and going back to the basics
JAIME ARISTOTLE B. ALIP,
December 20, 2021
The sun always comes out
after a storm. The adage is true, as slowly, the country is moving
from a pandemic to an endemic mindset. All regions are now
classified as minimal to low-risk from COVID-19, and over 40 million
Filipinos (almost 40% of the population) have been fully vaccinated.
Herd immunity is becoming a reality, as the Government eyes a second
mass vaccination drive to raise the number of fully inoculated to 54
million before the year ends.
Truly, we have a lot of things to be grateful for as the Christmas
season approaches. Public transport capacity has expanded, the
economy is reopening, and quarantine requirements had been relaxed.
Already, economists and multilateral agencies have raised the
Philippine growth forecast for this year and 2022.
COVID is still around, yes, but we are learning to live with it. As
a social development practitioner and financial inclusion advocate,
I propose going back to the basics to sustain these gains. Finally,
we are on our way to rebounding from the deep economic contraction
in 2020. The challenge for us is to push the momentum towards full
economic recovery and social renewal.
Microfinance and Financial Inclusion
Going back to the basics means revisiting our roots. Nowadays, the
term “microfinance” is almost passé, having been swallowed by the
broader phrase “financial inclusion.” But microfinance practitioners
should rally behind the fact that microfinance is the heart and soul
of financial inclusion, since the industry pioneered the
transformative vision of making financial services accessible to
poor people. Much remains to be done to reach the unserved and
underserved. The COVID-19 pandemic has aggravated the situation,
with more people becoming poor, and the poor becoming even poorer.
While digital transformation among microfinance providers -- as well
as the rise of fintechs -- have improved access to financial
services, the digital divide remains a challenge among the poor
Why is there a need to focus on microfinance? From a developmental
perspective, any improvement in capital markets reaching the margins
is a good thing. A lot of research has examined the positive impact
of microfinance on peoples’ lives and its positive benefits to the
country’s economy. At first glance, microfinance seems
counter-intuitive given its goal of facilitating poor people’s
access to much-needed financial services and integrating them in the
formal financial system. In a manner of speaking, the goal is to
‘graduate’ them from microfinance, and therein lies the rub.
Microfinance has a long way to go. Because the problem of the poor
is more than just access to financial services. Poverty eradication
advocates and microfinance advocates understand this. Giving
financial aid is crucial, but beyond that, the poor needs financial
literacy, capacity-building, marketing support, and a gamut of
services that will allow them to be productive members and
change-agents in their communities.
And how does microfinance relate to financial inclusion?
Microfinance -- the extension of financial and other support
services to low income groups -- is a very important economic
conduit designed to facilitate their inclusion in the formal
financial system and assist the poor to work their way out of
poverty. Financial inclusion aims to give everyone access to banking
and other useful financial tools, while microfinance seeks to ensure
that the use of those tools leads to positive benefits for the poor.
Simply put, microfinance aims to address more than the problem of
access; its ultimate goal is to give impoverished people an
opportunity to become self-sufficient. And that is why microfinance
is more important than ever.
Rural Development and Agricultural Financing
We also need to revisit the crucial role of microfinance in the
rural development process. Agriculture remains the backbone of the
Philippine economy, and 75% of poor Filipinos live in rural and
agricultural areas. The way is clear, as we should go where we are
needed – that is, towards providing financial support to help
farmers, agricultural workers and agri-preneurs. Agricultural
financing will help us make a dent in the country’s poverty
situation while also contributing to our food security. The latter
is especially important, as the COVID pandemic has disrupted the
food supply chain, which is everybody’s concern.
The Philippine Statistics Authority has reported that the
Philippines’ value of production in agriculture fell by 2.6% in the
third quarter of 2021. The drop was attributed to the decline in
production of crops, livestock and fisheries during the quarter. The
provision by the government of agricultural credit, the opening of
the economy and the relaxation of rules on travel and community
quarantine have given breathing space to farmers and fishers, but a
lot remains to be done to help them recoup their losses from this
year’s typhoons and the pandemic.
To respond to this need and also given its background, the Center
for Agriculture and Rural Development Mutually-Reinforcing
Institutions (CARD MRI) has always prioritized support for
agricultural and agribusiness endeavors. Its approach is holistic.
CARD MRI provides microcredit, microinsurance, capacity-building,
and market support to farming families, giving priority to poor
women in rural areas. Its agri-loan program finances agricultural
production and related activities, e.g., acquisition of farm
equipment, poultry and livestock, fishery products, crops, fruits
and vegetables production, seedlings and ornamental plants
production. In addition, the CARD Crop Assistance Program (CCAP)
assists clients whose agricultural business has been damaged by
natural calamities. It also implements a credit-with-education
program as part of its agri-loan product, and links clients to
individual and institutional buyers. Its business development
services include trade fairs for agri-preneurs and facilitation of
their clients’ partnership with industrial buyers. CARD MRI has a
long-standing partnership with the LBP, IFC, BPI, BDO, PNB, and
other commercial banks for the provision of microcredit to poor
people in rural areas.
Why Advocacy is Crucial
Be that as it may, and despite its outreach of 7.8 million clients
nationwide, CARD MRI is just one industry player in an ever-growing
sea of low-income agricultural families needing support.
Thus, we need to intensify our advocacy and place microfinance,
financial inclusion, and yes, agriculture, at the forefront of
policy debates as the country braces for the 2022 election. A
vibrant agricultural sector is the key to faster economic recovery,
and our next batch of leaders should be made cognizant of this, as
well as the crucial role that the microfinance industry plays in the
country’s development and in combating poverty.
Microfinance is important because we need more than just
institutions providing financial aid to the needy; we need a
transformative relationship that goes beyond access to banks or
credit provision. The government must ensure that those who are
marginalized even by the digital revolution are served. And we need
to stay the course, because when there are a lot of challenges, the
only way to go is forward.
We are now on the right track to economic recovery. Even with the
threat of new COVID variants emerging, the Philippines -- like the
rest of the world -- can move forward. We can do this if we will
just go back to the basics, and not lose sight of our poor brethren.