Alleviating Poverty: Is Microfinance the Solution?

Eurocredit also entered into a Memorandum of Agreement with Task Force Sikap Buhay during the latter part of 2001. Their target beneficiaries are also the entrepreneurial poor in the Quezon City area, although they make exceptions for applicants who live near Quezon City and have the endorsement of their barangay (village). The National Livelihood Support Fund also provides them with the funds for lending through a draw line list renewed annually. If they used up the budget for the past year, their budget for the incoming year may increase. Unlike CRBBI, Eurocredit focuses on individual loans, which may explain their smaller membership base of 800-900. Their members start from accessing loans in groups and eventually shift to individual loans.

Not for the poorest of the poor

The beneficiaries of microfinance are the micro entrepreneurs involved in retail and agricultural businesses, and home-based industries. They own businesses operating at micro level with capitalization of no more than P250, 000 ($4,836) per annum.

Aling Yolly and Aling Sabina are both microfinance beneficiaries under Task Force Sikap Buhay. Aling Yolly started in October 2004 and is a member of Group A at Barangay Botocan. She is 49 years old and explains that she became a member through a City Councilor roaming their area looking for potential beneficiaries. Since she already has a sari-sari store (small store of consumer goods), she was asked to join. She then attended a series of orientation seminars and was grouped with other women from her barangay.

During their first cycle in which they were given a P5, 000 ($96.73) loan, one of their group member’s husband died and was not able to pay the loan. The other group members had to shoulder the amount so that they can continue with the program. She and her group mates are now on their fifth cycle, which entitled them to a P10, 000 ($193.46) loan.

Aling Sabina joined only in December 2005 and is a member of Group B, also in Barangay Botocan. She is also 49 years old and was asked to join by her friend who is already a member. Like Aling Yolly, she already has a sari-sari store business before joining the group. Her group is still in the first cycle, thus, they were given a loan of P5, 000 ($96.73).

Aling Sabina used to earn P2, 000 ($38.69) a day, but nowadays, it does not even reach P1, 000 ($19.35). Aling Yolly’s earnings from her business also decreased through the years.

Aling Yolly said that she used the loan for added capital and for her family’s other expenses. Aling Sabina also used the loan to supplement her capital and for emergency cases. She and her group mates also use it for their paluwagan (mutual savings and loan scheme). They strictly follow the Tuesday schedule of payment for their paluwagan because they do not want to lose their loans as they can also use it for their daily needs.

Microfinance is supposedly being implemented to help alleviate poverty in the country. However, it is only the entrepreneurial poor that are being served by the program. The poorer and marginal sectors are not even reached.

Allan James Navarro of CRBBI explains that microfinance helps the beneficiaries by enabling them to earn more. He said there are success stories illustrating how it helps improve the quality of life of the beneficiaries. Paul Ryan Santos of Eurocredit agrees with him. Santos explains that through microfinancing, the member is provided with employment and business opportunities. Eurocredit also helps in training of its members.

However, Eurocredit does not provide loans to applicants who are just starting a business. Their Memorandum of Agreement with Task Force Sikap Buhay provides that they will only assist in adding capital to already existing businesses.

Government statistics show that 24.7 percent of Filipinos live below poverty line in 2003. Non-government organizations cite higher figures and a recent survey of the Social Weather Station revealed that 57 percent of Filipinos rate themselves as poor. But microfinancing schemes do not accommodate the poorest of the poor. It does not provide gainful employment or sufficient income. It benefits only the lower segments of the middle class with existing small businesses. Added to this, small to medium enterprises in the Philippines are standing on unstable grounds. The sari sari stores of Aling Yolly and Sabina are cases in point.

Microfinancing may have been able to help a segment of the poor improve their quality of life, albeit temporarily. But with declining incomes and increasing costs, it will only be a matter of time before small businesses fold up and beneficiaries of microfinance projects decreases. (

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