Micro loans provide escape from poverty

Contrary to popular opinion, fish vendors, rice retailers and tricycle drivers are good borrowers.

Bolstered by this belief, pioneering micro finance organization Tulay Sa Pagunlad, Inc. has changed countless lives.

In fact, the non-government organization specializing in lending out amounts of R8,000 on the average to the poor to fund micro ventures has a loan portfolio of R530 million. Better yet, its repayment rate is 99 percent, which is much higher than that of any large Philippine bank.

The organization founded by Australian philantrophist David Bussau, who was named Australian of the Year in 2004, has greatly assisted in revolutionizing the approach to poverty alleviation in the Philippines.

In the 1980s when TSPI was founded, development work consisted mostly of doling out funds, resources and infrastructure which benefitted the poor but would not necessarily help them climb out of their desperate situations.

By lending the poor money to run ventures such as the distribution of chicharon or the manufacture of cement stoves that retail for R50, TSPI has allowed its clients to preserve their dignity while helping them generate earnings to feed and even educate their families.

Community of shanties

Sitio Gulod in Barangay Muzon, Taytay, Rizal is typical of the communities served by TSPI, which celebrated its 25th anniversary recently. In this community of shanties on the outskirts of Taytay by the walls of a gated subdivision, there are no roads, sewer or even water systems. Many of the women fend for themselves and their children most of the week as their husbands, mostly laborers in construction sites in the city, come home only on the weekends.

According to petite Violeta Sabote, a housewife in her late 20s and an enterprising vendor of rice, biscuits and fish, TSPI brought hope to the community when it established a center there some years ago. Before TSPI made its presence felt there, loans for businesses could only be had from loan sharks that charged exorbitant rates. Regular banks could not be expected to lend the small amounts needed by the micro entrepreneurs who had no collateral to offer.

In Muzon as in other communities, TSPI minimized the risks of non-payment by organizing borrowers into groups of 20 or more, according to TSPI executive director Ruben de Lara. The members, who pay an interest rate of 3 percent a month, serve as guarantors for each other. As co-guarantors, they cover for each other when one or two are not able to make the weekly payments.

Covering their own

Violeta Sabote of Muzon recalls that Center 13, to which she belonged, was about to be closed because of the 28 original members, 10 were no longer paying their weekly installments. The 10 lived in another area and were almost impossible to track down. Unless, the remaining 18 could cover for the erring 10, no one in the group would qualify for further loans.

Center chief Mercedita Dacuta toyed with the idea of just letting things be. But a widow in the group pleaded that she needed TSPIʼs financial assistance because she supported four children and six grandchildren, she recalled. The feisty Mercedita, who is in her 30s and runs a convenience store, explains: "Nung nagsalita ang balo, nagbago ang isip ko at nagdesisyon na labanan ang pagsara ng center. (When the widow spoke, I changed my mind and decided to fight to keep the center going.)"

A testimony to the strong sense of commitment cultivated by the TSPI system, the remaining Center 13 members covered their own as well as the weekly payments of the delinquent members. They also found new recruits so they could meet the required minimum of 20 members per center.

100% repayment

Today, the center has 24 active members and boasts a repayment record of 100 percent, an achievement enjoyed by many of the thousands of TSPI centers nationwide. Its sound organization has allowed the institution to remain sustainable as it serves the needs of over 140,000 clients, who in turn have created over 100,000 jobs and indirectly help an estimated 1.75 million Filipinos bring food to the table each day.

De Lara notes that TSPI targets communities where residents have often been reduced to "a state of hopelessness from not being able to have enough for basic needs." He observes that many of the marginalized literally work from sunrise to sunset but remain poor for lack of resources. The micro loans effectively stimulate the borrowers to come up with their own ventures as their means to escape poverty.

When TSPI pioneered in micro financing in the country in 1981, the NGO itself had assets of only R200,000, a staff of four and a borrower base of 25. Total loans released amounted to over R1.5 billion in 2005.

Self-sufficiency

Nationwide, micro finance institutions dot the landscape. But only a small percentage are self-sustaining. TSPI achieved self-sufficiency in 2001 when its total operating income exceeded its total operating expenses, including financial costs.

In 59 other branches in the country, the micro finance pioneer has made an impact on the lives of its clients as they "crossover from extreme poverty and lead transformed lives," says de Lara.

Sabote describes the changes many of them have experienced: Many are now eating three meals a day where before they only ate one. Their shanties have been replaced by homes with concrete walls. Some have even experienced the joy of seeing children graduate from college, which to the women of Muzon, serves as concrete assurance that life will never seem as desperate again.

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