Editorial: People Power through microcredit

Editorial:

 

 

People Power through microcredit

"It's time to take 'People Power' to the next level. We need to fight poverty in a systematic way by mobilizing disadvantaged communities to help themselves with the empowering support of multiple sectors."—Former President Corazon C. Aquino.

MONDAY night, former President Corazon Aquino launched what could probably be the largest single private sector microcredit program in the country's history.

Called PinoyME, or Filipino Micro-Enterprise, the program aims to mobilize P5 billion to assist five million poor entrepreneurs in depressed communities all over the country in five years. The Philippine society should support this program for three major reasons.

First, the program represents a major shift in thinking among the country's economic elite about the potentials of the poor and marginalized sectors of society as agents of development and progress. For so long, managers of banks and financing organizations looked down on the poor as "unbankable." They usually have nothing to offer as collateral. They neither have stable jobs, nor what would be deemed a good résumé.

In developing countries like the Philippines, they often derive irregular incomes from economic activities (e.g. farming, peddling) and are considered high-risk and seasonal. They have no credit history that the banks could verify. And yet, Cory and her group are embarking on a program that is certainly risky and yet has the potential of transforming the country's economy for the better.

Of course, since Mohammed Yunus got a Nobel Prize for the success of the Grameen Bank that he founded in Bangladesh, bankers and financiers have started to realize that there is business in banking with the poor, especially women.

In fact, bankers these days have started to change their phraseology about microfinance: it's not that the poor are "unbankable"; they are simply "prebankable," and microcredit—given factors like adequate social preparation like training in entrepreneurship, value formation and effective community organizing—could be the best way of bringing them into the mainstream of the country's financial system. Once they are able to build a "track record," the poor are likely to be as reliable a partner of the banks as those who do their business from their posh offices along Ayala Avenue in Makati.

Second, microcredit programs, such as PinoyME, are probably the best way to ensure gender equality in the Philippines. Based on the experiences of Yunus's Grameen Bank as well as other schemes worldwide, microcredit programs are often focused on women. Why women? It's because, based on actual experience (believe us, there's empirical data for this), loans extended to women and their projects are likely to benefit the entire family more than when these are extended to men.

According to the Microcredit Summit Campaign launched in 1997: "Experience shows that women are a good credit risk, and that women invest their income toward the well-being of their families.  At the same time, women themselves benefit from the higher social status they achieve within the home when they are able to provide income."

Third, economic and social programs such as this one could help ensure broad-based growth in the Philippines. If it succeeds, it has the potential of uplifting the lives of a least five million poor families all over the country. Some of them may eventually grow into small and medium enterprises, create more jobs in their localities, and transform a lot more lives in the process.

In the last 12 quarters, the Philippine economy has been growing at decent growth rates (5 percent to 6 percent of the gross domestic product), driven mostly by robust performances of electronics, outsourcing and consumption-oriented economic activities buttressed by the dollar remittances of overseas Filipino workers. An initiative such as PinoyME, therefore, is a good way of complementing the growth of these sectors, boosting the economy even more. In fact, if we want to broaden the ranks of the middle class, microcredit is probably one of the best ways to do it.

The expansion of the ranks of the middle class is important because of its role in strengthening the country's democratic institutions. Former Negros Occidental governor Daniel Lacson sums it up well: "By making microfinance more accessible, PinoyME aims to unlock the potential of individual Filipinos, particularly those who have been marginalized and stripped of their dignity by sheer poverty. Over the medium to long term, this will also pave the way for better governance as a critical mass of citizens is empowered to make mature political choices and demands, as well as to aspire to become a new breed of leaders. Our vision is to help create a broad middle class, which is the foundation for an equitable economy and a strong democracy."

Of course, microcredit alone would not solve all the economy's problems. We will need growth-oriented policies, political stability and greater private-sector investments. We will need effective governance, educational reform and better infrastructure. It is within this context where people's entrepreneurial energies would even find fruition. It's not the be-all and end-all , but it is a significant contribution by the private sector that each one has to help nurture.

http://www.businessmirror.com.ph/01232007/opinion01.html