Commentary
Rising prices threaten gains of microfinance
By Gemma Rita R. Marin
Philippine Daily Inquirer
First Posted 00:36:00 04/23/2008
Filed Under: rice problem, Food, Financial & Business Services
The headlines and top news stories in the broadsheets over the past few weeks can be very scary for Juan de la Cruz. The Philippine Daily Inquirer, for instance, came out with articles like “High rice price to last for some time—experts,” “FAO says soaring cereal prices threaten peace and security,” “NFA to increase retail price of rice” and “Rice prices still soaring.” Other dailies printed “Bread prices to go up this month” and “Bread, poultry, meat prices also going up” and “No respite from rice crisis until 2010—IRRI.”
All this led me to wonder how I could bargain with my “suki” [favorite vendor] at the “talipapa” [public market] in San Francisco del Monte Avenue where I do my weekly marketing, when they have clear evidence and a ready reference about the rising prices of basic commodities. I must admit though that my family has enough reserve to mitigate the effects of soaring prices. But what about the poorer families who have already tightened their budgets or squeezed their meager earnings to ensure that food is served daily on the table, and that they will still have enough to spend for other basic needs?
The coming of microfinance in the Philippines since the 1990s has brought some hope to poor communities. Our recent study, jointly implemented with INAFI-Philippines, shows that the lives of the poor clients have become better with microfinance. Among the benefits enjoyed by them were increased in access to financial services or reduced dependence on high-cost credit, evidenced by 72 percent (of 317 client-respondents) agreeing or strongly agreeing that they borrowed less from informal lenders. They also recognized that the microfinance institution, or MFI, has become a ready source of credit and financial services like savings and insurance.
The top reasons given for borrowing were to acquire additional working capital (91 percent) and enjoy lower costs of borrowing (70 percent). Obtaining additional working capital ranked highest since most of the projects funded by the MFIs involved existing undertakings of the clients, mostly retail trading or vending.
As majority of the clients claimed that their incomes increased (95 percent) albeit by meager amounts, the additional funds helped them finance the basic needs of the household such as food, clothing, water, electricity and other utilities. It also allowed them to accumulate assets (75 percent) such as TV sets and refrigerators, and access social services (61 percent), chiefly education.
Microfinance has also opened opportunities especially for the women to become empowered. Community members learned to socialize as 80 percent attended meetings and 55 percent participated in training programs. Many of the key informants and respondents confirmed that after their homes and the workplace, they spent most of their time in the weekly group meetings and community activities. They have become more vocal and expressive about their views, even if their concerns remained micro. The clients were more interested in community concerns rather than in national or provincial issues. They would also rather concentrate on their business and the policies of the MFI governing their loan.
It is not all rosy with microfinance though. The rise in income may be high in percentage but not in absolute amounts. The micro-level business of trading did not produce enough margins to lift them out of poverty. Income earned from the projects was certainly not enough to cover their constant health and housing needs. In fact, any health, hospitalization or housing benefit gained was not derived from project earnings but usually came with the MFI package.
The technical and project skills of the poor were hardly enhanced. Notwithstanding the many skills training programs offered or referred by the MFIs to the clients, the latter failed to apply whatever learning was acquired due to uncertainties or unfamiliarity with the market and other risks. They preferred to stay with the trading business in which they have long engaged. While this has allowed them to earn a steady income, the measly earnings were not enough to finance any expansion in the business, much less hire new hands or create new jobs as the microfinance program aimed to achieve.
Overall, microfinance for more than 10 years now has made some headway in alleviating impoverished living conditions and empowering the poor, especially the women. But whatever little gains achieved are now being threatened by the rising prices of goods, particularly rice and fuel. Yet the government continues to report poker-faced about an upbeat economy characterized by an annual inflation rate of 6.4 percent in March 2008, gross national product growth of 7.8 percent and gross domestic product growth of 7.3 percent in 2007, and an appreciating peso now at 41.59 to the dollar.
Juan and Juana de la Cruz couldn’t care less about these economic indicators, especially if these cannot be translated into jobs or steady sources of income that will allow them to easily and adequately provide for the education, health and more basic and daily needs of their families.
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A book on the indicative impact of microfinance in the Philippines, along with another monograph on agricultural microfinance, will be launched in a microfinance forum to be held on April 29, 2008 at the MVP West Basement Lobby, Ateneo de Manila University.
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