Microfinance NGOs Act to create more entrepreneurs from marginalized sector

By Jonathan L. Mayuga

Several non-governmental organizations (NGOs) lauded on Wednesday the passage of Republic Act 10693, or the Microfinance NGOs Act, last year, which they said will primarily benefit the country’s poor and marginalized sector.

The NGOs said the law, signed by President Aquino on November 3, 2015, will help create more entrepreneurs from among the marginalized sector through increased and enhanced economic and social infrastructures for microfinance NGOs in the Philippines.

The law essentially recognizes the important role of microfinance NGOs in establishing financial mechanisms that enable the poor to build and expand their enterprises.

In a statement, Virginia Juan, president and CEO of Alliance of Philippine Partners in Enterprises Development Inc. (Append) underscored the role of microfinance NGOs in enhancing the capacity of lower-income households with access to finance to be able to expand or sustain their livelihood or enterprise and increase their income.

Append is one of the pioneer microfinance NGOs in the Philippines.

Microfinance NGOs serve as resource institution for associations and groups with members having an existing enterprise. Since its formation in 1980s, it has sought to address poverty by extending financial services, such as microcredit, savings and microinsurance to the poor.

In 2014 the Bangko Sentral ng Pilipinas (BSP) reported that microfinance NGOs served 2.5 million people with a total of P11.6-billion outstanding loans at the average of P4,640 per borrower. This was P200 million larger than the P11.4-billion portfolio of rural and thrift banks, twice lower in average loan amount per borrower and 1.3 times higher in terms of poor people reached. Unlike traditional banks, it lends money with low interest rates, free of collateral and credit history.

Microfinance NGOs also play an important part in empowering the poor through capacity-building and trainings in literacy, health, values formation, leadership, self-reliance, market intervention, social awareness and education, which help improve a person’s total well-being that is essential in owning and managing an enterprise, they said.

Taytay sa Kauwagan Inc., the largest microfinance NGO in Visayas, assists farmers whose means of living were destroyed after the rage of Supertyphoon Yolanda in 2013, the statement said.

Through its Farmers Integrated Development Assistance (Fida) program, 522 small farmers grouped in 33 farmers’ organizations accessed loans and trainings that helped increase their production output and income by 5 percent.

“We started helping the farmers by instilling the importance of a community that works hand-in-hand in moving forward. We believe that shared values and goals will motivate them to work hard, not just for their own upliftment but for the progress of the whole community, as well,” Ronnie Camangon, manager of Fida said.

The profits created by this institution is channeled back to the community through stepped-up business capital, community infrastructures, training and other welfare-improvement projects, and scholarships for the children.

With the passage of the Microfinance NGOs Act, accredited microfinance NGOs are provided with access to government programs and projects including operational and capacity-building grants, low interest loans and guarantee funds, preferential-tax treatment of 2 percent to all microfinance services to the poor, and technical assistance that will link the poor with the government, donors and other support institutions.

A system of accreditation, supervision, and monitoring of financial and social performance will be done by the Microfinance NGO Regulatory Council composed of one representative from the Department of Trade and Industry, one from the Department of Social Welfare and Development, one from the Department of Finance and three from the microfinance NGO sector.

The law also mandates microfinance NGOs to foster local economy development and social enterprises or social mission- driven organizations that seek to benefit the poor and marginalized through provision of goods, services and opportunities to enable them to take part in economic activities where the profit goes back to the community through transformational services.

“Strengthening support and proper infrastructures for microfinance NGOs only shows that its holistic approach has made microfinance an important strategy in poverty reduction. By directly supporting microfinance NGOs, we can stimulate growth in our local economies to make the financial and transformative development inclusive for every Filipino, said Jay Lacsamana, executive director of the Foundation for a Sustainable Society (FSSI).

Append conducted consultations to develop the implementing rules and regulations of the law in the three major island groups through a grant from FSSI, a social-investment organization that supports the development of sustainable communities through social entrepreneurship.

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