A lending hand to the poor
APART FROM being an icon in the accounting profession, Washington Z. SyCip is a strong supporter of underprivileged Fil ipinos as he addresses poverty issues. Along with basic education and rural health, the cost of credit to the poor is another concern he deals with by raising his voice to champion microfinance as a viable source of credit for the poor.
“You may say that how do you lend money to poor people, and expect to collect? I learned in life, I experienced it… the poor are more honest than the rich,” Mr. SyCip said in a recent interview with BusinessWorld.
Mr. SyCip related an incident he experienced with the 8,000 students on loan in the affected areas of typhoon Yolanda. He asked Dr. Jaime Aristotle B. Alip, founder of Center for Agriculture and Rur a l Dev e lopment — Mutua l ly Rei n forci ng Institutions (CARD MRI), if they should cancel the loans, but the latter disagreed and reminded Mr. SyCip that the poor are more honest. Even though the borrowers had lost their homes, “all the 8,000 students have paid better, many of the businessmen that borrowed money from the bank are still not paying,” Mr. SyCip said.
In an article “The Financial Power of the Poor,” Mr. SyCip wrote for BusinessWorld in 2012, he said that microfinance activities in the Philippines have greatly increased in the past years. “Generally, they speak positively about the capacity of the poor to save and repay their debts when they are given access to credit. The figures also suggest that microfinance institutions ( MFIs) — rural and thrift banks, nongovernment organizations or NGOs, and cooperatives — can be profitable institutions,” he said.
He noted that it should be emphasized that microfinance is not engaged in charity, subsidized credit, or dole outs nor it is the only remedy for poverty. “Most MFIs would charge from 2.5% to 3.5% interest per month which, to some may be considered high, but is so much lower than the outrageous 20% interest rate charged by the informal ‘ 5- 6’ lenders,” Mr. SyCip said.
As defined by the Bangko Sentral ng Pilipinas ( BSP), microfinance refers to “a broad range of financial services such as deposits, loans, payment services, money transfers and insurance to the poor and low income households, generally for their microenterprises and small businesses.” It enables the poor to raise their income levels and improve their living standard by developing an enterprise from the fund provided.
For instance, an average Filipino family, composed of five members, with a loan worth P5,000 can generate a daily income of P200 to P300 per day through a sari- sari store. This income can help the family meet its daily expenses and provide a three square meals a day instead of one or two.
Microfinance indeed has a vast impact to the poor. Mr. SyCip has worked closely with Dr. Alip of CARD MRI, a social development fund established in 1986 which evolved into an outstanding microfinance institution today. It is composed of 14 development institutions with a common goal of eradicating poverty in the Philippines and upholding the lives of the Filipinos through microf inance and soci a l development services.
CARD MRI’s microfinance prog ram includes credi t programs to small businesses, a savings mobilization program dubbed as Flexible Capital Build Up, micro insurance, Credit with Education, and Microf inance and Hea lth Protection Program.
As of April 2017, the group of mutually reinforcing institutions has served more than P4.3 million clients. It boasts a loan portfolio amounting to P16.1 billion with a repayment rate of 99.38%.
“Dr. Alip has a very successful small loan fund for basic education. He has enthusiastically responded to my suggestion of expanding this fund to significantly reduce illiteracy in poor communities,” Mr. SyCip said in his 90th birthday article in BusinessWorld in 2011.
Mr. SyCip believed that the real secret behind the success of microfinance institutions is the credit discipline instilled in its clients. Microfinance institutions have a typical collection rate of 98% while the industry standard is at 94%. “This clearly demonstrates — against conventional wisdom — that the poor have integrity. That given the opportunity, they can rise above their misfortune. Most of them do not need charity; what they need is our confidence in them,” Mr. SyCip said.
Mr. SyCip also acknowledged that microfinance institutions like CARD MRI have been contributing to the growth of microfinance industry in the country, but the challenge of increasing the number of those who are able to expand their microenterprises and become integrated into the mainstream economy remains.
“Let us not belittle the financial power of the poor. Their absolute number could make a significant improvement in our economy. To my mind, the real value of microfinance is that it gives hope to many in the midst of despair. Lending a hand to the poor and encouraging entrepreneurship though microfinance are not just a good deeds; they have an enduring effect on their lives,” Mr. SyCip penned in the 2012 article. —