getting mobile phone signals due to lack of infrastructure.[16] Not owning a phone, having basic phones and limited access to the internet prevents NEs from accessing information and taking advantage of opportunities online.
These ICT challenges of NEs constrained their participation in e-commerce. SEDPI’s research shows that in 2022 only 19% of NEs are into online selling and 13% buy products online. There was a short-lived participation in e-commerce in 2021 but this was not sustained due to the lifting of mobility restrictions and high cost of deliveries of products ordered online.[17]
Digital financial inclusion among NEs is low. Only 23% of them have bank accounts, 3% have mobile wallets and 3% know how to do online banking.[18]
Access to government programs and services.
At the personal level, they also lack civil registry documents such as birth certificates and marriage certificates that makes it challenging for them to access government welfare services such as SSS, Pag-IBIG and PhilHealth. These civil registry documents are typically required to get government identification cards such as a driver’s license, voter’s ID, passports. These government-issued identification cards are then required to apply for membership in SSS, Pag-IBIG, PhilHealth and other government programs.
Due to the lack of government-issued identification cards, NEs experienced delays in getting the cash assistance program the government provided to its citizens during the pandemic. Lockdowns started on March 14, 2020.[19] A month after, only 60% of NEs under SEDPI received cash assistance. This improved to 98% by the end of the month when local government units started easing requirements.[20]
As of May 2021, there are 3.36M self-employed individuals who are members of the SSS. This is the membership classification where NEs fall. However, they comprise minority since self-employed members also include professionals, proprietors of businesses, farmers, fisherfolks and the informal sector. Even if the 3.36M self-employed members of SSS were all considered as NEs, this will only make up 41% of the 8.1M estimated NEs.
Nanoenterprises lack support from the government because they are lumped with the microenterprise sector. Nano and microenterprises clearly have different profile, behavior and needs. Microenterprises are defined as having up to Php150,000 in assets as defined under the Republic Act 8425 (Social Reform Agenda) and Republic Act 10693 (Microfinance NGO Act). However, the Bangko Sentral ng Pilipinas defines loans extended to microenterprises at a maximum of PhP300,000. Meanwhile, the Department of Trade of Industry defines microenterprises as entities with up to PhP3M in assets.
In reality, MFIs serve mostly NEs, who are considered mostly poor, but have financial products and services designed for MEs, who are considered mostly non-poor. Financial products designed for microenterprises focus more on repayment history, capacity to pay and using savings as collateral. These designs are inappropriate for NEs since they face more vulnerabilities. There should be more social safety net mechanisms for financial product designed for NEs such as using savings for emergency purposes, capacity building for livelihood development, insurance coverage for disasters and subsidies from the government.
The inconsistencies in the definition of various government agencies on what microenterprises are, barring the fact that nanoenterprises are rendered invisible, leads to ineffective and inappropriate policies and programs. Microfinance institutions design their financial products and services according to the criteria set by government financial institutions geared towards microenterprises. Thus, the needs and financial product preferences of NEs are not addressed which may explain why they have a hard time escaping poverty.
Way forward
Making nanoenterprises separate and distinct from microenterprises means more effective and customized policies and programs that should provide them the opportunity to grow into a more sustainable enterprise that would lift them out of poverty.
A more robust welfare and social safety net programs should be in place to allow NEs to not just cope or survive in their current situation but to recover and thrive to transition as a micro or even a small enterprise. This strategy would complement existing market-based approaches that would reduce vulnerabilities of NEs.
The sheer number of nanoenterprises as distinguished from microenterprises should make them more visible to the government and private sector. Upscaling nanoenterprises renders tremendous multiplier effect. If NEs eventually transition as MEs, they will provide employment that starts at the bottom of the pyramid. They should be recognized as a pillar in socio-economic development since lifting them out of poverty will propel the Philippines to a developed country through inclusive growth.
[1] https://vincerapisura.com/a-case-for-nanoenterprises/
[2] https://vincerapisura.com/a-case-for-nanoenterprises/
[3] https://www.rappler.com/nation/filipino-families-living-in-poverty-2022-dswd/
[4] https://vincerapisura.com/a-case-for-nanoenterprises/
[5] https://vincerapisura.com/a-case-for-nanoenterprises/
[6] The poor and their money
[7] https://vincerapisura.com/a-case-for-nanoenterprises/
[8] Morgan, Mary, Making Markets Work for the Poor: A Reader, Southern New Hampshire University, June 2006
[9] https://www.gmanetwork.com/news/topstories/nation/847535/philippines-tops-world-disaster-risk-index-2022-ndrrmc-took-note-of-report/story
[10] https://www.un.org/sustainabledevelopment/blog/2017/09/worlds-poor-bearing-the-brunt-of-global-crises-stresses-un-rights-expert/
[11] Based on SEDPI’s research conducted in 2008 with Opportunity International, 2014 with Cordaid and 2015 with People In Need. There were 79 FGDs conducted all over the Philippines.
[12] SEDPI conducted a research in 2020 in CARAGA region to determine coping mechanisms used by NEs during the pandemic.
[13] https://www.meltwater.com/en/blog/social-media-statistics-philippines
[14] https://inclusivedocs.com/web-accessibility/what-is-digital-inclusion-and-why-is-it-important/
[15] Based on SEDPI research
[16] Ph data: Schumacher and Kent, “8 charts on internet use around the world as countries grapple with COVID-19,” Pew Research Center, April 2, 2020
[17] Based on SEDPI research
[18] Based on SEDPI research
[19] Santos, Ana P. (March 17, 2020). “Coronavirus: Philippines quarantines island of 57 million people”. Al Jazeera. Retrieved March 20, 2020.
[20] Based on SEDPI research
A case for nanoenterprises
According to the Department of Trade and Industry (DTI), there are nearly a million microenterprises in the Philippines. DTI considers any business with less than PhP3 million in assets and less than 10 employees as microenterprise.
The challenge with this classification in the social development perspective is that it lumps together poor and non-poor enterprises in one huge bucket. It attempts to describe a very broad base enterprises that have largely varied capacity in terms of management capacity, use of technology, access to finance, and general sophistication of products and services offered.
Enterprise classification in the Philippines
| Assets | # of employees | Approximate number | |
| Large | >PhP200M | ≥200 | 5,000 |
| Medium | >PhP15 to PhP200M | 100 to 199 | 5,000 |
| Small | >PhP3 to PhP15 | 10 to 99 | 106,000 |
| Micro | Up to PhP3 | 1 to 9 | 1,000,000 |
Source: Department of Trade and Industry
This paper intends to provide a case for nanoenterprises that is distinct and separate from microenterprises. The purpose is to aid in policy development for the government, as well as program intervention design and implementation of development organizations, so that their needs are addressed at its core.
The lowest asset base of a microenterprise in DTI’s definition is vague since it could mean as low as one peso or no asset at all. The microenterprise category is very important because this is where the poor belongs. However, microenterprises that have assets greater than a million pesos could not be classified as poor.
What is a nanoenterprise?
Government policies and programs of development organizations can better respond to the needs of the poor belonging to the microenterprise sector if there is a clear delineation between poor and non-poor microenterprises. Poor mircoenterprises are rendered invisible since non-poor microenterprise needs are prioritized and is the basis for most policies, programs and engagement.
Let us use nanoenterprises to refer to poor microenterprises. The table below shows the difference between a nano and microenterprise.
| Nanoenterprise | Microenterprise | |
| Assets | PhP3,000 to PhP150K | >PhP150K to PhP3M |
| Employees | 0 | 1 to 9 |
| Enterprise registration | Mostly unregistered | Mostly registered |
| Approximate number | 8,100,000 | 1,000,000 |
The Social Reform Agenda or Republic Act 8425 of 1998 defined a microenterprise with a maximum capitalization of PhP150,000. The same amount is set as the maximum amount for microfinance loans. This figure could be used as a good basis to separate nanoenterprises from microenterprises.
SEDPI proposes that PhP150,000 be used as the maximum asset size for nanoenterprises while those that exceed this but is less than PhP3 million would be classified as microenterprise. Nanoenterprises use rudimentary and obsolete equipment in manufacturing products or delivering services or they may have more advanced equipment that they lease. Microenterprises typically have better equipment and have ownership of these.
Nanoenterprises are typically unregistered livelihoods of self-employed individuals or informal solo-preneurs. They operate businesses alone or with the help of unpaid family members targeting their immediate local communities. Microenterprises are mostly registered enterprises able to hire employees albeit on a minimum wage rate.
As of March 2022, SEDPI estimates that the total outreach of microfinance is 9.1 mllion based on reports from the Bangko Sentral ng Pilipinas, Cooperative Development Authority and Securities and Exchange Commission.[1] One will observe the gross underestimation DTIs 1 million microenterprises versus the 9.1 million microenterprises the microfinance industry serves. This is mainly because DTIs estimate is based on registered microenterprises that are mostly non-poor. Removing the one million microenterprises accounted for by DTI, that leaves the number of nanoenterprises to be at 8.1 million.
Why nanoenterprises?
The sheer number of nanoenterprises as distinguished from microenterprises should make them more visible to the government and private sector. Most government programs fall under the banner of microenterprises, that grossly misrepresents the needs and largely excludes the magnitude of nanoenterprises. Thus making a concrete case to add nanoenterprises as the smallest size in classifying enterprises.
As it is, nanoenterprises lack support from the government and has limited engagement with the private sector This is because they are lumped into the microenterprise sector that clearly have different profile, behavior and needs. Making nanoeterprises visible means more effective and customized policies and programs that should provide them the opportunity to grow into a more sustainable enterprise that would lift them out of poverty.
There are 30 million Filipinos considered as poor based on a survey the Department of Social Welfare and Development conducted in 2022.[2] Directly addressing the needs of the 8.1 million estimated nanoenterprise will reduce this number by 27% which is a great leap forward for a truly inclusive Philippine economic development.
[1] https://vincerapisura.com/philippine-microfinance-industry-estimates/
[2] https://www.rappler.com/nation/filipino-families-living-in-poverty-2022-dswd/#:~:text=MANILA%2C%20Philippines%20%E2%80%93%20There%20are%20over,Welfare%20and%20Development%20(DSWD).
Philippine microfinance industry estimates
The Bangko Sentral ng Pilipinas (BSP) defines microfinance as the provision of a broad range of financial services such as deposits, loans, payment services, money transfers and insurance products to the poor and low-income households, for their microenterprises and small businesses, to enable them to raise their income levels and improve their living standards.[1] It is also defined as the provision of financial services to low-income clients, including the self-employed.
Who is a microfinance client?
Typical microfinance clients are low-income persons that do not have access to formal financial institutions. Microfinance clients are typically self-employed, often household-based entrepreneurs.
In rural areas, they are usually small farmers and fisher folk, as well as others who are engaged in small income-generating activities such as food processing and petty trade. In urban areas, microfinance activities are more diverse and include shopkeepers, service providers, artisans, street vendors, and others.[2]
Microfinance products
Financial products of microfinance used to be limited to savings and credit. Several financial services have sprung up in the past decade to address the other financial services needs of microfinance clients like insurance, remittance and even housing services.
Loans that are up to PhP150,000 used for consumption or productive purposes are classified as microfinance loans as stated in government’s Social Reform Agenda or Republic Act 8425 of 1997. The same amount is set as the maximum capitalization for microenterprises.
For microhousing loans, the Bangko Sentral ng Pilipinas (BSP) set the ceiling to PhP300,000 although the Housing and Land Use Regulatory Board (HLURB) classifies socialized housing at PhP450,000.
Government policy
The National Strategy for Microfinance envisions a viable and sustainable microfinance market that will help provide poor households and microentrepreneurs with greater access to microfinance services.
It calls for a greater role for the private sector and the non-participation of government line agencies in the provision of credit and guarantee programs. Emphasis is on the adoption of market oriented financial and credit policies to ensure viability and sustainability.[3]
It is worthy to note that the Philippines closed the gender gap in terms of financial inclusion[4] which is largely attributed to microfinance institutions.
Players, portfolio and number of clients
There are approximately 6,183 microfinance institutions in the Philippines.
| Microfinance institution | Number |
| Banks (2022)[5] | 139 |
| Cooperatives (2020)[6] | 2,762 |
| Microfinance NGOs (2022)[7] | 27 |
| Financing companies (2017)[8] | 673 |
| Lending companies (2017)[9] | 2,582 |
| Total | 6,183 |
The microfinance industry in the Philippines has grown into a PhP406 billion industry in terms of loan portfolio as of March 2022. [10] This would be larger if the portfolio from financing and lending companies that also mostly qualify as microfinance loans are added. the figure also
| Microfinance institution | Amount of portfolio in billion pesos | ||||||
| 2022 1Q | 2021 | 2020 | 2019 | 2018 | 2017 | 2016 | |
| Banks | 26.8 | 27.7 | 26.6 | 27.2 | 22.6 | 17.1 | 13.7 |
| Cooperatives | 327.1* | 327.1* | 327.1 | 315.8 | 315.8 | 194.1 | 167.4 |
| MF NGOs | 52.8 | 52.8 | 50.4 | 41.9 | 30.9 | 28.6 | 20.6 |
| Total | 406.7 | 407.6 | 404.1 | 384.9 | 369.3 | 239.8 | 201.7 |
* Carried over from 2020 figures, due to lack of updated data from the Cooperative Development Authority, to come up with a reasonable estimate of the total outstanding loans of the industry.
There are 18.2 million recorded microfinance clients in the banking system, Microfinance NGO and cooperative sectors.[11] In SEDPI’s research with various microfinance institutions, it is common for a client to have multiple memberships. In fact, a typical microfinance client has average membership in two to three microfinance institutions.
To estimate the number of microfinance clients served, the total number is multiplied by a factor 0f 50% to account for multiple memberships. This would bring the estimated number of microfinance clients in the industry to 9.1 million as of the first quarter of 2022.
| Microfinance institution | Number of clients/members | ||||||
| 2022 1Q | 2021 | 2020 | 2019 | 2018 | 2017 | 2016 | |
| Banks | 1,985,422 | 1,978,394 | 1,996,657 | 2,410,677 | 1,986,683 | 1,956,276 | 1,686,152 |
| Cooperatives | 9,900,000* | 9,900,000 * | 9,900,000 | 9,800,000 | 9,500,000 | 9,400,000 | 8,000,000 |
| MF NGOs | 6,400,000 | 6,200,000 | 6,400,000 | 6,200,000 | 5,200,000 | 4,300,000 | 3,900,000 |
| Total | 18,285,422 | 18,078,394 | 18,296,657 | 18,410,677 | 16,686,683 | 15,656,276 | 13,586,152 |
| 50% of total | 9,142,711 | 9,039,197 | 9,148,329 | 9,205,339 | 8,343,342 | 7,828,138 | 6,793,076 |
* Carried over from 2020 figures, due to lack of updated data from the Cooperative Development Authority, to come up with a reasonable estimate of the number of microfinance clients in the industry.
Based on the above figures, the average loan size per client in the industry is PhP22,000 as of the first quarter of 2022. Microfinance NGOs have the lowest average loan size at PhP8,250 which makes them reach the bottom of the pyramid. Cooperatives have the highest average loan size at PhP33,000 since most cater to salaried workers as well as farmers and microenterprises that require larger loan amounts. The average loan size for rural banks is PhP13,500.
Industry growth
Growth in microfinance portfolio was robust from 2017 to 2019, the pre-pandemic period, which registered 14% to 37% loan portfolio growth rate and 11%-16% member growth rate. Slight growth in loan portfolio was recorded in 2020 at 7% and remained flat in 2021 that registered only 1% loan portfolio growth.
| Microfinance institution | Growth in microfinance portfolio | ||||
| 2021 | 2020 | 2019 | 2018 | 2017 | |
| Banks | 4% | -2% | 20% | 32% | 25% |
| Cooperatives | 0% | 6% | 11% | 42% | 16% |
| MF NGOs | 5% | 20% | 36% | 8% | 39% |
| Total | 1% | 7% | 14% | 37% | 19% |
Number of clients had healthy growth rates from 2017 to 2019 which is ranged from 11% to 16%. On 2020 to 2021, the peak of the pandemic period, negative growth were recorded in terms of number of clients at -1% for each year.
| Microfinance institution | Growth in number of clients | ||||
| 2021 | 2020 | 2019 | 2018 | 2017 | |
| Banks | -1% | -17% | 21% | 2% | 16% |
| Cooperatives | 0% | 1% | 4% | 18% | 11% |
| MF NGOs | -3% | 3% | 19% | 21% | 10% |
| Total | -1% | -1% | 11% | 16% | 11% |
[1] BSP Circular No. 272, 30 January 2001
[2]Salonga, Edwin, “Microfinance: An Empowerment Tool for the Enterprising Poor,” October 8, 2003.
[3] Frequently Asked Questions on Microfinance, Bangko Sentral ng Pilipinas website
[4]https://public.tableau.com/views/MGIGendertableau/Dashboard1GPS?:embed=y&:showVizHome=no&:display_count=y&:display_static_image=y&:bootstrapWhenNotified=true
[5] bsp financial inclusion dashboard 220331
[6] bsp financial inclusion dashboard 220331
[7] list of sec accredited microfinance ngos 2022 221027
[8] list of financing companies with certificate of authority 171231
[9] list of lending companies with certificate of authority 171231
[10] Dashboard: Financial Inclusion in the Philippines, Bangko Sentral ng Pilipinas, December 2020
[11] Based on BSP financial inclusion dashboard and SEDPI multiple membership estimates
The Role of the Private Sector in Supporting Populations Displaced by Disasters: The Case of the Philippine Disaster Resilience Foundation
This paper is written by SEDPI Chairperson, Mr. Edwin M. Salonga.
You may download the copy of the whole article here:
The Role of the Private Sector in Supporting Populations Displaced by Disasters: The Case of the Philippine Disaster Resilience Foundation
Edwin M. Salonga*[1]
Abstract
Considered an immediate impact of disasters, displacement is counterproductive to development as it affects human, economic, and environmental gains. With disaster displacement, private sector support becomes crucial at times when governments are overstretched. Businesses can be effective agents of change in building their own resilience and that of local communities. This paper takes a closer look at how the private sector plays a significant role in supporting populations displaced by disasters. It attempts to shed light on the experience of the Philippines by illustrating the case of the Philippine Disaster Resilience Foundation (PDRF), which brings together private sector companies towards the achievement of its overarching goal of building resilience among businesses and communities in the country. This paper traces PDRF’s initiatives from inception to date. Moreover, it outlines key factors that contribute to PDRF’s success in designing and implementing development efforts to support local communities affected by disasters. Among these are its emphasis on building the disaster resilience of micro, small, and medium enterprises (MSMEs), maintaining its political neutrality, building institutional partnerships, investing in emergency preparedness measures, and promoting innovative practices.
Keywords
Private sector, Displaced populations, Disaster resilience, PDRF
- Introduction
Displacement is a common and immediate impact of disasters (NRC 2020). It is counterproductive to development as it affects human, economic, and environmental gains. It can create new risks and worsen the existing vulnerabilities of certain groups such as women, children and youth, older people, persons with disabilities, and indigenous communities (ADB 2020; NRC 2020). Disasters continue to have adverse impacts on the lives, property, and livelihoods of numerous people across the globe.
At a time when governments are already overstretched, private sector support becomes crucial. Businesses can have a positive contribution towards disaster recovery and mitigation (GFDRR 2020). Public-private partnership initiatives are becoming more common. Many businesses may compete commercially with one another, but there is a growing realization among them that their collective and concerted efforts on all phases of disaster management can benefit not only their own companies but also the communities where they operate (IRP 2016). Businesses are increasingly being engaged in resilience building at the local, national, and global levels. They are seen to be agents of change in building their own resilience and that of local communities (UNDP 2017). Instead of working only on DRR efforts that promote their self-interest, the private sector is investing on resilience building initiatives that grow businesses and promote sustainable development (Abe et al. 2019).
It is therefore important to take a closer look at how the private sector can play a significant role in supporting populations displaced by disasters. This paper attempts to shed light on the experience of the Philippines by illustrating the case of the Philippine Disaster Resilience Foundation (PDRF), which brings together private sector companies towards the achievement of its overarching goal of building resilience among businesses and communities. It is able to coordinate and consolidate private sector efforts for effective complementation of resources. This paper outlines key factors that contribute to its success in designing and implementing development efforts to support local communities affected by disasters. Among these are its emphasis on building the disaster resilience of micro, small, and medium enterprises (MSMEs), maintaining its political neutrality, building institutional partnerships, investing in emergency preparedness measures, and promoting innovative practices.
- Methodology and structure of the paper
This paper seeks to analyze the role that the private sector plays in supporting populations displaced by disasters. It reviews key literature on disaster displacement and the way businesses extend assistance to affected communities. The search for Journal publications was conducted in September 2021. Additional information from reports, project documents, policy papers, news articles, and institutional publications were gathered in October 2021. A key contribution of this paper is the collation and analysis of existing literature on the initiatives of PDRF as a case to exemplify how businesses can work together in providing assistance to communities affected by disasters. The results arising from the literature search were complemented by institutional knowledge from PDRF top management.
This paper is organized as follows. Section 1 presents the broad context on the importance of involving the private sector in humanitarian action and disaster risk reduction towards supporting populations displaced by disasters. Section 2 describes the methods employed in gathering information about disaster displacement, the role the private sector plays in supporting affected populations, and the development initiatives implemented in the Philippines by PDRF. Section 3 tackles the ways by which the private sector supports affected communities. Section 4 zooms in on the experience of the Philippines on disasters and displacement. Section 5 traces the initiatives of PDRF from its inception in 2009 until 2021. Section 6 discusses the unique features of PDRF as a model for generating private sector support for populations displaced by disasters. Lastly, Section 7 is about the conclusion that highlights key lessons that may be used to replicate PDRF’s model in other countries.
- Disasters, displacement, and private sector support to affected populations
Disasters often lead to the displacement of affected populations (NRC 2020). While some evacuees may be able to return relatively quickly after a hazard has abated, others may experience displacement for a protracted period to last for months or even years (Ponserre and Ginnetti 2019). Aside from disasters, conflicts and climate change further aggravate the situation of people at risk as each one intensifies the impact of the other (ISSAT 2020). Successful measures on disaster risk reduction limit how long people are displaced and help ensure displacement occurs in a dignified manner (NRC 2020).
The number of displaced people in recent years continues to rise. Data from the Internal Displacement Monitoring Centre indicates around 40.5 million new displacements in 2020. This is the highest figure recorded in ten years, even with the Covid-19 pandemic that may have discouraged people from seeking emergency shelter outside their primary residence (IDMC 2021). It must be noted, however, that displacements may also be in the form of pre-emptive evacuations led by the government (IDMC 2020). As for the countries with the highest contributions to new internal displacements, China comes first with 5.1 million. The Philippines and Bangladesh come next with 4.4 million each (MDP 2021).
The private sector plays a significant role in reducing disaster losses and managing impacts to affected populations. Recent disaster management frameworks recognize this. The Hyogo Framework for Action 2005-2015 specifies that the private sector is among the actors concerned in protecting the social, economic, and environmental assets of communities and countries. It also highlights the importance of involving businesses on disaster prevention towards social and economic development (UNISDR 2005). Its successor, the Sendai Framework for Disaster Risk Reduction 2015-2030, provides guidance on specific actions that the private sector can do to help achieve resilience and sustainable development. Its priorities for action highlight the need to bring in businesses for a holistic approach to disaster risk reduction (UNISDR 2015). The private sector is now regarded as a stakeholder in disaster risk reduction, especially as a partner of the government (Johnson and Abe 2015; Chandra et al. 2017; UNDP 2017; UNDRR 2019; GFDRR 2020).
While governments are viewed to be primarily responsible for preventing and responding to humanitarian needs, the private sector is seen to contribute a lot in reducing and managing disaster risks. Businesses provide financial and non-financial resources to help alleviate the impacts of disasters on affected communities (Connecting Business initiative 2019). In addition, the private sector is seen to make humanitarian responses quicker and more effective, especially those businesses with local presence that act as first responders (Fenton and Foley 2015). Some even expanded their roles from being donors and service providers to being commercial actors as they respond to humanitarian crises. Businesses are seen to facilitate growth and productivity for displaced people and their host communities (Boyer and Dupont 2016). Aside from generating jobs and livelihoods, private sector interventions in internal displacement situations may also be through the provision of goods and services, finance, and affordable housing (World Bank 2021). More importantly, the private sector is also seen to play an important role in disaster preparedness and coordination (ECHO 2017). A “whole-of-society” approach is recommended to ensure the participation of the displaced populations as well as the private sector towards the identification and achievement of lasting solutions (GP20 2020).
- Disasters and displacement in the Philippines
Located in the Pacific Ring of Fire, the Philippines is one of the most seismic countries in the world. It is also located in East Asia’s typhoon belt. Its unique topography exposes it to earthquakes, volcanic activity, tropical cyclones, storms, and floods that displace millions of people each year. In 2020, about 4.4. million new disaster displacements were recorded in the Philippines. This figure is the second highest in the world, only behind China. It must be noted that the Philippines is considered a rare example of a country where it is possible to obtain information about the way displacement evolves over time (Ponserre and Ginnetti 2019). Aside from disasters, conflict and instability in the southern part of the country also contribute to protracted displacement of people spanning decades (IDMC [no date]).
The Philippines consistently ranks among the countries in the world with the highest disaster risk in recent years, according to the World Risk Reports. In 2018, it was ranked third with a risk index value of 26.70. Out of 172 countries, the Philippines was only behind Vanuatu and Tonga (Heintze et al. 2018). It was ranked ninth in 2019 (Day et al. 2019). In 2020, it was again ranked ninth in the world with the highest disaster risk. Moreover, data shows that the Philippines was among the countries heavily affected by disasters that led to new significant internal displacement in the years of 2015 to 2019 (Behlert et al. 2020). With a risk index value of 21.39, it was ranked eighth in 2021 (Aleksandrova et al. 2021).
- PDRF initiatives
PDRF was formed in the wake of Tropical Storm Ondoy (Ketsana) in 2009, answering the call for private sector support in the provision of relief and response assistance to affected communities. It started with a five-pillar program consisting of development interventions in shelter; livelihood; education; environment; and water, infrastructure, sanitation and health. Its model allowed corporations to participate in ways they are comfortable with. Aside from pooling their material and financial resources together, businesses also shared their expertise (Lucas 2014). It paved an avenue for businesses to be involved even in the implementation of early recovery measures.
In 2013, Super Typhoon Yolanda (Haiyan) displaced approximately 4.1 million people and destroyed 1.1 million houses. PDRF initially deployed 50 “butterfly houses” made from eco-boards, consisting of 100 percent recycled materials. It also provided 150 indigenous housing facilities in various resettlement areas in Leyte (Philippine Daily Inquirer 2014). PDRF intensified its efforts to address the need for quality shelter and transitional housing facilities. In partnership with the local government and the United States Agency for International Development (USAID), it provided an additional 100 “butterfly houses” as transitional dwellings for affected communities in Tacloban (Desacada 2017).
The crisis in Marawi, a city located on the southern island of Mindanao in the Philippines, happened in March 2017. It displaced thousands of local families(UNHCR Philippines 2021). Arising from a study on the Marawi City water supply system, PDRF immediately committed to the construction of 12 water tanks, in an effort to augment the water needs of those staying in transitional shelters and evacuation camps (OCHA Philippines 2018b). In collaboration with other organizations, it worked on addressing the medical, water and sanitation, livelihoods, and education needs of the affected populations. In 2018, while PDRF supported the recovery efforts in Marawi, it also responded to the Mayon volcanic eruption in January, the Super Typhoon Ompong (Mangkhut) in September, and the Typhoon Rosita (Yutu) in October (OCHA and UNDP 2020).
In total, PDRF and its partner companies were able to install 17 water tanks in underserved transitional shelter sites in 2018. These tanks provided more than 200,000 liters of clean water per day for affected communities (PDRF 2020). In addition, 10 underserved schools were given a 3,200-liter water tank each. Also part of the project was the community training on water management and hygiene to instill the value of water and how to use it sustainably (Daily Tribune2019). In addition, the project included the distribution of hygiene kits and the conduct of activities promoting proper hygiene (PDRF 2020). Understanding that jobs and livelihoods are important to wellbeing, PDRF supported the design and implementation of job fairs in Marawi. Among those that participated were local enterprises with an interest in supporting economic empowerment of the affected populations (Connecting Business initiative 2019). It must be noted, however, that while the displaced populations are still struggling to return to normalcy, the Covid-19 pandemic exacerbates their situation (UNHCR Philippines 2021).
The Covid-19 pandemic heightened the needs and vulnerabilities of internally displaced persons. Moreover, it impeded humanitarian efforts, delaying the delivery of lasting solutions (IDMC 2021). In cases like this, it is evident that local actors play a crucial role in ensuring that adequate assistance is given to those who need it the most. In the Philippines, the private sector actively mobilizes resources to support affected communities and augment the services provided by the government.
When the Taal Volcano started to erupt in January 2020, PDRF sprang into action and immediately started its relief operation in Batangas. It provided face masks, sleeping kits, and bottled water to displaced families in five evacuation centers (PDRF 2021a). Response efforts lasted for months, well beyond the onset of the Covid-19 pandemic in March 2020. Despite the additional challenge brought about by restrictions in mobility, PDRF delivered essential food and non-food items to Batangas (NDRRM Operations Center 2021). It extended much-needed aid to the communities hardest-hit by the Taal volcano eruption in nine evacuation centers in Batangas. PDRF also deployed staff to repack and distribute hygiene kits, face masks, and other donated relief items to the affected communities (PDRF 2021b). Moreover, it began the construction of a multi-purpose facility in Batangas for people burdened by disasters and pandemics. It was designed to serve as a safe haven for those severely affected by the Taal Volcano and to help them prepare for future disasters. Aside from being an accessible and disaster-resilient structure that can protect the nearby population from the threat of existing hazards, the center may also be used for community programs and activities (The Manila Times 2021).
With the Covid-19 pandemic in the background, PDRF adjusted its operations to ensure continuous delivery of its services while following safety measures set by the government. It distributed food and non-food relief items to vulnerable sectors and provided millions of personal protective equipment and medical supplies to hospitals (PDRF 2021a). By mid-2020, PDRF was able to coordinate and implement various response efforts of its member companies. It raised close to 1.8 billion pesos worth of cash and in-kind donations through Project Ugnayan (National Task Force on COVID-19 2020). Project Ugnayan was a multi-sectoral, collaborative effort of the private sector, which aimed to provide unconditional emergency cash transfers to help economically-vulnerable families and address the food security needs of those affected by the enhanced community quarantine (PDRF 2021a). Through Project Ugnayan, PDRF was able to reach over 7.6 million people in vulnerable communities of the Greater Metro Manila Area (PLDT 2020). By the end of the year, PDRF was able to raise donations valued at 3 billion pesos (Presidential Management Staff 2020).
Since its establishment, PDRF continues to mobilize, inform, and direct business involvement and contributions for disaster management. It engages the country’s largest businesses and MSMEs (CSR Asia 2015). To date, PDRF remains to be the country’s major private sector vehicle for disaster risk management.
- PDRF as a model for private sector support to displaced populations
The private sector plays a key role in supporting populations displaced by disasters. Using the PDRF as a model, there are a number of factors identified to contribute in its successful design and implementation of development initiatives. Among these are its emphasis on building the disaster resilience of micro, small, and medium enterprises (MSMEs), maintaining political neutrality, building institutional partnerships, investing in emergency preparedness, and promoting innovation.
- Strengthening disaster resilience
PDRF seeks to strengthen the disaster resilience of communities and businesses in the Philippines. With this as its overarching goal, PDRF is able to convene private sector companies to build their own disaster risk management capabilities and to contribute to the sustainable development of the Filipino people (PDRF [no date]). It is able to coordinate and consolidate private sector efforts for effective complementation of resources, especially as a means to augment the services provided by the government. It understands that disasters not only threaten the life of local populations, but also their livelihoods. For this reason, PDRF provides support to micro, small, and medium-sized enterprises (MSMEs).
Nowadays, working with larger and more established companies is considered one of the most promising ways to upgrade small and medium enterprises in fragile and development contexts (Boyer and Dupont 2016). While most of its members are big companies, PDRF believes in the strength of the supply chain, with large companies linked with MSMEs. In just a few years, PDRF reached around 7,000 MSME owners throughout the Philippines with business continuity training (OCHA and UNDP 2019; UNDRR 2019). PDRF also offers technical support towards MSME resilience as it provides capacity-building interventions in an effort to build local competitiveness and sustainability (Philippines Humanitarian Country Team 2020). PDRF, with its UN partners, also developed SIKAP – or Synergizing Recovery Initiatives, Knowledge, and Adaptation Practices for MSMEs— a unified online business recovery hub to help enterprises affected by the pandemic (OCHA and UNDP 2020). Since 2017, PDRF has been supporting internally displaced populations in Marawi, extending capacity building sessions on financing and business recovery for MSMEs (OCHA and UNDP 2021).
Moreover, as part of the National MSME Resilience Core Group, PDRF is able to further strengthen its advocacy for MSMEs. Established in 2016, the National MSME Resilience Core Group (MSME-RCG) is a public-private partnership geared towards promoting the disaster and business resilience of enterprises in the country (DTI [no date]). Through the project “Strengthening MSME Disaster Resilience in the Philippines” the MSME-RCG was able to adopt a “National Roadmap and Action Plan on Strengthening Disaster Resilience” from a framework of the iPrepare Business facility of the Asian Disaster Preparedness Center (ADPC). The Philippine national roadmap and action plan has four (4) roadmap themes: Enhancing MSME general and disaster risk data; Disaster Risk Reduction and Management (DRRM) and Business Continuity (BC) awareness and training; Tailored risk financing for MSMEs; and MSME inclusion in DRRM and Climate Change Adaptation (CCA) policy, planning, and local institutions. The thematic areas aim to provide strategic direction on MSME program enablers’ plans and programs (Casado-Asensio et al. 2021). In 2019, the MSME RCG launched the MSME Guide to Disaster Resilience to serve as a reference material for MSMEs in understanding the basic concepts of disaster risk reduction and management, and business continuity practices (Mina 2019).
- Maintaining political neutrality
Among the key attributes regarded to ensure its long-term sustainability is its political neutrality. PDRF was able to sustain funding from a diverse range of sources, with the majority coming from the private sector (CSR Asia 2015). Because of this, companies can aid affected communities across political lines (How the Philippines brought business into disaster recovery – GovInsider. 2017). PDRF deploys the assets of its member companies to support the needs of the communities.
PDRF works to augment the capacities of the government (DSWD 2018). It believes that disaster management is not a responsibility of the government alone (PLDT 2020). Hence, it coordinates with the government to provide support by providing necessary resources such as fuel, machinery, and manpower (JICA 2017). Known to be self-reliant in terms of resource mobilization, through PDRF and other actors the private sector is integrated in the coordination, design, and actual implementation of humanitarian action in the country (Philippines Humanitarian Country Team 2020).
- Building institutional partnerships
PDRF recognizes that institutional partnerships are important in sustaining its efforts to help communities affected by disasters. In 2018, PDRF signed a memorandum of agreement (MOU) with the Department of Social Welfare and Development (DSWD) to extend help to disadvantaged populations (DSWD 2018). Under the MOU, PDRF commits to provide capacity augmentation on disaster operations, public service continuity, and interventions along disaster resiliency. The MOU seeks to strengthen public-private partnerships towards inclusive development in the country (de Vera-Ruiz 2018).
Together with the Office of Civil Defense (OCD), PDRF developed the Public Service Continuity Planning (PSCP) guidebook, which is a step-by-step guide that focuses on the development of an agency-specific public service continuity plan. It seeks to ensure that any agency is able to withstand disruptive events and continue to operate and sustain the delivery of public service (Tebrio 2020). The PSCP Guidebook was initiated as part of the PSCP Program, which was co-developed through the partnership of OCD and PDRF in 2017. This was formally institutionalized through the NDRRMC Memorandum No. 33, s. 2018 which enjoined government agencies, both on the national and local levels, to develop and implement their own public service continuity plans (Florano 2020). PDRF, through the creation of the PSCP Program aims to contribute to the strengthening of the country’s overall resilience, consistent with its advocacy that both public and private sectors are the key actors in ensuring continuity of operations and critical services.
- Investing in emergency preparedness
The Philippines is considered among the only few countries wherein time series displacement data may be obtained. The analysis of such data reveals the impacts of disaster preparedness and response measures (Ponserre and Ginnetti 2019). Aside from its disaster response and recovery efforts, PDRF also focuses on disaster risk reduction and emergency preparedness (CSR Asia 2015; OCHA Philippines 2018a). This is rooted in the belief among the business leaders behind PDRF that large-scale calamities are now the norm in the Philippines, being a disaster-prone country (Lucas 2014).
PDRF plays a lead role in business continuity awareness and capacity-building (UNDRR 2019). PDRF also has its own e-learning platform on disaster risk reduction, business continuity, and climate change adaptation that it calls Innovations Academy for Disaster Awareness, Preparedness, and Training (iADAPT). It aims to prepare communities against disasters (Aguinaldo 2020). Moreover, PDRF also believes that the private sector has a role to play in fighting the effects of climate change and helping reverse it (Quismorio 2021).
- Promoting innovation
The private sector can promote innovation by sharing lessons and good practices, especially on how to support displaced populations (Connecting Business initiative 2019). Businesses may likewise provide innovative products and services (ISSAT 2020). Considered among its innovative practices is the establishment of PDRF’s emergency operations center (EOC). It believes that there must be an efficient way of providing relief goods and responding to the needs of the populations affected by disasters. Effective coordination means partnering not just among businesses but also with governments and development-oriented organizations (Trajano 2016). Its EOC has an operations room that combines location software, data sources, and weather information. It is regarded as the world’s first national EOC run by the private sector. Its central feature is the command center that monitors earthquakes, tropical cyclones, volcanic eruptions, and pandemics (PLDT 2018).
PDRF’s EOC acts as a self-sufficient operations hub for training on disaster preparedness and the coordination of relief and response efforts during major disasters (OCHA and UNDP 2019). It has 24/7 capability and continues to monitor hazards and coordinate help to the areas and populations affected by disasters. Radios and satellite equipment are prepositioned to ensure that it will continue to operate even during worst case scenarios. For the EOC’s disaster information management system, its main tool is the Hazard and Disaster Analysis for Business Resilience or HANDA, which is also a local term that means ready. Among the features of HANDA are the following: real-time hazard monitoring for tropical cyclones and earthquakes; access to historical and probabilistic data for risk assessment; and highly customizable dashboards for data visualization. These features provide the necessary data and tools for the stakeholders in PDRF’s network to make informed decisions (Philippine private sector provides logistics support for Typhoon Ompong relief operations – Philippine Disaster Resilience Foundation. 2018).
The EOC may be used to support local and national governments as well as local and international development organizations (Philippines Humanitarian Country Team 2020). Moreover, it provides alerts and updates to PDRF member companies to coordinate asset inventory and the status of lifeline services. These greatly complement government efforts and highlight private sector initiatives in all aspects of disaster risk reduction and management (PLDT 2020). It maps data on lifeline services and public infrastructure to help protect them from hazards (PLDT 2018). Since the EOC lets its member companies coordinate with other donors, among the initiatives it can do is to direct the electricity suppliers to provide emergency power to people most in need (How the Philippines brought business into disaster recovery – GovInsider. 2017).
- Conclusion
The private sector plays a key role in supporting populations displaced by disasters. Using PDRF as the case to examine the ways by which businesses can extend assistance to affected populations, this paper provides an analysis of key factors that contributed to the success of its development initiatives. The private sector needs to be involved in all aspects of disaster risk management. Businesses can contribute not only in relief, response, and early recovery measures once disasters strike. More importantly, they can be involved in disaster risk reduction and preparedness efforts.
There are plenty of ways for the private sector to support populations displaced by disasters. To be effective, there are lessons that may be learned from PDRF’s experience. First, it was important to anchor its advocacy on an overarching goal of strengthening the resilience of business and communities against disasters. This served as the unifying call for private sector companies to come together and help out one another as well as those adversely affected by disasters, including MSMEs. Second, it was crucial for PDRF to maintain its political neutrality. Aside from independence in designing and implementing its development initiatives, political neutrality also allowed PDRF to extend support to localities most in need. Third, institutional partnerships were instrumental in sustaining its efforts. Despite personnel changes among its partners, PDRF was able to move forward with its programs. Fourth, investments were made towards emergency preparedness. PDRF offered capacity building interventions to its member companies and to local communities to prepare them against disasters. Fifth, PDRF promoted innovation with its establishment of an EOC. Aside from providing alerts and updates to its member companies, the EOC also supported other organizations in an effort to mitigate risks and to provide support where it was needed.
Given the limited scope of this paper that focuses only on the Philippine experience in the examination of the role of the private sector in supporting populations displaced by disasters, it is recommended for further studies to be undertaken. Nevertheless, PDRF may be used as a model to initiate or improve the ways businesses are engaged in providing assistance to populations affected by disasters.
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[1] Edwin M. Salonga
Asian Disaster Preparedness Center (ADPC)
edwin.salonga@adpc.net
+639989923210
1 out of 4 nanoenterprises adopted online selling in response to lockdowns
At least one out of four nanoenerprises are now either selling their products online, or are buying products to be sold in their local communities to cope with granular lockdowns imposed by local government units. Out of 7,675 respondents, 26% sold products and 29% bought supplies online, to augment their livelihood operations.
Nanoenterprise is a SEDPI-coined term that refers to unregistered livelihoods of self-employed individuals that have capitalization of less than PhP50,000 to operate. SEDPI estimates that the vast majority of entrepreneurial poor in the Philippines are nanoenterprises, numbering around 8 million.
Nano level risk diversification
More than half of the respondents or 52% also claimed that they added other kinds of livelihoods in response to the pandemic. Nanoenterprises refer to this as “diskarte” to be able to survive the negative economic impact of the pandemic. Diskarte is the ability to use creativity and resourcefulness to respond to challenges and adversities.
Nanoenterprises involved in the agricultural sector were better able to weather the pandemic compared to their non-agri counterparts. Eighty nine percent of the respondents said that those with farms were able to adjust and fair better.
Farming households were able to harvest produce for consumption. The surplus farm produce were then sold in local markets through ambulant vending and online selling. This resulted in reduced expenses for food and at the same time provided ample additional income
Status of nanoenterprises
A year after the Enhanced Community Quarantine (ECQ) imposed in the whole country, all
nanoenterprises reported that they already resumed operations. At the peak of the ECQ last year, 69% of them stopped operations which prompted the government to distribute cash assistance.
As of March 2021, four out of ten respondents said that they have fully recovered from the negative economic impact of the pandemic; while 55% said that it will take them up to 2 months more, before they get back to their pre-pandemic levels.
During the first quarter of the year most areas in the country were under Modified General Community Quarantine (MGCQ), the lowest quarantine level imposed by the Philippine government. These reinvigorated the local economy due to ease in the flow of goods and mobility of customers.
Social Enterprise Development Partnerships, Inc. (SEDPI)
SEDPI provides capital to nanoenterprises through joint ventures to approximately 10,000 low-income households in Agusan del Sur, Davao de Oro and Surigao del Sur. Its members also benefit from life insurance as well as medical and disaster relief assistance through damayan. SEDPI also partnered with SSS and Pag-IBIG to bring social safety net programs of the government closer to nanoenterprises in rural areas.
This research is part of a series of rapid community assessments that determines the economic impact of COVID-19 to nanoenterprises. SEDPI began the research last March 2020. This latest update was conducted on April 2021 to cover the first quarter of 2021.
The 7,695 respondents is not a representative sample of the entire Philippines. It is highly localized to SEDPI members. However, this is a good case study that reflects the situation of nanoenterprise and the local economy in the countryside. SEDPI believes that the nationwide picture is not far from its research results.
Summary of findings:
- Out of 7,675 SEDPI nanoenterprise respondents 26% sold products and 29% bought supplies online to augment their livelihood operations
- 100% are resumed livelihood operations a year after the hard lockdown
- 52% added other kinds of livelihoods in response to the pandemic
- 89% said that those with farms were able to adjust and fair better
- 40% fully recovered from the negative impact of the pandemic
- 55% said it will take them up to 2 months more before they get back to their pre-pandemic levels
Previous rapid community assessment updates. The titles are hyperlinked. Click on the titles to full read article online.
- January 20, 2021 (Update 11): Typhoon hampers bounce back of nanoenterprises in CARAGA
- July 17, 2020 (Update 10): Almost 4 in 10 nanoenterprises bounce back to pre-pandemic level
- June 12, 2020 (Update 9): Microenterprises show signs of bouncing back as lockdown eases
- May 28, 2020 (Update 8): 8 out of 10 microenterprises open for business one month after GCQ
- May 22, 2020 (Update 7): Demand for microenterprise products remain weak amid COVID pandemic
- May 15, 2020 (Update 6): Demand slumps on microenterprise products 2 weeks after GCQ
May 8, 2020 (Update 5): Only 5% of microenterprises back to “normal” in first week of GCQ - April 30, 2020 (Update 4): Two in three microenterprises hopeful to bounce back two months after lockdow – UPDATE 4
- April 24, 2020 (Update 3): Community assessment and recommendations for support to microenterprises and the informal sector during and after COVID-19 – UPDATE 3
- April 14, 2020 (Update 2): Community assessment and recommendations for support to microenterprises and the informal sector during and after COVID-19 – UPDATE 2
- April 6, 2020 (Update 1): Community assessment and recommendations for support to microenterprises and the informal sector during and after COVID-19 – UPDATE 1
- March 30, 2020: Immediate impact of COVID-19 lockdown to microenterprises
SEDPI at Opisina ni Senator Risa Hontiveros Nag-abot ng Tulong sa mga Nasalanta ng Bagyong Vicky
“Sagol nerbyos hadlok lagi kay basi manganaod kay paspas kaayo ang pag taas sa tubig og sulod kaayo.”
“Magkahalong nerbyos at takot dahil baka maanod kasi mabilis ang pagtaas ng tubig at pumapasok talaga.”
Ito ang naramdaman ni Roxanne Amigo habang rumaragasa ang baha na dala ng bagyong Vicky.
Kasama sa binaha at na-landslide ang mga residente ng Agusan del Sur at Surigao del Sur, kung saan mayroong microfinance operations ang SEDPI Development Finance, Inc.
Mula sa 10,000 SEDPI members, 1,884 ang apektado sa mga bayan ng Trento, Santa Josefa, Barobo, at Rosario sa Agusan del Sur at Lingig at Bislig sa Surigao del Sur. Dalawa ang inanod ng baha ang bahay. Isa naman ang na-landslide.
Agad nakapagbigay ng relief goods noong December 2020 ang SEDPI at ang Office ni Senator Risa Hontiveros sa nasalanta ng bagyong Vicky.
Hindi man madalas na mabagyo ang Mindanao, naging handa ang SEDPI sa pagtulong sa mga members dahil sa Social Welfare Protection Program (SWEPP) nito.
SWEPP ay ang hybrid microinsurance program ng SEDPI na pinagsasama ang “damayan” o pagtutulungan ng kapwa; formal life insurance mula sa CLIMBS Life and General Insurance Cooperative; at social safety nets mula sa gobyerno na binibigay ng SSS at Pag-IBIG Fund.
Maliban sa regular contributions sa SSS at Pag-IBIG, nagcocontribute ang mga members ng PhP360 every six months para ma-cover ng SWEPP.
Ang bahagi ng kontribusyon ay linalaan para sa “damayan”. Ginagamit ang naiambag ng mga members para tulungan ang kamember nila sa panahon ng kamatayan, pagkakasakit, sunog, o kalamidad.
Ito ang naging pondo para makabigay ng relief goods sa mga nabaha at dagdag na PhP5,000 sa tatlong na-wipe out ang bahay.
Bawat pack ng relief goods ay naglaman ng limang kilong bigas at ilang groceries na good for one week para sa pamilya na may limang miyembro.
“Naibsan ang pag-aalala ko dahil may makakain na kami kahit papano. Dumating ang aming pinapanalangin,” masayang nasabi ni Roxanne.
Naging malaking tulong ang donasyon na 134 sakong bigas na galing sa Liwanag at Lingap Program ng opisina ni Senator Risa Hontiveros.
Ang programang ito ay nagsimula noong bagyong Rolly bilang isang typhoon relief effort. Sinundan pa ito ng tulong sa mga apektado ng mga bagyong Ulysses at Vicky.
Mensahe ni Senator Risa Hontiveros, “Tuloy-tuloy ang pagpapadala natin ng Liwanag at Lingap sa mga kababayan nating naapektuhan ng kalamidad at nawalan ng kabuhayan. Umaasa akong sa munting paraan ay makatulong ang relief operations na ito para matugunan ang immediate needs gaya ng pagkain.”
Naging maganda ang pagtutulungan ng komunidad, SEDPI at ng opisina ni Senator Risa Hontiveros. Sa unang linggo matapos ang bagyo at baha ay nakatuon ang mga nasalanta sa pag-aayos sa kanilang mga bahay at gamit at hindi sa paghahanap ng kanilang makakain.
Ani ng Vince Rapisura, Presidente ng SEDPI, “Systemic and institutionalized safety nets talaga ang kailangan natin. Kailangan po talaga ay hindi lang yung sarili natin yung nag-eeffort pero nandyan ang private sector, nandyan ang public sector, nandyan ang community.”