SEDPI Archives - Page 3 of 6 - Social Enterprise Development Partnerships, Inc.

Regulatory landscape of microfinance in the Philippines: An overview

Microfinance has emerged as a critical tool for poverty alleviation and financial inclusion in the Philippines. The government has recognized its potential and has enacted several laws and regulations to promote and regulate the sector (Llanto & Fukui, 2015). This paper examines the key regulations governing microfinance in the Philippines and their implications for the sector.

Covered institutions

In the Philippines, microfinance services are provided mainly by banks (mainly rural and thrift), non-governmental organizations (NGOs), cooperatives, financing companies and lending companies. The focus of regulation is on portfolio quality, outreach, efficient and sustainable operations, and transparent information.

Banks with microfinance operations are under the regulation and supervision of the Bangko Sentral ng Pilipinas (BSP), cooperatives are under the supervision and the regulation of the Cooperative Development Authority (CDA) and microfinance NGOs, financing companies and lending companies are regulated by the Securities and Exchange Commission (SEC).

Regulatory framework

The regulatory framework for microfinance in the Philippines is multi-faceted, involving several laws and regulatory bodies. The Republic Act No. 8425, also known as the Social Reform and Poverty Alleviation Act, is a landmark legislation that recognized microfinance as a key strategy for poverty alleviation (Congress of the Philippines, 1997). It mandated government financial institutions to allocate a portion of their loan portfolio for microfinance.

Republic Act No. 10693, or the Microfinance NGOs Act, provides a regulatory framework for non-governmental organizations engaged in microfinance activities (Congress of the Philippines, 2015). It established the Microfinance NGO Regulatory Council, which oversees the accreditation, regulation, and supervision of microfinance NGOs.

The Bangko Sentral ng Pilipinas (BSP), the central bank of the Philippines, has issued several circulars related to microfinance. For instance, Circular No. 272 provides guidelines for the establishment of banks’ microfinance operations, while Circular No. 744 provides the framework for microfinance products and services (Bangko Sentral ng Pilipinas, 2001; 2013).

In 2010, an amendment to circular 694 was approved which recognizes from PhP150,001 to PhP300,000 to still be categorized as a microfinance loan (Bangko Sentral ng Pilipinas, 2010). This was done to accommodate the increasing demand for higher loan amounts from growing microenterprises. This policy increased the scope of those who can be microfinance clients, consequently increasing the potential market.

Sector-specific regulations

In addition to these general regulations, there are also sector-specific laws that mandate banks to allocate a portion of their loanable funds for specific sectors. The Republic Act No. 10000, or the Agri-Agra Reform Credit Act of 2009, requires banks to allocate at least 25% of their total loanable funds for agriculture and agrarian reform credit (Congress of the Philippines, 2009). Similarly, Republic Act No. 8550, or the Philippine Fisheries Code of 1998, mandates banks to set aside a portion of their loanable funds for fisheries development, which includes microfinance services for small fisherfolk (Congress of the Philippines, 1998).

Recent developments

The recent Republic Act No. 11494, or the Bayanihan to Recover as One Act, passed in response to the COVID-19 pandemic, includes provisions for low-interest loans for micro, small, and medium enterprises (MSMEs) and cooperatives, as well as loan payment grace periods (Congress of the Philippines, 2020). This act underscores the government’s recognition of the role of microfinance in economic recovery and resilience.

References

Bangko Sentral ng Pilipinas. (2001). Circular No. 272. Bangko Sentral ng Pilipinas.

Bangko Sentral ng Pilipinas. (2010). Circular No. 694. Bangko Sentral ng Pilipinas.

Bangko Sentral ng Pilipinas. (2013). Circular No. 744. Bangko Sentral ng Pilipinas.

Congress of the Philippines. (1997). Republic Act No. 8425. Official Gazette of the Republic of the Philippines.

Congress of the Philippines. (1998). Republic Act No. 8550. Official Gazette of the Republic of the Philippines.

Congress of the Philippines. (2009). Republic Act No. 10000. Official Gazette of the Republic of the Philippines.

Congress of the Philippines. (2015). Republic Act No. 10693. Official Gazette of the Republic of the Philippines.

Congress of the Philippines. (2020). Republic Act No. 11494. Official Gazette of the Republic of the Philippines.

Llanto, G. M., & Fukui, R. (2015). Financial inclusion, education, and regulation in the Philippines. Philippine Institute for Development Studies Discussion Paper Series.

Power to the Nano: How SEDPI is shaking up economic norms for the better

The SEDPI Group of Social Enterprises is a Philippines-based organization that operates with the aim of alleviating poverty among Filipinos worldwide. Since its inception in 2004, it has grown to include eight collaborative organizations executing three key programs: SEDPI KaSosyo, SEDPI KaNegosyo, and Usapang Pera. These programs focus on social investments, nanofinancing, and financial education respectively.

SEDPI programs

The SEDPI KaSosyo program attracts social investors who prioritize people and the environment over profit. These investors support nanoenterprises, social enterprises, and development organizations through a profit-sharing scheme known as Joint Venture Savings (JVS).

The SEDPI KaNegosyo program provides sustainable finance for nanoenterprise development. This includes providing livelihood capital, promoting a savings culture, providing social safety nets, and even creating affordable and inclusive housing communities through various sub-programs.

Usapang Pera, the financial education program, provides a comprehensive suite of financial empowerment services that include online trainings, live events, and publications. The program uses real-life examples and practical applications to improve personal financial habits and foster positive social change.
Over the years, SEDPI and its founders have received several recognitions and awards for their work. They remain committed to their vision of empowering Filipinos worldwide to support sustainable nanoenterprises.

Social and solidarity economy: The SEDPI approach

Social and Solidarity Economy (SSE) encompasses a range of organizations and enterprises that prioritize social objectives and uphold principles of solidarity, mutual aid, and social justice. In the Philippines, one of the organizations embodying these values is the SEDPI Group of Social Enterprises (SEDPI). Their model provides a roadmap for implementing Social and Solidarity Economy principles in practice.

Empowering Nanoenterprises through KaNegosyo

SEDPI’s KaNegosyo program follows six foundational principles that reflect a commitment to the values and practices of the Social and Solidarity Economy.

Financial Education: SEDPI prioritizes intensive savings mobilization, universal insurance coverage, provision of investment opportunities, and liberation from oppressive loan products. By offering financial education, SEDPI empowers nanoenterprises to make informed decisions and contribute to a more equitable economy.

Capital Infusion, Not Loans: SEDPI forms joint ventures with nanoenterprises, establishing a co-ownership business partnership, offering an alternative to loans that require perpetual interest and penalty charges. This innovative approach fosters economic resilience and promotes shared prosperity.

Profit and Risk Sharing: SEDPI’s strategy includes a profit-sharing mechanism that favors labor and participation. Risks are equally shared, fostering collaborative problem-solving and economic resilience, central tenets of the SSE model.

Loss Follows Capital: SEDPI’s model ensures that losses, defined as bankruptcy or the nanoenterprise’s decision to liquidate assets, are proportionate to the party’s capital contribution. This system upholds the principles of mutual aid and fairness central to the SSE.

Non-Profit damayan:SEDPI provides a non-profit insurance product that places solidarity and protection above income generation. This model strengthens collective resilience and reflects the ethos of SSE.

Partnership and Cooperation: SEDPI aims to establish partnerships with government agencies and like-minded organizations. This collaboration aims to bring basic services closer to low-income groups and advances the SSE’s mission of poverty eradication.

Social Protection through KaTambayayong

SEDPI’s KaTambayayong (KT) program addresses the unique needs and challenges faced by nanoenterprises, emphasizing the importance of providing adequate, accessible, affordable, and efficient social safety nets. This approach reflects a deep commitment to social protection, a key element of the SSE framework.

Understanding the vulnerability of nanoenterprises to natural disasters and the growing impact of climate change, SEDPI KT aims to provide a robust support system. The program offers benefits that cover basic costs or assist in disaster recovery, ensuring that these small businesses can withstand crises and remain operational.

SEDPI KT departs from the often tedious and lengthy claims processing typical of traditional for-profit insurance companies. Instead, the program is dedicated to providing near same-day delivery of benefits through a simplified documentation process, ensuring efficient and prompt support.

In keeping with the principle of solidarity, SEDPI KT is committed to offering social safety nets that are affordable and within the financial reach of nanoenterprises. This enables more businesses to access the program and enjoy its benefits, enhancing their resilience and stability.

SEDPI KT complements existing government social insurance programs – SSS, PhilHealth and Pag-IBIG, bridging gaps in coverage and providing additional support where needed. This cooperative approach underscores the core SSE values of partnership and mutual aid.

Fostering a new economic paradigm

SEDPI’s programs embody the principles of the Social and Solidarity Economy, demonstrating that social objectives can be pursued alongside economic goals. By prioritizing mutual aid, shared prosperity, and social justice, SEDPI is contributing to the creation of a more equitable and resilient economy. Their work offers an inspiring model for other organizations seeking to implement SSE principles in their operations.

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

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

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

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

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

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

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

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

SEDPI at 19: Pioneering change and empowering communities

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

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

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

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

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

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

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

The need for comprehensive financial inclusion strategies

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

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

Interconnectivity

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

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

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

Savings product design for financial inclusion

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

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

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

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

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

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

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

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

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

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

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

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

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

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

From risky clients to partners in development

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

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

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

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

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

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

Government support

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

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

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

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

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

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

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

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

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

Different types of sovereign wealth funds

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

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

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

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

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

How SWFs are funded

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

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

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

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

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

Countries with SWF best practices

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

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

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

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

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

Advantages of SWFs

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

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

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

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

Disadvantages of SWFs

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

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

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

Controversies surrounding SWFs

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

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

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

The Proposed Maharlika Investment Fund of the Philippines

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

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

Maharlika Investment Corporation

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

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

Funding MIF

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

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

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

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

MIF concerns and criticisms

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

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

Recommendations

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

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

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

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

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

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

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

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

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

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

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

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%

SEDPI at Ambagan PH Tumulong sa mga Nasalanta ng Bagyong Vicky

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

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

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

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.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Anj Reyes kasama ang ilang SEDPI members nung February 2020

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

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

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