pdtf as a tool for poverty reduction: a study for policy review

PDTF as a Tool for Poverty Reduction: A Study for Policy Review

The National Anti-Poverty Commission 1


The National Anti-Poverty Commission i

About the researcher:

Maria Angela dlc. Villalba is the Executive Director of Unlad Kabayan Migrant Services Foundation, an NGO service provider

helping migrants and poor communities build social community enterprises for the past 20 years. Her undergraduate

course in Social Work and Master in Management at the University of the Philippines were excellently combined in her field

in social enterprise development. She was awarded “Social Entrepreneur of the Year” in 2007 by Ernst & Young and Schwab

Foundation for innovative approach to migrant remittances transforming into savings and investments. She attended a

short-course on “Strategic Perspectives on Non-Profit Management” at Harvard Business School.


The National Anti-Poverty Commission ii

TABLE OF CONTENTS

List of Tables, Illustrations & Boxed Info ii

Acronyms iii

Executive Summary 1

Section 1 - Introduction 3

Philippine economy and poverty 3

The poverty rate in the Philippines 3

Unemployment and jobless growth 3

Income gap 4

Government responses to poverty and landlessness 5

Research Objectives and Methodology 7

Section 2 - Findings 9

Microfinance 9

Respondents - 10

MFI clients 10

PDTF operations 14

Grant applications and status 15

Project proposal processing 16

Implementation 16

Grant allocation and use 17

Institutional respondents 17

Microfinance Institutions 18

Monitoring and evaluation 16

LGU respondents 20

NGO-Business development service providers 22

Challenges and emerging needs 23

Section 3 - Conclusions 26

Section 4 - Recommendations 30

Section 5 - Case Studies 35

People’s Bank of CARAGA 35

PATANOM 42

LGU-Dumingag & BAKAS 47

Alter Trade Foundation 51

References 58

Directory of Resource Organizations 60

Annexes 61

Reference Tables, Graphs and Boxes 61

PDTF Monitoring Report template 73

Glossary 74


The National Anti-Poverty Commission iii

LIST OF TABLES, ILLUSTRATIONS, & BOXED INFO

Table 1 Respondents by individual and household incomes 11

Table 2 Respondents’ capital input, gross income and net income 11

Figure 1 Respondents by credit source 12

Graph 1 Respondents by credit use 12

Box 1 Types of microcredit 13

Box 2 Typical sari-sari store operations 13

Figure 2 Allocation of PDTF earnings 14

Table 3 PDTF financial report as of September 2014 15

Table 4 Status of PDTF applications by year 15

Figure 3 Project status by 2014 16

Graph 2 PDTF grants and status of projects 17

Table 5 Number and types of institutional respondents 18

Box 3 SEDPI training course for AFCCO and CRBCI 19

Box 4 Mindanao Microfinance Council Training 19

Box 5 Women’s group enterprise – Tailoring 20

Table 6 Projected PDTF corpus and earnings 30

Box 6 PBCI expanding operations and coverage 37

Table 7 PBCI microcredit and amortization period 38

Figure 4 PBCI-Kennemer shared value and benefits 40

Figure 5 PBCI-Kennemer intersecting value chains 41

Box 7 PATANOM Women’s Training 44

Figure 6 Dumingag Capability Building Framework-Components 50

Figure 7 ATFI Development Framework 52

Figure 8 Alter Trade Value Chain 55

Figure 9 Alter Trade transforming Farm Worker to Rural Entrepreneur 56


The National Anti-Poverty Commission iv

ACPC – Agricultural Credit Policy Council ADB – Asian Development Bank AFCCO – Abuyog Saint Francis Credit Cooperative ALRC – Agricultural Land Reform Code AMF – Agri-Micro Finance APCP – Agricultural Productivity Credit Program API – Annual Poverty Index ARB – Agrarian Reform Beneficiary ARC – Agrarian Reform Community ARSP – Agrarian Reform Support Project ASEAN – Association of Southeast Asian Nations ASKI – Alalay Sa Kaunlaran, Inc. ATC – Alter Trade Corporation ATFI – Alter Trade Foundation, Inc. BDS – Business Development Services BS – Basic Sector BSP – Bangko Sentral ng Pilipinas BSP-SDA – Bangko Sentral ng Pilipinas-Special Deposit Account BUB – Bottom-Up-Budgeting CARP – Comprehensive Agrarian Reform Program CBMS – Community Based Monitoring System CGAP – Consultative Group to Assist the Poor CHARM – Cordillera Highland Agricultural Resource Development CIIF – Coconut Industry Investment Fund CLOA – Certificate of Land Ownership Award COA – Commission on Audit CRBCI – Community Rural Bank of Catmon Inc. CSO – Civil Society Organization CSR – Corporate Social Responsibility CSV – Corporate Shared Value DA – Department of Agriculture DAR – Department of Agrarian Reform DBP – Development Bank of the Philippines DCP – Directed Credit Program DENR – Department of Environment and Natural Resources DOLE – Department of Labor & Employment DRR-CCA – Disaster Risk Reduction and Climate Change Adaptation DSWD – Department of Social Welfare and Development DTI – Department of Trade and Industry EIU – Economic Intelligence Unit E.O. – Executive Order FRIEND – Foundation for Rural and Industrial Equipment for National Development FTN – Fixed Treasury Notes GAA – Government Appropriation and Allocation GAP – Good Agricultural Practices GBL – General Banking Law GFI – Government Financial Institutions GOCC – Government-Owned and Controlled Corporations IEC – Information Education Communication IFAD – Food and Agriculture Development IGA – Income Generating Activities ILO – International Labor Organization

KAGABAY – Kababaihan Gabay ng Bayan KALAHI CIDSS – Kapit Bisig Laban sa Kahirapan-Comprehensive and Integrated Delivery of Social Services LACMS – Local Affairs Coordination and Monitoring Service LBP – Land Bank of the Philippines LBP-TBG – Land Bank of the Philippines-Trust Banking Group LCDP – Loan Collection Disbursement Point LFDWCC – Leyte Fourth District Women’s Credit Cooperative LGU – Local Government Unit MARADECA – Maranao People Development, Inc. MBO – Microfinance Business Office MCPI – Microfinance Council of the Philippines, Inc. MDG – Millennium Development Goals MF – Microfinance MFI – Microfinance Institution MMC – Mindanao Microfinance Council MOA – Memorandum of Agreement MPC – Multi-Purpose Cooperative NAPC – National Anti-Poverty Commission NCC – National Credit Council NCIP – National Commission on Indigenous People NCSB – National Census Statistics Board NEDA – National Economic Development Authority NGO – Non-Government Organization NLDC – National Livelihood Development Council NLSF – National Livelihood Support Fund NOFTA – Negros Organic Fair Trade Association NSA – National Sectoral Assembly NSCB – National Statistical Coordination Board NSM – National Strategy for Microfinance NSO – National Statistics Office OFW – Overseas Filipino Workers PAGCOR – Philippine Amusement and Gambling Corporation PAR – Portfolio At Risk PBCI – People’s Bank of Caraga, Inc. PCFC – People’s Credit and Finance Corporation PCIC – Philippine Crop Insurance Corporation PDTF – People’s Development Trust Fund PHILSEN – Philippine Social Enterprise Network PSA – Philippine Statistics Authority R.A. – Republic Act R&D – Research and Development RTB – Retail Treasury Bonds SCR – Sectoral Council Representative SE – Social Enterprise SEDPI – Social Enterprise Development of the Philippines, Inc. SME – Small Medium Enterprise SP – Service Provider SRA – Social Reform Agenda SSO – Special Sector Organizations TSKI – Taytay Sa Kauswagan, Inc. TWG – Technical Working Group WFP – Work and Financial Plan UNDP – United Nations Development Program

ACRONYMS



EXECUTIVE SUMMARY

A. Poverty and government response

The Philippines is mired in poverty. Various government attempts to address the root problems of poverty since the Ameri-

can colonial period, to the present, have largely failed. Poverty and inequality are basic problems of society. In recognition of

which, the Social Reform and Poverty Alleviation Program and the National Anti-Poverty Commission (NAPC) were created

by virtue of Republic Act 8425 in 1997. It also established the Peoples Development Trust Fund (PDTF), a resource whose

strategy to beat poverty is to build a network of micro finance institutions (MFI) that will provide the poor access to financial

resources enabling them to build microenterprises that will help lift them up from poverty. The Social Reform Agenda was to

be a total effort by NAPC and different agencies of government to address poverty and structural reforms in social, economic

and political life. It is now two decades since RA 8425 and ten years since the establishment of PDTF. Is the strategy of MFI’s

working?

It is the purpose of this research paper to present the PDTF experience in pursuit of the overarching goal of RA 8425 which

was to alleviate poverty; to recommend areas for policy review, reinforcing windows that effectively reduce poverty; and

opening new avenues that enable the PDTF to be an effective poverty-reducing resource.

This research activity (commissioned by NAPC) is brought about by a need to review the philosophy, rationale, roles, achievements and challenges of PDTF and its stakeholders including the National Anti Poverty Commission in the light of RA 8425.

B. Objectives and findings

The NAPC as the coordinator and motivator of the SRA in all government branches has oversight and monitoring functions

over the PDTF and its stakeholders. How was the PDTF used? As a mechanism in poverty reduction, how has it promoted

microfinance institutions (MFI) and how have microfinance products advanced the SRA? Moreover, how has it addressed the

needs of the poor (basic sectors)? How has the PDTF worked with her other major partner, the LGUs (local government

units)? What are PDTF’s strengths as well as its weaknesses? What are the new areas in which PDTF can best serve the needs

of the poor? These are the aims of this research paper.

The research effort has brought to light the phenomenal growth of the microfinance industry (MFI) which is designed to ena-ble the poor to access capital resources, build livelihoods and move away from poverty. The findings showed how market- oriented MFI grantees efficiently provided microfinance products to an expanding clientele. The findings present the prevail-ing poverty situation of many MFI clients, the challenges they face, and their unaddressed economic needs. Majority of MFI clients and beneficiaries were women, poor and with meagre assets. Although, on average the clients and beneficiaries of MFIs have accessed financial resources, engaged in and developed livelihoods, grossed higher incomes, but net incomes have not significantly risen. The poor are still beset with problems such as crop failures, highly unstable micro-enterprises, poor health and low education. While MFIs have multiplied and grown, PDTF has fallen short of its goals. It had envisioned a corpus of funds of PhP 4.5 bil-lion for strategic building of MFIs. But it has raised only P 100 million in corpus funds and disbursed only PhP9 million of dis-bursable fund for grants for operations in the last ten years. Despite significant support of PDTF to and growth among MFIs, despite policy reforms for financial inclusion, PDTF’s reach and impact among the poor has been minimal. Certainly, minus-cule compared to the reach of DSWD in its 4 Ps and dole out programs for the poor amounting to PhP40 Billion a year. While identifying areas where PDTF had made notable achievements primarily in building capability of MFIs with less than satisfactory evaluation and processing of applications and taking some remedial measures that address proponents’ handi-caps and difficulties, there are still great barriers that prevent the poor from accessing and using PDTF resources. Apart from MFIs, the other major partner of PDTF in the anti-poverty struggle is the LGU. In terms of effectiveness in the use of PDTF grants, local government units (LGU) were found to be wanting in the coherence and cohesiveness of responses that seek to utilize PDTF for anti -poverty programs and for enduring local development.



Limited financial resources and cumbersome requirements for a minuscule grant served as disincentives to access PDTF, among local government units. Related to this is the lack of a systematic and coordinated promotion plan to bring in more participation from the local govern-ment side. While phenomenal growth of MFIs is praised this paper also pronounces that there has been no significant reduction in the poverty rate of about 25% at a macro level in the country as a consequence of the MFI strategy.

C. Recommendations

Finally, the following are recommendations on how the PDTF can be an effective resource for alleviating poverty, especially in rural areas where majority of the poor live. Firstly, PDTF, a resource for development to address poverty of the basic sectors, needs to be bolstered. A corpus fund of PhP100 million fell short of the projections in amount and impact of development on the basic sectors and alleviate their poverty. PDTF can become a cutting edge resource if applied to where it is most needed. PDTF should now target the basic sectors and their institutions/organizations such as cooperatives and social enterprises. MFIs and banks are more than capable of self-development and their need is no longer that urgent. As shown in the study, there is also an equally important need to build capability of the local government units to be more strategic, making PDTF integral to SRA and poverty alleviation. Secondly, the need to move out of poverty requires a more strategic consideration of options. Local manufacturing that build local value and local jobs, maximize international markets by being part of global value chain. Initiatives and experiments in social enterprise, local supply-value chain for an internally driven growth, cooperatives+, are some models engaging the basic sectors as key players – as producers-workers, owners and asset builders. These experiments are still fragile and risky. It is in-cumbent on the government in a social reform mode to share the bigger burden of the risk. PDTF can start to take the risk by providing the necessary push for these initiatives to produce results in poverty reduction. There should be a review and redraft of the PDTF Manual of Operations. A more encompassing definition of capability building should be responsive to emerging needs of stakeholders, especially the basic sectors. Review and corresponding changes must be in the context of the recent changes in PDTF: composition and scope of decision making, priority targets and beneficiaries, fund allocation use. Finally, a redrawing of the concept of and commitment to the Social Reform agenda is recommended. Poverty and inequality cannot be solved except by an overhaul of priorities in governance, social reform should be primordial. The MFI strategy is most effective when the other aspects of the Social Reform Agenda, agrarian and land reform, population management, politi-cal reform, infrastructure support and basic services e.g., the professionalization, coordination and complementation of all gov-ernment agencies, reform of the education system and economic reform, are also conducted with effectiveness.



INTRODUCTION

A. Philippine economy and poverty

In 2014, the Philippine GDP was up 6.1%, placing the country behind China, which had the fastest economic growth for the year in Asia at 7.4%. Optimists claimed on the basis of this that the Philippine economy had turned the corner and become “an economic powerhouse in Asia, with strong growth driven mostly by domestic consumer spending on goods and services.”1 But an economic forecast released in July 2015 by the Economist Intelligence Unit (EIU), claims that despite fast economic growth being achieved in the past few years, the Philippine poverty rate will remain high, as the gap between the richest and the poorest sectors will continue to widen until 2019. [De Vera. Ben. O. Poverty Incidence. Philippine Daily Inquirer. July 24, 2015] Moreover, the performance of the Philippines on the first goal of the United Nations Millennium Development Goals (MDG) which is to eradicate or reduce poverty by the year 2015, is also apparently below par. [The Other Goals of MDG] According to Social Watch Philippines, the Philippine goals generally remain elusive. With the expiry date of the MDGs ap-proaching, no less than the United Nations has described the Philippines’ performance in that respect as dismal. Despite these assessments, the government claims that the country is generally on track to achieving most of the MDG goals”.(Raquiza, M., Social Watch. 2015] According to NCSB (National Census Statistics Board) data several targets for the goal seeking to eradicate Philippine poverty have not been met. While the goal was to halve the proportion of people whose income is less than US$ 1 a day, that is from 34.4% in 1991, to 17.2%, by the year 2015, it was assessed in 2012 that the proportion was still up at 25.2%.

The poverty rate in the Philippines Poverty is defined as a monthly income below P8,778 for a family of five that cannot meet basic needs of food and other ne-cessities. [Villasana. Poverty Count. 2014] According to the Philippine Statistics Authority, poverty incidence among Filipinos in the first semester of 2014 was estimated at 25.8% based on the 2014 APIS conducted in July 2014. This represented an increase of 1.2% from the same period in 2013, in which poverty incidence was recorded at 24.6%.[Poverty Statistics, March 6, 2015] Poverty incidence has hovered around 25% in the last decade from 24.9% in 2003 to 26.6% in 2006, to 26.3 % in 2009 and 25.2% in 2012”. [Raquiza.2015] As of 1st quarter of 2014, the incidence of poverty affected 25.8% of all Filipinos. [Annex: Table 1, & graphs 1 and 2] Extreme (subsistence) poverty is defined as a monthly income below P6,125 for a family of 5, which is the minimum required to meet only food needs. As of 2014, extreme poverty affected 10.5% of all Filipinos (or 1 out of 10).[Raquiza.2015] According to the EIU, the Philippines will remain one of the poorest economies in South East Asia, because of lower level of GDP per capita compared to that of the majority of the region’s developing countries – Singapore, South Korea, Taiwan and even Thailand. [De Vera B. PDI] EIU also claimed that the Philippines remains a small market despite a population of 100 million as the GDP per capita divided by population is only US$ 2,843 at market exchange rates.

Unemployment and Jobless Growth Philippines unemployment rate was at 6.6% in January of 2015, up from 6% reported in October 2014 but down from 7.5% in the same month a year ago.2 The employment rate is estimated at 93.4% in January 2015, up from 92.5% a year earlier. There were 37.4 million employed people: 54.6% worked in the services sector, 29.5% in agriculture and 15.9% in the industry sector.

1 www.globalsecurity.org (May 24, 2015) 2 http://www.tradingeconomics.com/articles/03122015021126.htm

http://www.glbalsecurity.org

http://www.tradingeconomics.com/articles/03122015021126.htm



The number of unemployed persons decreased to 2.6 million in January from 2.9 million a year ago. Among unemployed peo-ple, 66% were males. The age group 15 to 24 years old accounted for 47.3 % of total unemployed, while the age group 25 to 34 accounted for 31.6%. By educational attainment, 20.4% were college graduates, 13.0% were college undergraduates, and 34.4% were high school graduates. Among regions, the National Capital Region (9.3%), Calabarzon (8.6%), Ilocos Region (8.5%) and Central Luzon (8.5%) showed unemployment rates higher than the national average. According to the International Labor Organization the Philippines has the highest unemployment rate among members of the Association of Southeast Asian Nations (Asean). This was stated in a report of the International Labor Organization (ILO) pub-lished in 2014. The Philippine unemployment rate in 2013 stood at 7.3%, the highest compared to neighboring countries like Indonesia 6.1%, Brunei 3.8%, Myanmar 3.4%, Malaysia 3.2%, Thailand at 0.8%, Vietnam at 1.9%. [ILO, Global Employment Trends. 2009] But more than the high unemployment rate, is the stagnation in peoples livelihoods. Social Watch reports that jobs have not improved despite higher growth rates indicating that unemployment is not sensitive to changes in labor trends because the country’s labor force is significantly composed of self-employed workers and unpaid family workers. In the Philippines most people do not have adequate access to social protection, the majority of people have to work in order to survive.” “Thus the underemployment rate is the more meaningful indicator. The underemployment rate has generally been high in the Philippines, registering a high average of 19.25% in the last ten years. However, it is not just access to jobs but quality jobs that allows people to combat poverty. One can have a job but be part of that category referred to as the ‘working poor.’ “Because of the bleak employment scenario, some eight million Filipinos have opted to work overseas. Their earnings, sent back to the country in the form of remittances at around US$20 billion annually, drive consumption spending in the country. Overseas remittances benefit families at the higher end of the economic ladder, underscoring how overseas labor migration exacerbates inequalities in the country.“3

Income Gap Income inequality has been a persistent development challenge for the Philippines. In a statement released by the National Statistical Coordination Board in 2005, it was recognized that the income gap between the rich and the poor was wider in the Philippines than in Indonesia and Thailand, indicating serious inequality in the distribution of the country’s economic gains. It is noted that the income of the Philippines’ richest 10% of the population was in fact twenty times the income of the poorest 10%.[ADB. Poverty in the Philippines.2005] Former NEDA chief Cielito Habito, says the increased wealth of the country’s richest forty individuals is equivalent to the bulk —76.5% or more than three fourths— of the country’s overall increase in income last year, reinforcing perceptions of an “oligarchic” economy. Little wonder why the country’s Gini co-efficient —at .44— is among the highest in the region.[Raquiza, M. Social Watch] GDP per capita will continue to rise in the period 2015-2019, reaching US$ 4,549, per capita, but poor Filipinos will be left behind and would not feel the gains of a fast expanding economy, the EIU claims. Wide inequalities of income and the dispar-ity between the richest and poorest sectors will be acute, the EIU claims. NAPC understands several inter-related factors that cause poverty in the Philippines namely: inequality, poor economic growth and stability, and ineffective governance, and poorly designed anti-poverty interventions. (Source: KALAHI Conver-gence Working Together for Poverty Reduction, 2005). [Villasana. B. Poverty Count] The Asian Development Bank (ADB) cites the following as the major causes of poverty in the Philippines: Weak macro-economic management; employment issues; high population growth rates; an underperforming agricultural sector and an unfinished land reform agenda; governance issues including corruption and a weak state; conflict and security issues, particu-larly in Mindanao.

3 Ibid.



4 https://en.wikipedia.org/wiki/Agriculture_in_the_Philippines 5 https://en.wikipedia.org/wiki/Land_reform_in_the_Philippines

B. Government responses to poverty and landlessness

The Philippines is an agricultural country whose tenancy relations were institutionalized by the Spanish encomienda and haci-enda systems in nearly 400 years of colonization (1521-1898). By the end of Spanish rule, the Catholic church and Spanish and mestizo hacienderos had become the biggest landowners in the Philippines. Agriculture employed the overwhelming majority of Filipinos who were mostly landless and living in poverty. This pattern has survived today, with 47% of the Filipino workforce employed in agriculture as of 2013, according to World Bank statistics. Agriculture however accounts for 12% of Filipino GDP as of 2013, according to the World Bank.4 American colonizers and subsequent Filipino governments have tried to grapple with the intractable landlessness and agrarian poverty issues with little success. The American colonial government first bought friar lands in1904 for US$7.2 million amounting to some 166,000 hectares, of which one-half was in the vicinity of Manila. The land was eventually resold to Filipi-nos, some of them tenants but the majority of them estate owners.5 Commonwealth President Manuel L. Quezon implemented the Rice Share Tenancy Act of 1933 that sought to set a standard of share cropping between landlords and tenants at 50-50, but Congress set up requirements which practically nullified the provisions of the Act. As a new Filipino president was installed, he enacted laws that addressed tenancy and poverty which supplanted the program of the outgoing administration. President Ramón Magsaysay enacted Republic Act No. 1199 (Agricultural Tenancy Act of 1954) and RA No. 821 providing share tenants loans with low interest rates. Thus the government began to appropriate legal and financial “services” for land reform beneficiaries. [NAPC, Secondary documents] President Diosdado Macapagal enacted the Agricultural Land Reform Code (RA 3844) in 1963 abolishing tenancy and estab-lishing owner-cultivatorship and the economic family-size farm as the basis of Philippine agriculture, hoping to divert landlord capital in agriculture to industrial development. [NAPC documents] On September 22, 1972, President Ferdinand E. Marcos after having declared martial law a day earlier, declared sweeping land reform all over the country through PD 27. The law provided for Masagana 99 loans to farmer beneficiaries, in order to increase rice production to 99 cavans of rice per hectare. There was very low repayment rate for these loans so that eventual-ly this failed to answer the lack of farmer’s access to credit services. [NAPC documents] There were parallel government loan programs for fisherfolk called Biyayang Dagat but the same problem of low repayment rate of borrowers eventually scuttled the program. Tulong sa Tao, a loan program for livelihood capital for urban poor was discontinued for the same reasons. After the fall of the Marcos dictatorship, President Corazon Aquino signed Republic Act No. 6657, known as the Comprehen-sive Agrarian Reform Law. She provided credit resources to the rural and urban poor by replicating the Bangladesh model of Grameen Bank which was promoted by the PCPC in the Philippines. About 27 micro finance institutions adopted this model in providing credit services to the poor. [NAPC] President Fidel V. Ramos, president from 1992-1998, speeded up the implementation of the Comprehensive Agrarian Reform Program (CARP) of former President Corazon Aquino in order to meet the ten-year time frame. However, there were con-straints such as the need to firm up the database and geographic focus, generate funding support, strengthen inter-agency cooperation, and mobilize implementation partners, like the non-government organizations, local governments, and the busi-ness community. In 1992, the government acquired and distributed 382,000 hectares of land with nearly a quarter of a million farmer-beneficiaries. This constituted 41% of all land titles distributed by the Department of Agrarian Reform (DAR) during the last thirty years. But by the end of 1996, the DAR had distributed only 58.25% of the total area it was supposed to cover. From January to December 1997, the DAR distributed 206,612 hectares. That year, the DAR had distributed in a decade a total of 2.66 million hectares which benefited almost 1.8 million tenant-farmers.

https://en.wikipedia.org/wiki/Agriculture_in_the_Philippines

https://en.wikipedia.org/wiki/Land_reform_in_the_Philippines



Ramos signed R.A. No. 8532 extending the Comprehensive Agrarian Reform Law (CARL) for another ten years. He signed this law on February 23, 1998, a few months before the end of his term. President Ramos also created the Presidential Commission to Fight Poverty in 1994 and the Peoples Credit and Finance Corpo-ration (PCFC) in 1995 tasked to provide micro finance institutions and services to the poor, with a gender bias for women. As of end 2013, PCFC’s microfinance program is implemented by its 111 microfinance institution partners in all 16 regions, 79 of 80 provinces (99% coverage), 141 out of 143 cities (98% coverage) and 1,223 of 1,497 municipalities (82% coverage) nationwide. Cumulative loan releases have reached PhP19.56 billion with active end-clients of more than 2.40 million. PCFC sits as Chair and Secretariat to the Microfinance Program Committee (MFPC) whose tasks include monitoring the accomplishments of the government’s microfinance program and promoting the industry as an effective tool in poverty alleviation efforts. [NAPC docu-ments] But perhaps the greatest contribution of Pres. Ramos was the enactment in 1997 of the R.A. 8425 (Social Reform & Poverty Alleviation Act) creating the National Anti Poverty Commission under the Office of the President. This called for the merging of the Presidential Commission to Fight Poverty, Presidential Commission on Countryside Development, and Social Reform Coun-cil into one commission, the NAPC. R.A. 8425 also created the People’s Development Trust Fund (PDTF to serve the needs of the poor. In 2001, President Gloria Macapagal Arroyo launched the “Kapit Bisig Laban sa Kahirapan” or KALAHI as the administrations’ over-arching framework and program for poverty reduction. This built partnerships to develop leaders and communities in rural and urban poor families in Metro Manila and Basilan. A year later, Arroyo ordered the PCFC to be administered by PDTF so that microfinance services will be delivered to the poor. When President Benigno Aquino took office, there was a renewed push to complete the agrarian reform program. The Depart-ment of Agrarian Reform adopted a goal to distribute all CARP-eligible land by the end of Pres. Aquino's term in 2016. As of June 2013, 694,181 hectares remained to be distributed, according to DAR. Notwithstanding the high accomplishment rate for land equity, land reform has failed to reduce poverty according to Dr. Raul Fabella, professor at the UP School of Economics for many reasons, among which is the economic size of land (3 hectares) for agrarian reform beneficiaries. The small size of land has “high default risk and has less capacity to command credit,” Fabella claims.

RA 8425: A comprehensive anti poverty approach RA 8425 is a new approach to the anti poverty debate in the Philippines. In December 11, 1997 under the leadership of Presi-dent Ramos, the country understood what was necessary for the state to battle the age-long scourge of rural and urban pov-erty and enacted the Social Reform and Poverty Alleviation Program, creating for the purpose the National Anti Poverty Com-mission (NAPC). R.A. 8425 policy is to “adopt an area- based, sectoral and focused intervention to poverty alleviation; pursue asset reform or redistribution of productive economic resources to the basic sectors including the adoption of a system of public spending which is targeted towards the poor, and institutionalize and enhance the Social Reform Agenda (SRA) which embodies the results of the series of consultations and summits on poverty alleviation.” [R.A. 8425] (emphasis supplied) It also created the National Anti Poverty Commission (NAPC) “to support the above-stated policy and serve as the coordinating and advisory body for the implementation of the SRA.” [R.A. 8425] The Act also established the People’s Development Trust Fund (PDTF), “a trust fund intended for the development and strengthening of institutions involved in providing microfinance and micro-enterprise services to the poor...The PDTF income shall be directly utilized for implementing microfinance and micro-enterprise capability programs and projects.” Monitoring the utilization of the fund shall include performing other oversight functions. [E.O. 110] The SRA and NAPC are now two decades old. On the other hand the PDTF is now on its 10th year. RA 8425 defined the poor as “individuals and families whose incomes fall below the poverty threshold as defined by the Na-tional Economic and Development Authority (NEDA) and/or cannot afford in a sustained manner to provide the minimum basic needs of food, health, education, housing and other essential amenities of life.” Absolute poverty refers to the condition of the household below the food threshold level while relative poverty refers to the gap between the rich and the poor.



Basic sectors refers to the (12) disadvantaged sectors of Philippine society, namely (1) farmer-peasant, (2) artisanal fisher-folk, (3) workers in the formal sector and Overseas Filipino Workers (OFW), (4) workers in the informal sector, (5) urban poor, (6) indigenous peoples and cultural communities, (7) women, (8) differently-abled persons, (9) senior citizens, (10) victims of calamities and disasters, (11)youth and students, and (12) children. It also included (13) cooperatives and (14) non-government organizations (NGOs). Social Reform refers to the continuing process of addressing the basic inequities in Philippine society through a systematic, unified and coordinated delivery of socio-economic programs. These inequalities are basically caused by the deprivation of a sector of the population of the assets by which they can se-cure their living. These assets include: b) natural assets, e.g., land, water, minerals, marine, natural resources; b) physical resources, e.g. roads, infrastructure, machines, storehouses, production houses; c) human, e.g. skills, education, nutrition, mobility, demographic characteristics, etc.; d) financial – income, savings, loans, capital; and e) social, e.g. traditional practic-es, solidarity, labor collectives, bayanihan, networks, etc. [ADB 2009]

RESEARCH OBJECTIVES AND METHODOLOGY

As a monitoring and oversight body, NAPC saw the need for a study on the experience of PDTF, its policies and implementation, to determine how it can better serve the anti-poverty struggle which is at the core of the SRA.

A. Research Objectives

How was the PDTF used as a mechanism in poverty reduction? How has it advanced the SRA and how has it addressed the

needs of the poor (basic sectors)? What are its strengths and as well as weaknesses? What are the new areas in which PDTF

can best serve the needs of the poor? These are the aims of this research paper. Specifically, the study will:

1. Gather all relevant statements of policies and guidelines governing PDTF programs and projects and to enable the NAPC,

the PDTF Executive Committee and the Office of the President – Presidential Management Staff, to:

a) Review the goals, policies and guidelines of and governing PDTF current programs and projects;

b) Conduct assessment and analysis of relevant policies and guidelines and determine how effective the PDTF is as a

mechanism/tool and resource to fight poverty;

c) To determine the impact of PDTF intervention made to MFIs, LGUs and other project proponents; to the lives of the

end-clients and beneficiaries.

2. Recommend policy program reforms that: a) Encourage access to various assets including capital for the poor and marginalized sectors; b) Review emerging needs of Basic Sectors on various assets including capital support for enterprise development and

capacity building; and 3. Identify PDTF programs that need to be strengthened or other windows that need to be opened that best support the

needs of the poor sectors.

B. Research Problems

The conceptual-operational framework shows the cascading funds and benefits of PDTF that will address the central prob-

lem which is: “How effective is capability building of MFIs and LGUs as users and as intermediaries, in reducing poverty?”

Corollary questions would be:

1. Who are the main players in PDTF (microfinance) and how did they play out their roles in SRA and poverty reduction?

2. How has and to what extent has PDTF in microfinance and LGUs been instrumental in improving the well-being of the

poor, thus act as a driver/s in poverty reduction?

3. How else can PDTF become more responsive to current and emerging needs of basic sectors at the policy level and in im-

plementation?



C. Assumptions

1. The lack of access to credit and other microfinance products is a major cause of poverty among basic sectors.

Hypothesis 1: A robust microfinance industry increases access of basic sectors to credit and other microfinance products

and lift them out of poverty.

2. Developing a nationwide network of viable and sustainable microfinance institutions and micro-enterprise business

development service groups will be able to deliver effective and efficient microfinance services to the poor and help to

develop enterprises. [E.O 110]

Hypothesis 2: Building the skills and knowledge of basic sectors to build and enhance livelihoods will lift them up from

poverty.

3. Local government units shall be responsible for the formulation, implementation, monitoring and evaluation of the Na-

tional Anti-Poverty Action Agenda in their respective jurisdictions, identify the poor in their respective areas, identify

and source funding for specific social reform and poverty alleviation projects.

Hypothesis 3. Local government units carry out Anti-Poverty Action Agenda and source funds, including PDTF, for tar-

geted poor in their respective jurisdictions.

D. Scope and limitations

The main sources of data for the study came from interviews with key persons of PDTF grantees, past and present staff of NAPC, PCFC staff directly involved in administration of PDTF. Data were also gathered from a survey of MFI clients and bene-ficiaries of PDTF and sectoral representatives of the basic sectors, 230 and 270 respondents, respectively. Focus-Group-Discussions (FGD) were attended by participants to the various training activities and local government personnel. Review of literature and secondary data were taken from government documents, MFI reports and publications and re-search report on PDTF, microfinance and poverty related studies. Additionally, five case studies of grantees and non-grantees were chosen to demonstrate some distinctive approaches to development and poverty alleviation. Simple statistical analysis was used for surveys and other quantifiable data. Triangulation method was made through groups meetings and focus-group discussions among clients and PDTF training participants. The distances of grantees/ projects, schedules and availability of respondents were a major constraint. Four grantees and three key informants had to be taken off the list of respondents. Access to financial and historical information from MFIs, LGUs and clients was a real challenge. Internet was immensely helpful filling in data gaps and data validation.



Section 2 - FINDINGS

A. MICROFINANCE

RA 8425 explicitly pointed to microfinance as a key strategy in its Social Reform Agenda (SRA) with the expectation that access to microfinance by the poor would alleviate poverty. Thus, microfinance, in general, and MFI grantees’ experiences, in particu-lar, were given important focus in this study. To this end, data on MFI-BDS and their clients and data on LGUs were disaggre-gated as far as possible.

Finding 1: The Microfinance Industry in the Philippines has shown remarkable growth.

The rapid growth of microfinance institutions started in 1989 with the “Grameen Bank Replication Project” of the Department of Agriculture (DA). From 27 MFIs then, it has grown to more than 530 MFIs (BSP, 2014) or a 1,751% increase in two and a half decades. [mixedmarket.org] In six years (2005 to 2011) the total number of microfinance borrowers increased by 138.7% from 1.5 million to 3.6 million. In total loans outstanding it increased by 175.5% from PhP7.4 billion to PhP20.6 billion (2005-2011). Total savings deposit increased by 252.8% from PhP2.6 billion in 2005 to PhP9.2 billion in 2011. [Harabadas & Umali]

The twin drivers in the growth of MFIs were the substantial support from international aid agencies and multilateral banks and the enabling policy environment.6

Particularly in the early years, MFIs were heavily supported by grants from multilateral banks, aid agencies and governments that played a pivotal role in their establishment and institutional sustainability. Among the early funders were aid agencies of Protestant and Catholic churches in Europe, the United Nations Development Program (UNDP), World Bank-International Bank for Rural Development (WB-IBRD). More recent supporters were the Asian Development Bank (ADB), International Fund for Agricultural Development (IFAD), USAID and other government aid. MFIs also received funds and non-financial support from their local and international networks for capitalization and in many cases, part of their operating funds.7

As a government fund, PDTF was designed to be a resource for building the capability of MFIs to increase their reach and be financially self-sustaining.

In 1997, the National Strategy for Microfinance (NSM) saw to a determined shift from “welfare” to market-orientation that further fueled this growth. The mainstreaming of microfinance in the banking sector through amendments of the General Banking Law (GBL) facilitated the entry of a significant number of rural banks as retailers. Universal and commercial banks as wholesalers of loan funds to MFIs increased the participation of the private sector in the provision of microfinance services. In line with the National Strategy for Microfinance (NCC 1997) to develop a micro financial market in a market-oriented and liberalized economy, the role of government is to provide infrastructure and capacity building, a phase-out of subsidized credit programs and prohibit non-credit granting government agencies in the implementation of credit and guarantee programs. [Micu. 2010] The Regulatory Framework for Microfinance in the Philippines clearly defined the respective roles of government entities involved in microfinance with the end in view of fostering more efficient and effective microfinance market. These principles served as a guidepost for subsequent policies and regulations that were put in place to help microfinance industry players achieve their twin goals of outreach and financial sustainability.

6 In 1992, the Human Development Report (HDR) of the United Nations Development Programme (UNDP) established the lack of access to credit and capital by the poor as one of the major causes of poverty in the world. The Department for International Development (DFID) of the United Kingdom has also determined that financial capital is the most flexible type of capital but it is also the least available to the poor. The combina-tion of these two obstacles –the lack of access to market and lack of access to capital- constitutes the biggest root causes of poverty. Thus, the key challenges for microfinance to achieving a sustainable path to poverty reduction in the Philippines are in its ability to: (a) increase its outreach to more poor people, particularly those in rural, agricultural communities; (b) promote the integration of micro-entrepreneurs to the mainstream market; (c) ensure that MFIs are profitable and at the same time create impact in reducing poverty among their clients; and (d) in-crease access of the poor to the formal financial system.

7 Grantee reports and profiles.



Quick in their response, MFIs expanded operations beyond their core areas and some reached out to overseas workers on

-site. As intermediaries of government directed credit program (DCP), they accessed credit funds whose interest were

lower than market rates. Through the DCPs, MFIs reached the rural poor, particularly agrarian reform beneficiaries (ARB)

and communities (ARC). Additionally, BSP’s policy refinements, economic and financial programs and financial literacy

campaigns, supported in no mean way, MFI efforts for growth and outreach, [BSP, Financial Inclusion] implicitly subsidiz-

ing MFI operations.

Finding 2: The biggest achievement of PDTF was enhancing the institutional capacity and growth of its MFIs.

Keeping faith to its mandate, PDTF placed a larger part of its resource to building the capability of its MFIs to be viable and sustainable. For every 3 grantees, two were MFIs, (26 or 74.3% of all grantees) while PhP0.69 centavos for every peso grant went to MFIs.8 MFIs respondents affirmed that PDTF was instrumental in improving their over-all performance. Capability building grants enhanced their management systems and operations: improved governance and competence of personnel, new and effi-cient systems were installed, products were enhanced and delivery of services provided to customer’s satisfaction. Increased collection, better system of credit-background investigation (CI-BI) that reduced past due accounts and over-all portfolio at risk (PAR) and increase in profitability were some of the indicators of performance and growth. New micro-finance units were established, increasing their outreach. Good performance allowed to access bigger and more govern-ment support and benefits. New microfinance products were developed and started the roll-out, such as agri-microfinance, a package with micro-insurance. Four MFI grantees were in the top ten of Philippine microfinance institutions: In number of borrowers, Taytay Sa Kauswagan, Inc. (TSKI) ranked 6th, Negros Women of Tomorrow, Foundation (NWTF), 8th and Alalay Sa Kaunlaran Inc. (ASKI) was 10th. ASKI and People’s Bank of CARAGA, Inc. (PBCI) ranked 7th and 10th, respectively, in terms of gross loan portfolio. In number of depositors, TSKI and PBCI ranked 5th and 8th, respectively. [Habaradas & Umali] ASKI had total as-sets of US$35.7 million (2014), NWTF assets worth US$27.5 million (2015), PBCI, US$25.4 million (2015) and TSKI, US$20 million (2014).[Micu 2010]

Finding 3: MFIs were reaching the poor but its impact on poverty alleviation is minimal.

In just six years, the number of microfinance borrowers increased by 138.7%, 2005-2011.[Harabadas & Umali] This may be a staggering numerical growth, however, “the reach of MFIs was still small compared to the whole population who ac-cessed microcredit.” [BSP National Baseline Survey]

B. RESPONDENTS - MFI CLIENTS

Finding 4: Two of 3 clients, were poor, their assets meagre, with hardly any surplus.

Income and sources In the survey of 230 clients of MFI grantees it was found that 2 of every 3 clients or 60.2% were poor, earning a monthly income below PhP7,778.00.[Villasana] Fisherfolk were found to be the poorest, followed by farmers, indigenous people and micro-entrepreneurs. On extreme (subsistence) poverty were half of all clients, 53.4%, earning within the income bracket less than PhP1,000 to P5,000.00. (Profile of clients - Annex)

8 PhP9.5 million of PhP13.2 million PDTF grant released as of December 30, 2014



Breaking down further the income categories of the poor showed the following:

Table 1. Respondents by individual and household incomes.

Individual Income Bracket Individual

% Household Income

Bracket HH %

1,000.00 and below 14.9 1,000 and below -

1,001-5,000 38.5 1,001-5,000 30.9

5,001-7,000 6.8 5,001-7,000 14.5

Sub-total 60.2 45.4

7,001-8,000 3.1 7,001-8,000 7.5

Total 63.3 Total 52.9

8,778-15,000 20.2 8,001-15,000 8.9

15,001-21,0000 15.6 15,001-21,000 12.7

21,001-50,000 0.4 21,001-30,000 7.9

30,001-50,000 7.9

50,001 and above 9.7

N/A 0.5 N/A -

TOTAL 100.0 TOTAL 100.0

A substantial number of respondents had multiple income earners in the household, 42.5%, which considerably increased house-hold income. But even with aggregate household income, still more than half of clients fell below the poverty threshold. Re-mittance from OFWs was significant addition to household income with ¼ of respondent households were remittance recipient. Farming was the main source of income of 62.9% of respondents followed by those engaged in micro-enterprises, 23%. Micro-enterprises were mostly sari-sari stores and vending. Fishing was for 10% and from informal work was 2%. The rest were profes-sionals, 2.1%. Table 2. Capital input, gross income and net income.

Amount Capital Gross Income Net Income

Freq % Freq % Freq %

< 10,000 28 34.6 21 25.6 44 50.0

10,001-20,000 19 23.5 11 13.4 14 15.9

20,001-30,000 10 12.3 6 7.3 6 6.8

30,001-40,000 3 3.7 6 7.3 4 4.5

40,001-50,000 7 8.6 7 8.5 3 3.4

50,001-60,000 14 17.3 3 3.7 17 19.3

60,001-70,000 0 - 5 6.1 0 -

70,001-80,000 0 - 1 1.2 0 -

80,001-90,000 0 - 1 1.2 0 -

90,001-100,000 0 - 5 6.1 0 -

> 100,000 0 - 16 19.5 0 -

Sub-total 81 35.2/100 82 35.7/100 88 38.3/100

NA/NR 149 64.8 148 64.3 142 61.7

TOTAL 230 100 230 100 230 100

Most respondents required capital for their economic activities, 97.9%9. Cost of input and the resulting gross in-comes and net incomes from economic activities followed a definite pattern. Majority clustered around the lowest amount of less than PhP10,000.00. But the number of clients was reducing as the amount increased. Table 2 showed that whether capital input were high or low, net incomes were only around breakeven point. Net incomes realized hardly allowed clients to have surplus, much less assets. Calamities and pesti-lence, sickness and death in the family easily cripple their source of living. Sources of capital mostly came from loans. Other sources were savings or surplus income, donations, and retire-ment or separation pay.

9 Data on capital input was 35.2% of respondents, 35.6% on gross incomes and 38.2% on net incomes



Credit, use and benefits Three of every 4 of respondents availed of loans, 75.3%. They borrowed mostly from cooperatives and banks, 93.6%. Other sources of loans were relatives and friends, 3.3%, informal lenders and pawnshop, 3.1%. Loans were small, PhP15,000 and below, 52.6%, half of this (24.6%) loaned out PhP5,000 and below. Those who borrowed PhP30,000 and above were mostly ARBs in rice, corn and sugarcane. Nine out of 10 were repeat borrowers with 12 years of loan availment. Figure 1. Sources of Credit

Most borrowers, (63.8%) used their loans to finance economic activities. Other uses were: education and family daily needs, e.g. food, house and repair, (31%); to pay off other loans, CBU contribution, (5.2%). Repeat borrowers, or those who have made more than one loan, were mostly loans for economic activities. Loans for micro-enterprises usually are for a three-month period. Rice and corn production for six months, 2 production cycles a year while sugarcane is annual. Respondents said that credit ensured and improved incomes – an accessible source of cash and inputs. Graph 1. Uses of credit



Box 1. Types of Microcredit

Agricultural loan Loan amounts varied according to use. ARBs in PATANOM, could take a maximum of PhP65,000.00 for re-planting of sug-arcane and PhP60,000.00 for “raton” (second or third growth cane) per hectare per cycle. For corn and rice, ARBs can take out PhP32,000.00 and PhP30,000, respectively. However, the amount is divided into cash loan (31.25%) and inputs in kind (68.75%). Repayment would be just after harvest. (Credit Fund is from the Agricultural Credit Productivity Council-ACPC).

Micro-enterprise loan SIKAP (Serbisyo Ihatag sa Katawhan Alang sa Paglambo), the microfinance program of CRBCI is typical to MFIs. It has three core products: credit, savings and insurance whose target market were rural farmers and tenants, low income earn-ers and the informal sector, who already have existing income-generating activity or microenterprise. The first loan is as low as PhP1,000.00-3,000.00 with a six-month repayment period. Succeeding loans can gradually increase up to PhP50,000.00 depending on repayment and business performance and capacity to pay based on cash flow. Loans are non-collateralized.

-000-

Assets Of 72 (31.3%) respondents who owned farmlands, most farm owners (19.3%) were professionals and NGO workers. The rest of 12% were farmers (19), IP (7) and fisherfolks (0.8%). Savings of the majority, 70.4% were small with an average of PhP5,000 and less. Most respondents had their own houses, 90.8%, but only 61.3% owned the home lot. Other assets mentioned were household appliances and mobile phones. Only 3% had substantial investments, e.g. farm machineries, shops, motorcycles. Two respondents had time deposits.

Calamities, lack of capital and poor returns from economic activities were major challenges faced by clients.

Calamities-disaster was the problem faced by majority of respondents, 74.4%. Calamities refer to typhoons, flooding, drought, and crop failures, pestilence. Unpaid credit sales were the problem of 24.4% respondents while 18.6% said their problem was lack of or inadequate capital. These twin problems come down to lack of capital. Unpaid credit sales can easily wipe out a small revolving cap-ital leading to closure of micro-business. Competition and/or poor business environment was the problem mentioned by 12.7% of respondents. Ten per cent (10.4%) said, sickness and death was their biggest problem. With small savings or no surplus, capital is easily wiped out. Other problems mentioned by the rest were high cost of capital, 1.7%, care for children and elderly, peace and order, lack of jobs, poor roads or high cost of transportation, 1.4%. (Annex -Table on Problems)

Box 2. Typical sari-sari store operation

“A 15-30% mark up of goods in a sari-sari store would be just enough to keep the store open and to repay the 3% interest (average market-rate) on the loan. Whatever net income made goes directly to daily consumption – the equivalent of a day’s wage in running the store, roughly PhP250.00 on a good day. We have two major problems, lack of roads and typhoons. It is only by ‘banca’ that we get to the town to transport goods and other necessities. When a storm comes we are completely cut-off. We could not bring or get supplies to and from the town. Customers can’t sell their products. Without income they buy daily needs, cooking oil, laundry soap, etc., on credit. For days, we could not buy supplies for the store. These are the very bad days. Fishing-mining community Binuangan, Tubay, Agusan del Norte.

-000-



Training in disaster-preparedness and having multiple income sources were the solutions to calamities that most respondents said. For the problem of unpaid credit sales, respondents said that the solution was to increase capital and strategize ways to compel creditors to pay. A small but significant number of respondents would seek government assistance for their problems. The challenges that clients faced were strategic and at the root of poverty. On the other hand, solutions they have taken to address them were survival responses and not poverty reducing measures.

C. PDTF OPERATIONS

Created by R.A. 8425, the Social Reform and Poverty Alleviation Act of 1997, the PDTF is one of the resources for poverty allevi-ation. It is intended to “build the capability of microfinance institutions (MFI) and enable them to provide microfinance prod-ucts and micro-enterprise services to the broadest section of the poor. Secondly, it is a resource for local government units, with microfinance and micro-enterprise services for its poor constituents, in pursuit of their Social Reform (poverty reduction) Programs.”10 In essence, MFIs and LGUs are intermediaries through which the poor are capacitated to build viable and sustain-able micro-enterprises. A Manual of Operations was drawn-up to guide the administration, allocation and use of funds, including the process of award-ing grants, monitoring and evaluation. The PCFC was designated as administrator of the fund. Its President and CEO “shall be responsible for the direct management, utilization and disbursement of the Fund.”11 The PCFC Board, of which the NAPC Secre-tary is a member, shall “ratify resolutions adopted by the PDTF Executive Committee during PCFC stockholders’ meeting. It has eight (8) members, representing the PCFC (5), NAPC (1) and Basic Sectors representatives (2). The Executive Committee has the following functions: 1) Provide strategic direction for the PDTF operation in accordance with the social reform and poverty reduction goals; 2) Approve policy guidelines for the PDTF operation; 3) Ensure the effective management and utilization of the Fund; and 4) Review and approve application for accreditation of Service Providers and grant requests from eligible proponents. [PDTF

Manual] A Technical Working Group (TWG) whose functions were: (1) to evaluate and recommend the approval of project proposals and accreditation of service providers; (2) Review and recommend policy guidelines and amendments on the existing policy; (3) Review and recommend joint Work and Financial Plan (WFP) or budget for approval of PDTF ExCom; (4) Review and endorse materials for PDTF ExCom; and (5) Conduct monthly meeting to assess PDTF operations, was created. [PDTF Manual] PCFC and NAPC disseminate information about PDTF to qualified grantees. In practice, PCFC circulates information, require-ments and process of accessing PDTF grants among its MFI and BDS members-partners during meetings and assemblies such as the Microfinance Council of the Philippines, Inc. (MCPI), member cooperatives, etc. NAPC, on the other hand, reaches out to local government units in the course of SRA localization programs and among basic sector representatives.

A corpus of PhP4.5 billion was projected for PDTF within ten years, the earnings of which are disbursable for grants and for administration expenses.

Only the earnings of the corpus is disbursable for grants and administration purposes. Allocations were as follows: “50% for grants to MFI-NGOs, cooperatives, banks, and special sector organizations (SSOs); 25% for LGUs under-taking self-help projects related to microfinance; and 25% for administrative expenses. The 25% administrative fund is shared between PCFC and NAPC where PCFC gets 70% share for administration while NAPC’s oversight-monitoring expenses is allocated 30%.[PDTF Manual]

Figure 2. Allocation of PDTF earnings

10 R.A. 8425, Section 11 and EO 110, Section 4. 11 PDTF Manual of Operations



The initial fund of PhP100 million was a loan from the National Livelihood Development Council (NLDC) in 2004. It was paid by NAPC in the same year with funds from General Appropriations. In 2006, the fund was transferred to the PCFC which was the body directed as PDTF administrator. [PCFC] No additional fund was raised since then. Table 2. PDTF Financial Report as of September 30, 2014.

Finding 5: PDTF remained a small resource and fell short of the envisioned corpus of PhP4.5 billion in ten years. In ten years (2004-2012), PDTF generated PhP56.49 million in interest earnings.12 After deducting PhP14.88 million as cost of fund, the total disbursable amount was PhP41.61 million (73.4%) for grants and for administration, PhP31.2 million and PhP10.4 million, respectively.

Grant applications and status During the ten-year period, ninety-eight (98) applications were received, 54 projects were approved or 55.1% of total applications. The rest, 40 or 40.8%, proposals were disqualified. Reasons by PCFC for a low rate of approvals were: (a) ineligibility of the pro-ject’s purpose based on PDTF guidelines; and (b) funds applied for were much higher than the prescribed grant ceiling, and (c) ina-bility of proponent to comply with documentary requirements and/or provide the 25% counterpart of project cost. In a few cases, applications were withdrawn because proponents had lost interest or the submitted project had become irrelevant. Table 3. PDTF applications by status

12 This was derived from interest earnings in government securities, e.g. Land Bank of the Philippines-Trust Banking Group (LBP-TBG) placement of P55.122M in high-yielding government securities such as Fixed Treasury Notes (FTNs) and Retail Treasury Bonds (RTBs) with a coupon rate of 2.80% per annum, P17.374M placed in a short-term investment (i.e., Bangko Sentral ng Pilipinas-Special Deposit Account (BSP-SDA) to generate additional income while awaiting disbursements for grant funding and PDTF administration.

PROPOSAL 2006 2007 2008 2009 2010 2011 2012 2013 2014 TOTAL

RECEIVED 2 1 18 14 20 10 10 9 14 98

RETURNED 1 0 7 5 13 3 1 9 1 40

EVALUATED 1 1 11 9 7 7 9 0 13 58

APPROVED 1 1 11 8 4 7 4 5 13 54

COMPLETED 0 0 2 1 8 4 7 4 3 29



Project Proposal Processing Ideally, it takes 30 days or one month to complete the processing of applications - from date the application is received, approval. The actual processing period could not be determined for lack of data on dates that applications were received. However, the period from project approval to MOA signing took almost 3 months (2 months and 19 days), on the average. Average time be-tween MOA signing and release of first tranche was one month and 3 days. ASKI took the longest processing time of 8 months and 4 days, from the time its proposal was approved to the release of funds for the first tranche. There were no data on length of time from receipt of application to project approval.

The lack of capacity of applicants in preparing project proposals barred them from accessing PDTF grants. The most common cause of delay was incomplete documentary requirements. But the more daunting challenge, as PCFC found, was the applicants’ lack of capacity in preparing project proposals, particularly among LGUs. Remedial measures were taken by PCFC such as engaging a service provider for this purpose and to incorporate the cost in the project budget. A simplified project proposal template to replace the weighty proposal guide was another. Finally, PCFC-TWG took over the work of writing pro-posals. The first grant was approved in 2006 for the Kasanyangan Foundation, Inc. (KFI) project in Zamboanga City. Since then, 53 more projects were approved. The number of applications and approvals per year was very uneven, averaging at 11 applications, 6.4 evaluated and 6 approvals. [PCFC] PCFC noted, with concern, that only 3 applications were received in the first half of 2015. In 2014, a total of 54 projects of 48 grantees were approved. Six grantees had two projects each. While the final phase of docu-mentation was in progress, 11 projects were cancelled because grantees were unable to provide the 25% project counterpart and a loss of interest on the part of proponents. In 2015, two LGUs withdrew their proposals that reduced to 41 the total PDTF projects. The lengthy processing time and fastidious requirements had taken its toll, either the project focal person had left and/or the LGU had moved on to other things which rendered the PDTF project to become irrelevant.

Implementation Prescribed implementation period was one year but most grantees took more than one year to complete their projects with an average period of 1.5 years. Delays in fund releases caused project activities to be postponed and re-scheduling– matching availability of resource persons, participants, and staff - became a strenuous exercise of patience. PBCI took the longest with 3 years and 3 months, while TSKI took only 8 months to complete. In January 2014, 2/3 (29 or 70.7%) of projects were complet-ed, Nine (22.0%) were still in implementation stage while 3 (7.3%) were in the stage of finalizing their Memorandum of Agreements (MOA). Figure 3. Project status as of December 31, 2014 Monitoring and evaluation NAPC is mandated to monitor the utilization of the PDTF. This function was largely performed by personnel of the NAPC secretar-iat, which included monitoring the PDTF funded capability building projects/programs/beneficiaries. [R.A. 8425] Monitoring visits were made when actual training and related activities were being carried out. Monitoring staff/teams inter-viewed proponents and persons directly involved in the project, service providers, as the case maybe, resource persons. They also visited project sites, where relevant. Feedback and other inputs from participants and end-beneficiaries of training and of the project were crucial to the reports. Project completion and post-activity reports were submitted in a standardized report for-mat. (MCPI Monitoring Report – annex) The reports contained basic information about the projects in general and more details about specific training-project activities where the staff/teams were present. Recommendations were addressed to NAPC, PDTF-Executive Committee and to PCFC. Some of the action points and recommendations revealed that monitoring teams/staff were not provided background documents and relevant information about the projects. Information on the feedback or actions taken were not available. Some recommenda-tions were: to conduct a summit/congress of all MFI grantees, and to conduct advocacy on value-chain financing.



There were no post-project monitoring/reporting and reports that gauge the extent of application and replications of train-ing lessons and projects. An improved monitoring and evaluation template, as recommended in Mindanao Microfinance Council Report may include items that respond to the challenges raised in the report and more detailed indicators on rele-vance and effectiveness of projects to PDTF objectives and to poverty reduction.

Grant allocation and use PDTF grants ceiling for MFIs and LGUs was PhP0.5 million. Special Sector Organizations (SSO), service providers, councils, networks and federations have a ceiling of PhP1 million. As of September 31, 2014, total amount disbursable for grants was PhP31.2 million. The combined amount of approved grants for 41 projects was PhP20.81 million or 68.5% of total disbursable fund. On the other hand, total amount released as of December 31, 2014, was less than half, 44.0% or PhP13.7 million fund available for grants.

Finding 6: Less than half (44.3% or PhP13.83 million) of total disbursable fund for grants was released (as of December 2014.) The overwhelming majority of grantees, received lower than the approved amount. Only six grantees received the full ap-proved amount. KAGABAY received the highest grant, PhP999,000.00, while the Municipal Government of Sominot had the lowest, with PhP13,041.00.13

Graph 5. Status of grants

D. INSTITUTIONAL RESPONDENTS

The study covered 18 institutional respondents: 13 PDTF grantees and 5 non-grantees. Respondent- grantees represented 37.1% of total grantees. Non-grantees that were included were 1 MFI - Paglaum Multi-Purpose Cooperative (Paglaum-MPC), 3 municipal governments, Bagac, Siayan and Dumingag and 1 NGO Service Provider – AlterTrade Foundation, Inc. (ATFI)

13 In August 2015, Sindangan Municipal Government cancelled its application



Table 5. Number and type of institutional respondents

MFIs Of the 35 grantees with 41 projects nationwide, almost half (16 or 45.7%) of grantees and projects (48.8%) were in Luzon. Visayas had 9 grantees (25.7%) with 11 projects (26.8%). Mindanao had 7 (20%) grantees and 7 (17%) projects. Three (3-8.5%) grantees had national coverage. There were 3 grantees had expanded operations beyond their “core areas”: ASKI, TSKI and PBCI. Six (6) grantees were sector-specific: women specific were 3 - NWTF, Leyte Fourth District Women Credit Cooperative (LFDWCC) and Kababaihan Gabay ng Bayan (KAGABAY); only MILAMDEC on Lumad (indigenous people) and Moro com-munities – Aakay ang MILAMDEC Microfinance Foundation, Inc. (MILAMDEC); urban poor were 2 - KAGABAY and the Peo-ples Alternative Study Center for Research and Education and Social Development, Inc. (PASCRES).

Three of every 4 grantees were MFIs. They received PhP9.5 million, more than 2/3 of total grants. MFIs composed almost ¾ of all grantees (26 or 74.3%). LGUs and NGO-Service Providers were 5 (14.3%) and 4 (11.4%), respectively. MFIs also received the biggest share of grants, PhP9.48 million (69.0%) followed by NGO-SPs, 23.8% or PhP3.27 million, and LGUs, 7.2% or PhP0.98 million. MFIs have had a fairly long experience in financial intermediation. Banks started in early 1970’s while cooperatives and federations were organized in mid-1970s and early 1980s. MFI-NGOs came into the microfinance picture in early 1980’s with ASKI and TSKI among the forerunners. The majority were post-1989 (Grameen Replication Project). Mindanao Mi-crofinance Council (MMC) was the most recent, in 2003. Most of them were church initiated, funded and/or inspired, with the purpose of “serving the poor”. True to their mis-sion, majority of clients were poor sectors of the population, with preferential bias to women. In the early years, MFIs based their operations in rural towns where the poor were. But with the NSM and its market ori-entation, most have moved to urban and rapidly urbanizing town centers. The rural areas were reached through their microfinance business operations (MBO). Microfinance teams were also organized as advance units to build “Grameen-type credit groupings”, serve as collection units and to lay the groundwork for expansion. As conceived and designed, MFI clientele were women, predominantly, engaged in micro-enterprise. But men were seen to increase among members of cooperatives and organized farmers/fisherfolks. ARBs and ARCs, and Irrigators Associa-tions, beneficiaries of government DCPs, were still largely male dominated. On the other hand, cooperatives and their federations, microfinance councils and NGO networks cater, mainly, to the needs of their members. Larger MFIs and banks provide regular banking services to small and medium enterprises. Two-thirds (2/3) of grants (PhP8.2 million) (24 MFIs and one NGO-BDSP) was used for institutional capacity building, e.g. upgrading skills and competencies of management and personnel, installation of standard and efficient operations sys-tems and development of new microfinance products. Four MFIs carried out training activities for institutional capacity enhancement as well as livelihood skills for their clients.

Respondent Total

Grantees Respondent-

Grantee Non-

grantee Total

MFI-NGO/Council 13 4 0 4

Bank 6 2 0 2

Cooperative/Federation 7 3 1 4

LGU 5 3 3 6

NGO-BDSP 4 1 1 2

Total 35 13 5 18



Box 3. SEDPI “TAMA Training Course” for AFCCO and CRBCI

SEDPI (Social Enterprise Development of the Philippines, Inc) was the service provider of AFCCO and CRBCI that carried out its training course - Technical and Mentoring Assistance (TAMA) that lasted more than one year. TAMA had 3 com-ponents:

(1) Market-based Financial Product Design and Development-determine the needs of the market, assess insti-tutional readiness for product design ad assess the competitive advantage of products and services; (2) Financial Analysis-allow the organization to measure its financial performance and determine the quality of its financial performance based on best practice financial standards; and (3) Financial Management-assist the MFI in improving financial performance through effective treasury man-agement, asset-liability management and liquidity management.

AFCCO found the course “very useful as it enabled the participants to understand the technical workings of micro-finance, design and matching products with the needs of the market”. Thirty (30) staff members, committee officers and the manager participated in all sessions. Including the periodic field visits and assessments and mentoring sessions, the projects took a little over a year. CRBCI was highly satisfied with the training course. Participants were from the staff of the bank and in MFI operations – MFI manager, area-unit coordinators, loan processors, cashiers, tellers, bookkeepers, and 21 project assistants (field collectors). The one year course was extended for another six months.

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MFIs reported that capability building training considerably enhanced operational systems, governance, risk management and personnel competence contributing to improved financial performance. Indicators mentioned were: (a) expansion to new areas of, (b) increase in number of clients, (c) increase in collection, (d) reduced past due rate and PAR.

Box 4. Mindanao Microfinance Council (MMC) Training

The Mindanao Microfinance Council is a network of 30 banks, MFIs, cooperatives and foundations whose objective is to pro-mote the growth of microfinance industry in Mindanao and contribute to poverty alleviation. Its mission is to “strengthen mem-ber institutions in delivering effective financial and capability development services to the poor and to develop them into effec-tive catalysts of economic and social development of Mindanao.

In July 22, 2014, MMC was granted PhP776,100 from PDTF to support its capacity building project “Enhancing Marketing Capa-bilities and Financial Literacy of MFIs in Mindanao Towards Product Development in Agri-Micro-Finance-AMF.” Within six months (August 2014 to January 2015) four training courses in (1) AMF Market Research; (2) AMF Product Development; (3) Training of Trainers-TOT on Financial Literacy; and (4) Disaster Risk Reduction Management and Climate Change Adaptation – DRRM-CCA.

Ten (10) training-seminars were conducted in Mindanao: Davao, Surigao, Dipolog, Cotabato with a total of 134 participants from 28 member institutions (banks, cooperatives, MFIs and foundations). Most participants were familiar with supply and de-mand but were interested in knowing and learning how this applied to the AMF, a new product about to be introduced to the market. Specific topics of interest were Farm Plan, Procedure and Budget, Risk and Delinquency Management, AMF Operations Manual.

TOT on Financial Literacy (FinLit) was designed for clients, heavy on values about wealth creation and managing finances. It is about changing mindset becoming more entrepreneurial. DRRM-CCA was high on disaster risk mitigation and impact. The Caga-yan de Oro training in northern Mindanao was cancelled due to low turn-out of participants.

Participants gave high satisfactory ratings to all training events. They recommended longer training period to adequately cover important details.

Total project cost was PhP1,661,300.00 with a counterpart of PhP885,20.000 equivalent to 53%. Eventually, MMC had to come up with PhP1,079,845.00 or 65% of total project cost.

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Two MFIs, with PhP1.28 million ran a series of training events for their clients with the objective equipping its clients with skills in managing financial resources. PBCI complemented financial literacy with livelihood skills in sewing, food preparation and mar-keting. These activities were run by the MFI’s training arm, ASKI Skills and Knowledge Institute and PBCI Foundation for Rural and Industrial Equipment for National Development (FRIEND). FRIEND partnered with government agencies and service providers.

Box 5. Women’s Group Enterprise - Tailoring

After the sewing skills training of Talaingod and Manobo indigenous women, PBCI-FRIEND organized them into a group enterprise in cooperation with DSWD and DTI. The agencies provided technical trainers, sewing machines and initial capital. Some clothes had been made and sold. In the remote town of La Paz, running a tailoring business has good market potential in schools and offices, a growing population of youth and professionals and special occasion dresses, curtains, and the like. It can also do repairs and re-modeling of “ukay-ukay”*. Its competitors were “ukay-ukay”* and clothing shops in town with limited choices. The major mall is in San Francisco, 2 hours away and in Butuan City, a 5-hour trip. At that moment, though, operation was temporarily suspended for lack of capital. Some members had not remitted their collections. Secondly, members were still occupied with their work in the farm and routine housework. No one could spare time to procure raw materials in Davao City. Other issues that the women raised were; (a) lack confidence in their skills, (b) feeling of uncertainty about the enter-prise’s profitability, and whether payment for their work is by piece or in the form of dividends, like a cooperative. The group enterprise faced formidable challenges and barriers. On the production side, raw materials were procured in Davao City, an 9-hour travel. Procurement was done in bulk that required higher capital and a fairly high inventory. With clothing as end product, raw materials must have variety and flexibility to suit changing market needs and trends. Basic rules and agreements to guide the business has not been made such as (a) structure and system of operations or division of labor; (b) production system - individual and/or production line (Mattel model), mass and/or customized, etc., (c) finance, etc. Too many things were new to the IP women. Despite a tradition of collectivism, group enterprise and tailoring were unfamiliar ground. But these challenges are surmountable with time and close mentoring. Perhaps, in a process of busi-ness incubation by FRIEND because it is not the core business of a bank. * Second hand or relief clothing prohibited for sale, nonetheless, the only clothes the poor can afford.

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LGU respondents Only 5 LGUs were PDTF grantees, with 7 projects: four in Luzon, 2 by the Provincial Government of Mt. Province and Municipal Governments of Tadian (Mt. Province) and one by Lian (Batangas). Visayas has only grantee and project in the island town of Limasawa (southern Leyte) and one in Mindanao, by the LGU of Sominot in Zamboanga del Sur. Two non-grantee LGUs whose projects had been approved but were later withdrawn were still included.

PDTF grants were integral to LGUs poverty reduction programs, but were not so effective components. PDTF projects were poverty reduction components of priority programs in agriculture and resource-base management, productivity and environment enhancement, local economy development and value chain, and tourism. LGUs targeted poor constituents: indigenous communities of farmers, fisherfolks, unemployed and underemployed in the informal sector with poverty reduction. Service providers were engaged in the implementation of these projects.



Mt. Province and the municipality of Tadian belong to the Cordillera Autonomous Region (CAR), home to Bontoc and Kankana-ey tribes. Majority of the population are rice and vegetable farmers who were often cut-off from commercial and trading centers due to its topography and badly maintained road infrastructure. Major river systems and dams in the Cordillera and lowland regions of Ilocos and Cagayan Valley have their headwaters and watersheds in the region. Intensive logging, mining and commercial agricul-tural production had denuded the watersheds and damaged the river systems which are critical to the people’s traditional liveli-hood base. Mt. Province and Tadian were not among the poorest in the country but most indigenous communities remained sub-sistence farmers in marginal lands. Resource-base management and livelihood support projects continued to be undertaken in CAR by national and international agen-cies. One of the more highly funded project is the Cordillera Highland Agricultural Resource Management (CHARM 1 and 2). Mt. Province and Tadian are included in this project. CHARM was initiated by the Department of Agriculture (DA) and funded by the Asian Development Bank (ADB) and the International Food and Agriculture Development (IFAD). It is “concentrated in areas where poverty is most severe...the aim is reduce poverty from 70% to 20% and improve the livelihoods of indigenous peoples in farming communities.”14 The strategy is closely linked to land tenure and ancestral claim of indigenous peoples. PDTF grants had a good fit to CHARM project and integrated the training of indigenous women, farmers, youth and elderly for de-veloping entrepreneurial values, skills and practices. According to the LGUs, “shifting peoples mindset and transforming them into entrepreneurs, not just producers (of vegetables, fruits and livestock) is critical to enhancing productivity and reducing poverty. This was following recommendations of CHARM1 post project evaluation. In addition, Tadian conducted training programs in financial literacy, and organic production and processing of coffee, fruits, meat, and bread from local rootcrops and vinegar making from sugarcane. Both projects of Mt. Province and Tadian were still in progress. The projects of the municipalities of Bagac (Bataan) and Lian (Batangas) were poverty-reduction components of their tourism pro-

grams. Both are coastal municipalities planning to become tourist destinations. “Filipinnovation” project of Bagac would train 20

fishermen from 7 coastal barangays to become divers and to participate in the restoration and management of coral reefs in Ba-

taan. A “Dive Shop” was part of the plan because Bataan has good sites for diving. The processing time of the project took longer

than expected. Meanwhile, the focal person left and the LGU moved on to other tourism components and the project became irrel-

evant.

“Building Disaster Resilient Communities through Livelihood and Social Entrepreneurship” was a poverty-reducing component of

the Lian tourism program. PhilSEN, its service provider, held a series of training events for 50 fisherfolks and 20 women. Tourism

related training were on mangrove rehabilitation-management and reef ranging. Social entrepreneurship was about financial litera-

cy and livelihood skills training in siomai-making and massage therapy.

Post-project visit and monitoring found out the difficulties faced by the LGU in making the beaches of Lian an attractive tourist des-

tination. Huge amount of garbage, from as far away as Metro Manila, constantly drifted into the mangrove nurseries and beaches.

Regular clean up and maintenance cost would make business in the area a losing proposition. On social entrepreneurship, only 2

women continued to put up micro-enterprises in siomai making and vending. The anticipated tourist market did not materialize.

BAKAS (a Bisaya term for joining resources/forces as leverage) is a convergence of 6 geographically contiguous municipalities of

Sindangan and Siayan in Zamboanga del Norte and Dumingag, Mahayag, Midsalip and Sominot in Zamboanga del Sur. BAKAS mem-

bers were among the poorest municipalities in the country. Siayan had the highest poverty incidence of 97.5% in 2009. This has

since reduced to 79.9%, but remained the highest in NAPC’s list of 600 poorest municipalities.

Barring Sindangan which is a coastal town along Sulu Sea, with rich fishing ground and productive coconut farms, the rest of BAKAS

members are all landlocked and quite far from city centers of Ozamis, Dipolog and Pagadian. It has wide plains and hilly terrain de-

voted to rice and corn production. The six LGUs came together under a common platform with coordinated projects on poverty

reduction. BAKAS started from a vision (of Dumingag Mayor Pacalioga) to build an internally-driven economic growth by employing

techniques in organic production, product consolidation and marketing, development of internal market through product exchange;

and value adding processing-manufacturing of local products. Dumingag became the first BAKAS convenor with a focal person to

liaise among members and with NAPC and PCFC. BAKAS planned to apply for one PDTF grant but would not qualify because it had

no legal personality. They were advised to apply as separate municipalities. Sindangan and Sominot submitted their proposals and

were approved. Sindangan application was approved in 2014 but was taking a long time in finalization the Memorandum of Agree-

ment with PCFC. Finally, the application was withdrawn.

14 www.IFAD.org

http://www.IFAD.org



Finding 7: A holistic-effective approach to poverty reduction and economic development takes a long process of building people’s capabilities within a coherent LGU platform and strategy. An “internally driven economic growth” espoused by Dumingag LGU address poverty at the level of households and bring about growth and development at the broader community-social level. Stages ---(a) develop values, mindset and practices of entrepreneurship among the people, (b) resource-base management and environmental protection through organic agriculture, (c) manufacturing and trading to create local value chain, in economic benefits for producers and workers. As a result, there would increase in incomes of local people, increase in purchasing capacity, creating a vibrant domestic market. With organic products, people would live healthier and more productive lives, reduce medi-cal and hospital costs. To realize this goal, the people have to be prepared to undertake such an encompassing and strategic undertaking. The mayor had no illusion that because the aims were noble and beneficial that it would be smooth-sailing and short-term. It was clear that the process would be painstaking, wrought with trials and errors and protracted. Capability building was the first phase, working with LGU personnel who became a team translating the vision into actionable program and mobilizing the people to move in organized fashion. Dumingag organized various sectors into associations and cooperatives of farmers, Dumingag Business Association with members from the market vendors, food service, RTW businesses, sari-sari stores, women’s associations, etc. the LGU built Dumingag Or-ganic Academy where processing of coffee, bread, squash and other local products were donnic fertilizer production. Organic agriculture is promoted and adopted by most BAKAS members. Sominot’s PDTF project was training in organic agricul-ture. They adopted the system of Livelihood Development Coordinators (LDC) as frontline persons who organize, educate, train and, coach and monitor projects at the barangay level. They have become the link and liaison between barangays and the munic-ipal LGUs. Siayan is the current BAKAS coordinator. One of its programs is the consolidation and marketing of local products such as corn and cassava. The LGU would also be looking into prospects of locally processing these products. The BAKAS convergence for poverty reduction is a project in progress. Organic farming continued to spread among the people and the LGU was quite pleased with results, e.g. increase in yield and incomes, according to the mayors. But the rubber, cacao and coffee trees, some newly planted, would take a few years more to grow and to be tapped. The local executives of Dumingag and Siayan were dedicated, hard working, no frills public sector entrepreneurs. Both local exec-utives expressed certain aversion to microcredit as a strategy to uplift the poor in their localities.

NGO-Business Development Service Providers Three grantees were NGO-BDSP namely; KAGABAY, PASCRES and PhilSEN. PASCRES and KAGABAY work with urban poor resettle-ment areas in Regions IV and IV-A, promoting and supporting micro-enterprise development initiatives. Microfinance needs of these initiatives were referred to MFIs operating in the localities. PhilSEN, one of two respondents, is a network of social enterprise NGOs with members in various parts of the country. PhilSEN and its members train micro-entrepreneurs and assist them in building livelihoods and community enterprises. It started in 2000, as a loose network of MFIs and enterprise development NGOs of a donor agency. Capability building training sessions conducted by PhilSEN in Davao City, Butuan City and Cagayan de Oro were attended by sen-ior and field staff of ALTERDEV, ECOWEB, MARADECA, among other member NGOs. MARADECA Executive Director and 2 staff members two training courses, “Business Development” and “Social Enterprise in the Grassroots” which they found very useful for their communities who produced and traded vegetables in Marawi City.



Finding 8: The poor can move out of poverty when they have access to knowledge and skills, productive assets, and to collectively plan and manage their own economic activi-ties and other affairs.

Alter Trade Foundation, Inc. (ATFI) was included in the study because of its singular experience in social enterprise. The immediate impetus for ATFI’s establishment was the sugar crisis in 1980’s in Negros Occidental where more than 35,000 families of sugar farmers were starving. Children were suffering from malnutrition and extreme protein deficiency, a phe-nomenon known only among refugees in Africa. Because of the depressed price of sugar in the world market, haciendas had stopped production, even as the local market was awash with imported and smuggled sugar. Moved by the sad plight of the people, European and Japanese coopera-tives offered to support the farmers in production and trading of their products through the fair trade system. The Negros ARBs were former sugar workers who earned an average of PhP71 daily wage. Women were paid half the wage of men. Child labor was a common practice in the haciendas. Each ARB was awarded an average of half to one hectare land. But land ownership was not enough for them to improve their economic situation. The ARBs needed production capi-tal, tools, machineries and technology. They had to be trained in (farm and production) planning and management and equipped with knowledge, tools, and techniques in production, market access and trading. ATFI organized the ARBs into production units - cooperatives and small producers organizations (SPO) in the production of muscovado sugar. Diversified economic activities were introduced to address the so-called “hunger months” – August and September – waiting period for the harvest season. Rice, coffee, peanuts and vegetables were grown alongside poultry and swine production. Farm and product consolidation were introduced towards achieving “economies of scale”. Farmers organizations banded together to form the Negros Organic and Fair Trade Association (NOFTA), which serves as platform and marketing arm in local and international fair trade. Members who were First Grade SPOs were certified organ-ic and fair trade since 2002. They went on to become Second Grade SPO in 2009. Annual raw sugar production volume was estimated at 1,382 metric tons. NOFTA’s annual fair trade premium received was about PhP2 million. Fairtrade premiums addressed other needs of SPOs and such as electricity, training center, hauling trucks, etc. In 2014, NOFTA had 13 members associations and cooperatives. All SPO members were already food sufficient and have improved diets. Farmers built houses of concrete materials. They have farmlands, acquired tools and equipment, house-hold appliances, supported children’s education. Majority of farmer-beneficiaries were now above poverty line and 69% of SPO members have definitely crossed the pov-erty threshold. There is palpable change in their living conditions. NOFTA members have transformed themselves from sugar workers dependent on hacienderos for meagre wages to be-come small producers able to trade their own products locally and overseas. AFTI practice of integrated services to CLOA-ARBs and credit schemes had become models and were replicated by government agencies and some government financial institutions.

E. CHALLENGES AND EMERGING NEEDS

Finding 9: Shifting business landscape and emerging needs of clients and micro-enterprises challenge the viability of MFI and its efficacy to poverty reduction.

The rapid growth of the microfinance industry had its down-side. MFI respondents admitted that “escalating competition among MFIs and increasing pressure from new government regulations, compliance to which, were getting quite expen-sive” posed tremendous challenges to their sustainability. They have become more competitive, elbowing out smaller and weaker ones. That they were drifting away from their original mission, was an expressed concern. This disturbing trend was noted in the study of Harabadas and Umali which showed reducing number of MFIs in a process of weeding out small and “inefficient” players. There was also a huge disparity in all indicators of growth, between the top ten performers and rest of the MFIs, in all the growth indicators.



The proliferation of big malls and franchise business compete with and often result to closing down of micro and small en-terprises such as groceries, restaurants, bakeries, service business in repair, barber and beauty shops, sari-sari stores, and many more. Many of these were MFI clients and market. Taking the bull by the horns, so to speak, respondent MFIs aggressively expanded operations and moved to new markets, acquired more and new assets, such as land, buildings, etc., and/or engaged in diverse business concerns, in some cases competing with their own clients and members. Secondly, having higher financial literacy and rising expectations, clients started to demand for quality services and query the efficacy of microfinance products. Typhoons and other disasters uncovered the vulnerability of micro-enterprises and their long-term viability which compelled MFIs to introduce innovations in their core products and services and to review bottomlines. OFW savings-credit packages, “Kiddie and Youth Savings,”15 and OFW-families savings-credit schemes were some of the innovations adopted by respondents. Impact of natural disasters led to the development and roll out of AMF. Non-financial products and services helped to ensure the viability of micro-enterprises and increase their clients’ capacity

to repay loans. Garlic and onion producers of Nueva Ecija were assisted in securing marketing agreements with fast food

chains, while calamansi producers in Agusan del Sur were linked to traders in Davao City. Three respondent MFIs forged or

were in the process of signing contracts with Kennemer Food International, a Philippine based agribusiness specializing in

production, consolidation and supply of fermented cacao beans for the international market. In a supply-value chain, cacao

farmer-clients were trained in technology of growing, harvesting and fermenting products that would increase farmers’

income through production of quality seeds, seedlings and beans. Kennemer would ensure the market for these products.

Finding 10: Access to capital, technology and machines and infrastructure support are critical to improving economic activities and reducing poverty.

Lack of assets and an unfriendly economic/business environment were major challenges that cause poor people to despair and become passive, construed as “laziness”. Laziness was identified by 39.8% of MFI clients as the cause of poverty. FGD participants, however, explained laziness in the context of the oppressive reality of poverty. Having nothing to begin with, and faced with obstacles at every turn hold peo-ple back from making any plan to improve one’s situation. This leads to inaction and passivity and interpreted as, yes, “laziness". This was the constructive conclusion of the FGD debate on laziness. It is interesting to mention Ceilito Habito’s article “Culture of Poverty” where the same baffling reply was made by respond-ents to his team in a field research of the country’s poorest areas, why people were poor was because they were lazy. [Habito, Cielito] Related to “laziness” was 13% of responses that said lack of jobs and underemployment was the cause of poverty. Other respondents said it was lack of support to enterprises, 15%. Again, In the FGD, participants elaborated on this that linked it to high cost of inputs, 7% of responses, and corruption in government, 6%. FGD participants cited the that intense and often losing out in the competition with shops in malls and with each other. The so-called “hot pandesal or water refill-ing syndrome” were promoted and supported by MFIs and government agencies under the guise of promoting a “level playing field”. The cause of poverty was lack of entrepreneurial spirit, according to 6% of respondents; while another 6% said it

“inherited” (intergenerational) poverty. Inter-generational poverty, according to FGD, was a result of continuous division of

assets among children of large families. In time, young families would end up with land the size of a palm - “duta nga daw

palad kadaku”.

15 Developed during a partnering program with Aflatoun, a program for children based in the Netherlands



Finding 11: LGUs, NGO-BDSP and cooperatives seek government support for financial capital, post-harvest facilities and technology to bring full benefits to their (basic sector) beneficiaries.

Organizing, education in entrepreneurship, technical knowledge and skills training built the capability of the poor in Dum-ingag but only as a first stage. The next stage would be support in terms of operating capital, processing machines and tech-nology transfer, and a road network to facilitate and reduce cost of economic transactions to increase income and generate employment. To stabilize and grow, ATFI-NOFTA, PATANOM and Paglaum MPC need capital, capex and technology. NOFTA found it costly and inefficient to produce muscovado in a privately owned sugar mill. PATANOM needed post-harvest facilities. Paglaum MPC needed support for its 3-hectare demonstration-training farm in organic agriculture.

Finding 12: A small PDTF coupled with administrative imperfections were barriers to ac-cess of PDTF grants.

1. Conservative promotions and marketing. Efforts to disseminate information were not aggressive enough. There are 530

microfinance institutions, 190 banks (microfinance-oriented and engaged), cooperatives, but only 25 were able to re-ceive PDTF grants, 3.4%. [BSP, 2015] Less than 1/3 of sectoral representatives were aware about the existence of a PDTF (74 or 28% of 261 responses).

The conservatism or reticence to promote PDTF could be due to any or all of the following:

a. The disbursable fund is not much to pass around and broadcast. It may cause disappointment and become a disin-centive if there are more applications, and approvals more than what is available. Compared to other sources, grant amount is not large enough to play a pivotal role to poverty reducing projects.

b. Lack of a systematic promotional plan anchored on a strategic view of PDTF in poverty reduction. c. Lack of appreciation about PDTF- a puny resource for the huge problem of poverty reduction.

2. Administrative imperfections. Cumbrous requirements and processing were disincentives to potential applicants and for

repeat applications. “Our time is better used in doing our core business,” according to 3 MFI respondents. Policy on tranches and public bidding got in the way of training design, activities and smooth implementation. Smaller coopera-tives that needed capability building funds more could not afford the 25% counterpart despite flexible in-kind contribu-tion. Counterparts of ASKI, CRBCI and MMC were more than the grant amount.

3. Difficulties in Engaging Service Providers. Qualifications and accreditation of service providers were in excess to the

needs of capability building programs. Grantees found that urban-based and highly qualified SPs and their personal needs were quite expensive. In many cases, grants were just enough for their fees.

Sectoral council survey said financial capital as the most urgent need that would improve income-generating activities of the poor, not microfinance but adequate capital for their varying economic activities. This asset should be coupled with investing in human capital – enhancing their capability to undertake enterprise planning and management with the right attitudes and values. The other needs to be addressed is provision of technology and equipment, infrastructure such as roads and transport to reach markets at the shortest and most affordable cost, basic services, such as water, electricity. Market highways in the country was described by one economist as “chaotic and anarchic”. It is based on personal contacts where products move in circles, where contacts are located, instead of taking the shortest route to a central drop-off point for wholesalers and distribution to retailers. Savings as a mandatory component of microcredit had a positive effect on the practice in planning, budgeting and prudent spending. There are those who save more than the mandatory amount. Saving is also practised in other forms, apart from deposits in the bank or cooperative, such as seed-keeping (seed banking) or more progressively in investing as in acquiring assets. On the other hand, unexpected events such as sickness and death, especially of the main income earner, whatever savings put away over a period is quickly used up in not time.



SECTION 3 - CONCLUSIONS

Hypothesis: Microfinance through its financial intermediaries are reaching the basic sectors (poor) and

improving their well-being, lifting them out of poverty.

MICROFINANCE

Conclusion 1: The intent of R.A. 8425 to develop viable and sustainable microfinance insti-tutions had been realized.

The Philippine microfinance industry is now one of the most robust in the world, ranked first in terms of policy and global regulatory framework and 4th in over-all microfinance business environment. [Habaradas and Umali] It was also cited by the Consultative Group to Assist the Poor (CGAP) as the “best in implementing microfinance programs to reduce poverty” during the International Year of Microcredit in 2005, a special event of the United Nations held in New York City. (Micu, 2010) In building a vibrant and sustainable microfinance that is accessible to the poor, PDTF made its contribution, albeit, limited to grantees. External grants and aid from various sources and from government continued to underpin the growth and sustaina-bility of most MFIs. Having done its job PDTF should now make its mark in a well planned, strategic and sharply targeted projects poverty reduc-tion niche. Following policy declaration of R.A. 8425 to adopt “...a system of public spending which is targeted towards the poor.” (emphasis supplied)

Conclusion 2: Microfinance grew but outcomes and impact on the poor were insignificant.

Microfinance and Micro-Outcomes The remarkable growth of MFIs in assets, loan portfolio, savings deposits and number of borrowers was patent, but poverty incidence remained hovering around the 25% mark. This raises the issue of efficacy of microfinance for alleviating poverty. Results from access to microcredit had mild significance on assets. Only ARBs were able to pay amortizations, slowly but steadily staking claim on distributed land. Those with bigger assets were able to build on them to access higher loans and realize higher income returns. Microfinance impact on incomes and assets of the poor would be more incremental or cumu-lative. Higher growth in population among the poor can easily overtake whatever poverty reducing outcomes from micro-finance. “The significance of microfinance was to provide a safety net for and maintain a level consumption of the poor.” [Chowdhury, Anis. 2009] Professor Yunus [2003: 171], of Grameen, himself had this to say about microfinance, that “it is not a miracle cure that can eliminate poverty in one fell swoop. But it can end poverty for many and reduce its severity for others. Combined with other innovative programs that unleash people’s potential, micro-credit is an essential tool in our search for a poverty-free world”

Microfinance + MFI products and operations were increasingly becoming sophisticated. Realizing that microcredit provision and reliance on peer pressure to secure repayment was not sufficient, they had to offer new products and services that ensure the viability of micro-enterprises and that clients were able pay. Other factors such as developments in the public sector and the entry of business merchants who needed steady supply of goods/products that MFI clients produced shaped the frame of a micro-finance mix and microfinance+. MFIs followed market highways, not the expected driver of economic development and growth. They were mostly in urban and rapidly urbanizing areas with high population and market potential. Lanao del Sur, the poorest province, had no known MFI in operation. It may have to do with Islamic practice forbidding interest-earning loans as haram. Credit sources, except the precious few in ARMM cities, were from family, relatives and friends. Additionally, no single MFI grantee was based in the 15 poorest provinces.



MFIs mission “to promote the well-being of the poor” is salutary. But improving MFI capability designed to adopt a market ori-ented policy and regulatory environment made them more a commercial business outfit in the full sense. That they drifting away from their raison d’etre and eventually may become irrelevant to the poor is a concern expressed by some MFI respond-ents.

PDTF

Conclusion 3: PDTF remains a small, non-strategic and insignificant resource.

PDTF operation was found to be moderately satisfactory. Fastidious and lengthy processing period of applications led to disin-terest in accessing grants. Although delays were often caused by difficulties on the part of applicants, monitoring was not ade-quately attended to. By December 31, 2014, there was still a P15.84 million undisbursed fund available for grants. At P0.5 mil-lion ceiling per grant, this could mean 30 or so projects. However, in the first half of 2015, PCFC already noted a significant drop in the number of applications. Not only did PDTF fall short of the mandate to increase the corpus to PhP4.5 billion, a more seri-ous weakness was its failure to make full use of PDTF. In such a situation, proper authorities would be hard put to infuse new funds when the current level fund utilization could not be rationalized. Admittedly, technical barriers to PDTF access, is an issue, but more serious flaw is the lack of systematic educa-tion and information-promotion of PDTF among stakeholders. The Sectoral Representatives overwhelmingly asked for an IEC about PDTF. Clearly, there, is no lack of projects out there urgently needing support. Conservative promotion and disinterest of potential grantees may be traced to the puny grant amount with cumbersome requirements.

Conclusion 4: Competition, inadequate planning and oversight challenge PDTF.

1. Relevance - The biggest challenge to PDTF is the decreasing number of grant applications. This could raise the issue of rele-vance. Applications and approvals of projects fluctuated over the ten-year period and picked up in 2014 with 14 applications and 13 approvals. However, for the first half of 2015, only four (4) applications were received. Additionally, at the end of 2014, disbursable fund balance still stood at PhP15.84 million.

Two or more possible reasons could be cited: First, a lack of information and systematic promotion to potential grantees; second, disinterest due to size of grant compared to other accessible funds, with rather hefty documentary requirements and project counterpart. A third possibility is the uncertain or unclear poverty reducing outcomes among end-users. These are not insurmountable and must be addressed with urgency.

2. Competition – government agencies, including BSP, LBP and private-non government entities are increasingly carrying on capability building, e.g. financial literacy, to MFIs and Basic Sectors.

3. Mismatch in supply and demand – increasing MFIs and microfinance products without increasing and expanding economic production and increase in purchasing capacity, the market for goods and services of micro-enterprises could be easily com-promised.

Some LGU projects were just completed while others were in progress. A review of partial results showed that they were not able to make full use of PDTF to reinforce their poverty reduction programs. PDTF grants applied to somewhat expensive train-ing in making products that were already on the shelf, such as siomai, vinegar, had only minimal outcomes. Without the ex-pected tourist market only 2 out of 20 trainees put up mini-business in Lian. In terms of effectiveness in the use of PDTF grants, local government units (LGU) were found to be wanting in the coherence and cohesiveness of responses that seek to utilize PDTF for anti -poverty programs and for enduring local development.

PATHWAYS TO POVERTY REDUCTION

Conclusion 5: There were approaches and alternative pathways to development and pov-erty reduction that worked.

Some experiences and approaches of respondents have demonstrated effectiveness in reducing poverty. Elements in micro-finance practice can be replicated and/or modified among rural cooperatives to make it work for alleviating poverty of the rural poor. Others approaches by specific respondents used distinct development frameworks addressing poverty and empowering the poor - basic sectors. The case studies in Section 5 describe these experiences and approaches to poverty reduction.



Cooperatives+ Based on the Bangko Sentral ng Pilipinas [BSP] definition of microfinance plus, only MFI oriented and rural banks are included. NGO-MFIs and cooperatives are excluded. On the other hand, generally accepted definition of microfinance plus by microfinance experts, clearly apply to cooperatives. According to CGAP, microfinance plus is the provision of fi-nancial and non-financial products and services. The idea and findings in the study that access to financial resource alone cannot result to poverty alleviation and human development was demonstrated in the experience of PATANOM Credit Cooperative. PDTF grant was prudently used both for enhancing financial management and services as well as training for women to improve farm production. [more in PATANOM Case Study] It continued to do advocacy and lobby for a wide range of support such as water, roads, land distribution as a key pro-ductive asset. Such activities were carried out through PATANOM Alliance. In many senses PATANOM Credit Cooperative is also an Advocacy Cooperative. In addition to the advocacy agenda, it advocates for infrastructure to support its mar-keting activities. Microfinance+ an approach of PBCI interfacing financial and non-financial products with the aim of enhancing the clients’ enterprises while reinforcing its core business. It has adopted techniques in supply-value chain through FRIEND and part-nerships with the public and private sectors. Most of PATANOM’s practices mirror those of PBCI, albeit, incipient and on smaller scale. It has partnership with the public sector and small businesses, provides market networking support to its members. Rural cooperatives like PATANOM are made up of basic sectors who are the rural poor. The spirit of cooperativism is strong as they desire to spread the benefits of government programs, such as the DCP to other community members, the ARCs first, then to non-ARBs. Cooperatives should be strengthened as a distinct microfinance window for the poor in the form of Cooperatives Plus.

Social Enterprise (SE) “The search for solutions to pressing social challenges beyond microfinance...(in poverty reduction)” may be found in social enterprise initiatives in the context of inclusive agriculture,“ [Esguerra, Jude. Notes, 2014] says Jude Esguerra, Un-dersecretary of NAPC. Definitions varied according to contexts but the objective of pursuing a social mission was a common denominator. In the west, where the term and use started, a social enterprise was defined as a business run for a social or environmental purpose, to deliver benefits to the community and not to generate profits for individuals or shareholders.” [Pearce, J.] Social enterprises in many third world countries was understood and practised as “a business that starts as a response to a social problem and employs business tools and techniques to generate profit that accrue to individual and organiza-tional investors for financial gain and growth and for organizations to sustain their social mission.[ANU-Unlad Kabayan video] Social enterprises are initiated and/or owned by those in the non-profit and/or social sector [Pearce, John. ], which also puts cooperatives of basic sectors in the same category. The phenomenon of social enterprises is rapidly gain-ing traction as a field in academic investigation and study. This puts ATFI in the category of a social enterprise. ATFI is the social entrepreneur and NOFTA the social enterprise. ATFI organized DAR beneficiaries with Certificate of Land Ownership Award (CLOA), consolidated products for collective trad-ing, introduced sugarcane processing muscovado, organically grown and raw semi-processed (brown) sugar entered into fair trade network. Rife with victories, lessons and problems, ATFI and NOFTA continued to struggle, gather experiences along the way that saw its growth into a social enterprise. Altertrade had the idea and forward-looking strategies that guided the sugar workers to transform themselves from small farmers to to workers and traders. NOFTA as a social enterprise must grow and sustain itself. It must enhance production-processing and improve its products to be competitive. It bears a respon-sibility of bringing in other sugar workers into a similar operating system. It has three bottomlines: (a) social ownership and management by the organized poor, (b) self-governing and empow-ered where financial-profits is shared. An allocation is made for capability development of members and its organiza-tions, and (c) ecologically enhancing with organic production and processing. [more in ATFI case study]



Social Economy The vision and development platform of BAKAS as articulated by Dumingag LGU was to develop an “internally driven eco-nomic growth” as the strategy to poverty reduction. This vision saw building of values of and shifting mindset and practic-es to entrepreneurship among the people as most important consideration. Economic activity-based groups were orga-nized. Through legislative fiat, anti-social and unproductive activities such as gambling, drinking, drug abuse and smoking were stopped.

The platform reckoned that local product processing and manufacturing as value and employment creating sector of the economy and must be championed. It can start at household level but envision the growth into small and medium scale manufacturing enterprises. The search for a “kinder, greener, less unequal and more-redistributive capitalism” [Ash, A.] On another plane, social econ-omy proposes “a new system that allows diverse forms of social ownership, harness finance to productive use, mobilize local resources and capabilities, serve social and developmental needs, empower producers and consumers, and reinforce human solidarity and ethical care.” [Ash Amin] A third sector that includes organizations such as cooperatives, non-profit organizations, social enterprises and charities organized in a broader politico-economic context, testing out its value and viability vis-a-vis traditional economic theory. Organic-based agriculture and resource management was introduced and widely practised by organized sectors. People at-large strongly believe in environmental protection and enhancement as a common good. Expectations were high and some results in income increases and some jobs created, local processing at experimental scale. “Macro”-level impact may take longer time, e.g. increase in purchasing capacity, creation of a vibrant local market with social benefits in healthier and more productive lives, fiscal gains in reduced medical and hospital costs. Dumingag is an undertaking in progress following the characteristics of a social economy. It pursues a geographic-based internally driven economic growth. LGU became a public sector entrepreneur leading the path to a social economy. Social entrepreneurship is an innovative social value-creating activity can occur within and across the social sector, business and government” (Harvard Business Review, 2000). Seeing the people in the streets of Dumingag, going to or coming from somewhere with purposeful strides gave that buoyant feeling that purposeful lives can be possible and achievable also in the Philippines. [more in Dumingag-BAKAS case study]

Corporate Shared Value (CSV) The traditional view that private business’s contribution to society is through investments that create employment, pro-vide wages, and paying taxes, by making profit, is no longer sufficient. [Potter and Kramer, 2011] CSV had been practiced by better known companies in many other countries, with notable results. Mexico’s Agrofinanzas-AMSA business model has many similarities to PBCI-Kennemer.[Agrofinanzas] Other models are those of Nestle’ Corporation’s supply chain and closer to home is Figaro Coffee. [See PBCI case study-Microfinance Plus & Corporate Shared Value] Corporate Shared Value is an approach to supply chain management. It is about “policies and operating practices that en-hance the competitiveness of a company while simultaneously advancing the economic and social conditions in the com-munities in which it operates. Shared value creation focuses on identifying and expanding the connections between socie-tal and economic progress.[Potter and Kramer, HBR, 2011] The partnership between PBCI and Kennemer Foods International illustrates CSV, as adopted by both business entities. Through PBCI, Kennemer can address gaps in its supply chain, e.g. access to a substantial number of organized smallholder farmers as suppliers and affordable production financing. Through Kennemer, clients of PBCI have an assured market for their cacao beans and access to technology. Through this partnership local producers are integrated into a global value chain with a win-win-win proposition. CSV is distinct from corporate social responsibility (CSR) which is about how companies make profit and what they do with these. CSR is more akin to philanthropy, it decides how it could make meaningful contribution to the community and be-come a good corporate citizen. It focuses on improving quality of life of the workforce and its families and makes contribu-tion in philanthropic donations that improves image of its core business. Real estate businesses, for example, provide fund towards building homes for homeless/informal settlers, or beverage businesses donate funds to water-related projects. [more in PBCI case study]



Section 4 - RECOMMENDATIONS Poverty remains to be a formidable challenge to the nation. At the current rate that anti-poverty programs are pursued, halving poverty by 2016, when the MDG ends, cannot be achieved. On September 25, 2015, world leaders adopted at the United Nations the 2030 Agenda for Sustainable Development with 17 Sustainable Development Goals (SDG). Goals 1-End poverty in all its forms everywhere and 2-achieve food security and improve nutrition and promote sustainable agriculture, when addressed, would establish the terrain for achieving most of the SDGs. The SDGs should serve as a benchmark for change the way the gov-ernment, business sector and civil society including the basic sectors think and function. More than ever, anti-poverty legisla-tions, agencies, programs and resources should be made to bear on the conditions of the poor. The strength and niche of NAPC is in conceptualizing, development and test-runs of anti-poverty strategies and programs. Kapit-bisig Laban sa Kahirapan (KALAHI), a community driven approach that enable LGUs and civil society organizations (CSO) to identi-fy, plan, budget and implement local priorities in delivery of basic services, developed by NAPC is now a DSWD flagship program for poverty reduction. Bottom-Up-Budgeting (BUB) is another strategy “engaging the basic sectors and CSOs as partners in a budget formulation pro-cess of poor municipalities that take into account the priorities identified in Local Poverty Reduction Action Plans (LPRAP). DILG take lead in carrying out the BUB. In light of the findings, and NAPC’s core competence the following recommendations are put forward that will bolster PDTF as resource in the struggle to fight poverty. There is certainly an economic and political space for microfinance but in a modified form that benefit the basic sectors in a direct way.

Recommendation 1: Increase the corpus of the PDTF as projected by R.A. 8425 and affirm its relevance. PDTF is relevant and must remain more so in this period of high poverty rates and SDGs. Relevance should also be expressed in financial terms. The huge projection reflects an equally huge expectation of the law on what PDTF could accomplish in the huge demand of poverty reduction. As a resource to address poverty of the basic sectors, PDTF corpus must be increased and reinforced. A corpus fund of PhP100 million fell short of the projections in amount and intent of capacitating the basic sectors and lift them out of poverty. The 2004 initial corpus fund has not increased after 10 years. Within the current interest rate levels (average .01%), the financial projection of the law, PhP4.5 billion through 10 ten years would generate PhP930 million in accumulated earnings. On the 10th year alone, PhP4.5 billion would earn PhP180 million. Table 6. PDTF corpus, earnings and allocations – 10 year projection16

YEAR CORE FUND

(Million Pesos) EARNINGS

(Million Pesos)

GRANT FUNDING (M) PDTF ADMINISTRATION (M)

MFIs (50%)

LGUs (25%)

TOTAL PCFC

(17.5%) NAPC (7.5%)

TOTAL

2015 100.0 4.0 2.0 1.0 3.0 0.7 0.3 1.0

2016 350.0 14.0 7.0 3.5 10.5 2.5 1.1 3.5

2017 700.0 28.0 14.0 7.0 21.0 4.9 2.1 7.0

2018 1,100.0 44.0 22.0 11.0 33.0 7.7 3.3 11.0

2019 1,500.0 60.0 30.0 15.0 45.0 10.5 4.5 15.0

2020 2,000.0 80.0 40.0 20.0 60.0 14.0 6.0 20.0

2021 2,500.0 100.0 50.0 25.0 75.0 17.5 7.5 25.0

2022 3,000.0 120.0 60.0 30.0 90.0 21.0 9.0 30.0

2023 3,500.0 140.0 70.0 35.0 105.0 24.5 10.5 35.0

2024 4,000.0 160.0 80.0 40.0 120.0 28.0 12.0 40.0

2025 4,500.0 180.0 90.0 45.0 135.0 31.5 13.5 45.0

TOTAL 930.0 465.0 232.5 697.5 162.8 69.8 232.5

16 The ten-year projected corpus is based on R.A. 8425, interest earnings on the 2014 while allocations were taken from the PDTF Manual of Operations.



Following the current policies and grant ceiling, this would translate into PhP697.5 million disbursable fund for projects and PhP232.5 million for administration. Further on, based on current grant ceiling, 1,395 projects could be funded instead of only 43. But if policies are revised and would increase the grant ceiling to PhP2 million, PDTF could fund 348 projects or 35 strategic projects per year. With higher disbursable fund for grants, PDTF should consider multi-year grants. Poverty is a gripping, historically rooted prob-lem that short-term and uncoordinated actions would not suffice. Targeting: For PDTF to remain and increasingly become more effective as a poverty-alleviating resource must set the criteria for targeting of grantees. The study showed that microfinance is no longer the relevant and urgent strategy to poverty reduc-tion. Some criteria to consider for grantee and project selection:

Projects that directly benefit the poor;

Projects that are integrated into the SRA plan and poverty-reducing programs of local governments;

Local government units with clear SRA plans and commitment to poverty reduction, would be the ideal PDTF intermedi-ary, particularly when the SRA is strategic and institutionalized. They should come in in partnership with the organized basic sectors in their respective jurisdictions. The organized basic sectors would remain in the locality. The municipality of Dumingag is a case to be reckoned here.

MFIs and BDS in the locality will be mobilized to respond to areas where they have resources and competence.

Recommendation 2: Target organized basic sectors and their institutions and organizations and build their capacity as cooperatives+ and/or social enterprises.

PDTF can become a cutting edge resource if applied to where it is most needed. PDTF should now target the basic sectors and their institutions and organizations such as cooperatives and social enterprises. MFIs and banks are more than capable of self-development and their need is no longer that urgent. Support to MFIs should be only for those that target the unserved and underserved rural communities of farmers, fisherfolks and indigenous peoples. Capability building of basic sector organizations should take priority in PDTF, such as cooperatives and workers guilds, associa-tions of micro-entrepreneurs and the like. Their capabilities in organizing, strategic planning and to become self-managing must be enhanced so that they can provide the needs of its members and grow to become significant, mature players in and contributors to the economic, political and social spheres of society. Research studies on cooperatives identified two major problems that cooperatives, especially rural cooperatives, face, (a) poor management skills and ethical practices that often led to mismanagement; and (b) lack of capital. PDTF should continue to support small cooperatives and enable them to grow into cooperatives+. Cooperatives have also the potential for or are already building their own enterprises. PDTF can support and be partners in the experimental phase of these initiatives by mobilizing PDTF to generate sources of operating capital and capex. They should be allowed the space and wherewithal to grow, acquire and build assets. Experiments with urban poor housing cooperatives are already an on-going concern of NAPC. PDTF can be applied in building capacity of these cooperatives to become urban poor cooperatives+ that help to address the huge housing deficit.

Recommendation 3: Target LGUs and NGO-BDS who can demonstrate innovative, society changing values and enhance their role in poverty reduction.

Progressive and forward looking LGUs and NGO-BDS are better positioned to engage the basic sectors and their organizations in drawing-up more comprehensive plans as platforms for development and poverty reduction. They can operate inde-pendently but it would benefit people/communities more if they work in partnership. LGUs have the legislative and institution-al capacity and access other resources, private, including MFIs and government. NGOs with skills set and commitment to peo-ple-centred development. As the study revealed, there is a crying need to build capability among local government units, in the area of strategic plan-ning, drawing-up SRA plans and strategies, in the first instance.



Recommendation 4: PDTF should consider supporting experiments/test-runs of small and medium enterprises as social enterprise and social economy.

Barring businesses of cooperatives, only a handful of social enterprises are in the category of small and medium enterprise (SME). There is no law, as yet, in the country that establishes and defines the legal entity of a social enterprise. It cannot be registered, supported, or regulated as such. Without legal personality it cannot transact business as SE. Unlike in the United Kingdom, the “responsibility for social enterprise was with the Department of Trade and Industry and a junior minister ap-pointed.”[Pearce, John. 2003] Recently they have initiated a Community Interest Corporation, i.e. a new legal entity for SE (Gibson) In Asia, only south Korea has a social enterprise law. SE and its advocates have much work must be done in this re-spect. The process of development of social enterprises starts with recognition of a social problem, usually related to poverty, like hunger, joblessness, poor health, among marginalized sectors. The innovative character of social enterprises (and social en-trepreneurs) finds solutions by engaging the marginalized sectors to address the social problem. In the country, the few social enterprises more are in production and manufacturing-processed aspects of important industries, such as rice, coconut, sug-ar, abaca, etc. [Gibson, K, Community Perspectives from Ash Amin] Because the concept and practice is quite new social en-terprises and their champions go through is one of “clearing the path while walking on it” kind of experience. Support through PDTF can help “clear the path” and allow social entrepreneurs the space to continue to come up with inno-vative and creative ways of adding value, diversifying products, creating more jobs and other scale up strategies, instead of getting bogged down in mundane issues of meeting quotas, machine repairs and finding more money. Social enterprises in a value-supply chain – production-processing-manufacturing-services - have multiple ways of contrib-uting to poverty reduction, both direct and indirect. First, its ability to develop new products, (b) adds financial value to the product and to the industry, (c), employment creation, and not the least, (d) developing home-grown entrepreneurs from the basic sectors. There are many more that need to be documented. Because of their social character, social enterprises are mindful of standards of and needs for a decent life of its stakeholders. Joblessness and underemployment continue to drive people to foreign shores. The study also showed a strong demand for employment. Anis Chowdhury concluded “for any significant dent on poverty, the focus of public policy should be growth-oriented and equity-enhancing programs such as broad-based productive employment creation.” This conclusion is support-ed by Karnani (Aneel Karnani, 2007) pointing out that “90% of labor force in developed countries, where education levels and access to financial services is high, are employees, not entrepreneurs.” The 2012 ADB Report strongly urged Philippine gov-ernment to get into manufacturing and create jobs as the solution to high unemployment. Social enterprises have demonstrated its job creating character. Micro and social enterprises in coco-fiber have sprouted all over the coconut rich provinces, thanks to DTI support through its Shared Service Facility (SSF). They are run by small cooper-atives, households and social enterprises. However, the bigger bulk of revenues from this go to private consolidators. Consoli-dation and scale-up of these micro and social enterprises should remain in the hands of the producers. Micro and social enterprises in the social sector are models that should be studied and helped to scale up to small and medi-um social enterprises for the reasons and benefits it gives to the industry and the economy as a whole. Section 11 of R.A. 8425 provides that PDTF can be used for “(3) community organizing for microfinance, livelihood and micro-enterprises training services; and (4) livelihood/micro-enterprise project/program feasibility studies and researches”. (emphasis sup-plied) Social economy development and experiments are more within the purview and capability of LGUs. The Dumingag experi-ence had the essential features of a social economy. It is initiated and led by the public sector but the process certainly focus-es on the social sectors of farmers and other small producers and traders. Along the same lines of Section 11 of R.A. 8425, PDTF can study and support emerging initiatives in social economy, especially with LGUs, even as components of social enterprises and cooperatives+ are integral. The benefits of (local) social economy to the national economy are likewise many and diverse, from a socio-economic to ethical. According to Ash Amin [Ash Amin 2009], social economy, in the last decade, has been recognized even by governments (in the west primarily) not only for its economic utilitarian value but also from a desire to make capitalism more caring, looking at economy as a heterogeneous, not any longer as historical leftover or marginal economic values.[Ash, A.]



A study on Dumingag and BAKAS could bring in the multiple and heterogeneous elements in social economy, economic modes and ethical practices. How basic sectors as key players become producers, workers, owners and asset builders. These experiments are still fragile and risky. It is incumbent on the government in a social reform mode to share the bigger burden of the risk. PDTF can start to take the risk by providing the necessary push for these initiatives to produce results in poverty reduction. As a start, PDTF can identify capability building needs assessment of BAKAS LGUs in the context of eco-nomic-geographic social economy. The country’s elite is among Asia’s richest, says a newspaper headline. Unfortunately it has low and limited philanthropic practice, who would rather build their own foundations as expression of their corporate social responsibility. Emerging social entrepreneurs in the social sector and those building social enterprises cannot expect angel investment or venture capital much less “social venture” capital. It behooves the public sector to take the risk and to invest public resources in social entre-preneurs, social enterprises and social economies. The Development Bank of the Philippines (DBP) a GFI, had at some point was studying the phenomenon of social enterprises whether it was a financially, certainly socially, sound to invest in. Government financial institutions can start to consider “social venture capital” as a window of support. PDTF can partner with social entrepreneurs and enterprises in this emerging venture or experiment.

Recommendation 5: Review and substantively revise the PDTF Manual of Operations.

The Manual of Operations as guide in the operation-implementation of PDTF and its funded projects was found to be inade-quate in many respects.

Key Words A major area is a review on the understanding, interpretation and coverage of capability building, two decades after R.A. 8425 was set forth. In light of changing status, place and outcomes of microfinance in poverty reduction, in the context of emerging needs of the poor and poverty alleviation, there must be a more progressive, relevant, and more encompassing interpretation and understanding of capability building. Capability building with microfinance as a strategy should be reviewed and reconsid-ered and put more stress on the other roles and uses of PDTF. The key words of organizing, livelihood and micro-enterprise, research and feasibility studies need re-defining and committed into the Manual of Operations. Capability building to mean training skills, is limiting the full meaning of “the basic sectors becoming capable of building enterprises”. The role of NAPC in monitoring the utilization of the PDTF should cover all areas where funds are involved. It is part of decision-making in so far as it also refers to:

(a) fund-raising for the corpus and planning; (b) allocation of disbursable fund;

Allocation for grants and administration;

Allocation of funds for each type of grantees-Cooperatives-MFI, LGU

Grant ceilings. (c) Awarding of grants and amount for every project; (d) Ensuring that fund is used as requested or intended.

This would now refer to ensuring validation and monitoring activities for institutional development and capability building pro-jects/programs/beneficiaries.

(e) Review and monitoring of financial reports, or at least a financial analysis.

Monitoring should include post-project implementation that would enable NAPC to determine and measure the efficacy of ca-pability building activities and the projects and gauge their impact on clients and end-beneficiaries. This type of monitoring should draw-out lessons that would improve operations and input on policy review. Project and training objectives often men-tion application and/or replication. The post-implementation monitoring will inform NAPC to what extent, application and repli-cation were done. Documentation of good practices should be part of monitoring and evaluation to highlight areas for policy purposes, modelling, replication and scaling-up. Review and redefinition of oversight function. Chapter 1 of the manual on Overview, says that “NAPC was named as the over-sight agency in-charge of monitoring the utilization (of the PDTF)”. Oversight and administration were synonymous, and with overlapping areas of responsibility.



The recent developments in PCFC provide NAPC the latitude for more thorough-going changes. With limitations on the ex-tent and implications of the changes, this paper will only propose on important areas and bodies. Firstly, NAPC, its competence, expertise and focus-location in government’s poverty alleviation thrust should drive PDTF as an integral resource to poverty alleviation. It should direct the use and targets in awarding of grants. Active internal campaign and information-education about PDTF should be carried out within the NAPC family and secretari-at. Its focal persons in the field must have a working knowledge about PDTF and how the LGUs can make full use of this re-source in advancing the SRA in their localities. An overwhelming majority of NSA respondents asked for IEC about PDTF, a clear signal of interest on their part. IEC should start with sectoral representatives/councils with the intent to cascade it to basic sectors organizations and stakeholders in general. That transparency and participation of basic sectors in every sphere in poverty alleviation was a clear intent of R.A. 8425 and the SRA. The decision-making body of PDTF should have a broader composition that could include (a) more representatives from NAPC, including the Secretariat and the basic sectors, (b) LGU representatives, and (c) experts in the area of poverty allevia-tion and strategic planning, as permanent members or upon invitation. A unit within the NAPC Secretariat that is responsible for the day-to-day concerns of PDTF should be restored or created. The PDTF should consider and start to experiment on multi-year grants for projects with more strategic objectives, enduring outcomes and impact. In conclusion, the over-arching goals of the SRA and PDTF must bring the Basic Sectors to the center as active and effective subjects in poverty reduction projects. Without painstaking education and enterprise building capacity through formal edu-cation channels and civil society value formation and skills development programs, it would be foolhardy to romanticize the poor as selfless, eager for change and expect them to be entrepreneurial. Civil society over the years has engaged the basic sectors and has shown both commitment and perseverance in finding pathways to people’s development. Their participation and competence need to be harnessed. It would require tremendous political will on the government side, to overcome biases against civil society and the basic sectors who are often seen as adversaries and/or competitors rather than partners in the huge demand for poverty reduction.



Section 5 - CASE STUDIES

PEOPLE’S BANK OF CARAGA, Inc. San Francisco, Agusan del Sur

Microfinance + and Corporate Shared Value (CSV)

Profile and history The People’s Bank of Caraga, Inc. (PBCI) is a rural bank with main office in the municipality of San Francisco, Agusan del Sur (Caraga-Region XIII). It serves 40,000 clients in 12 branches and 14 micro-banking offices (MBO) spread out in the provinces of eastern Mindanao, mostly in the regions of Caraga and Davao. It has extension operations in Magsaysay and Gingoog City in Misamis Oriental. The farthest is the Oroquieta City branch in Misamis Occidental. The opening of the Oroquieta branch was en-couraged by the People’s Credit and Finance Corporation (PCFC) at a time when no microfinance institution was serving the area. PBCI started in 1969 as the Mindanao Agricultural Resettlement Agency (MARA), a project of the National Council of Churches in the Philippines (NCCP) assisted in resettling farmers in Talacogon, Agusan del Sur. It is part of the Protestant churches’ contribu-tion to the government’s agrarian reform program. In partnership with the Land Authority (now Department of Agrarian Reform-DAR), MARA sought to help farm settlers develop 16,440 hectares of logged-over land. The Land Authority awarded farm land to settlers, assisted in land surveying and built some infrastructures such as a dirt road to MARA. NCCP organized farmer-settler cooperatives and provided farmers a credit fund for crop production. It also built facilities for health services and provided technical assistance to farmers as well as built post-harvest facilities such as a rice mill. Funding support came from the World Council of Churches (WCC- a Geneva-based Council of Protestant churches), ICCO of Netherlands and Bread for the World-Germany. The International Bank for Rural Development (IBRD) gave a soft loan for farmers to plant and grow rubber trees. PBCI’s mission is “social uplift of the poor and less privileged through desirable financial services, capacity building and the use of suitable technologies.” It is one of the founders of the Mindanao Microfinance Council (MMC) and an active member of the Mi-crofinance Council of the Philippines, Inc. (MCPI).

From Church-based Project to Rural Banking While the capability building component of the project such as resettlement, training, etc., was doing well, the credit program was doing poorly. Most beneficiaries did not bother about paying back the loans thinking that church money was for giving-away anyway. To put a stop to the growing dole-out mentality, the MARA Executive Committee, chaired by the late Dr. Juan Flavier, decided to formalize the credit program and establish the Rural Bank of Talacogon in 1972. The bank took over the management of the credit component of MARA. Farmers in the resettlement area of Talacogon, San Luis, Prosperidad and San Francisco were its first clients. Samahang Nayon farmers’ cooperatives, (organized during the martial law period) were invited as stockholders. In June 1996, the Securities and Exchange Commission (SEC) approved the change of name from Rural Bank of Talacogon to Peo-ple’s Bank of Caraga, Inc. It remained a rural bank because during the process of changing the name and conversion, an applica-tion of a cooperative bank in the province was approved. PBCI’s clientele has expanded to include other farmers, micro business - market vendors and enterprising housewives and rank and file employees of government in a “socialized” lending method.



Funding sources and growth PBCI’s authorized capital was PhP2 million, of which PhP1 million was in common shares and PhP1 million in preferred shares. Through grants from churches and from Rabo Bank, capitalization grew to P100 million, of which PhP97.5 million was in common shares and PhP2.5 million in preferred shares. Farmers cooperatives, Women’s Microfinance Federation, bank employees and FRIEND foundation, were among the owners of PBCI. Today, PBCI has more diverse sources of funds including credit lines from the Land Bank of the Philippines (LBP), the Small Business Corporation (SBC - formerly Small Business Guarantee Fund Corporation-SBGFC) and the National Livelihood Development Corpo-ration (NLDC). It participates in the government’s special financing programs. The Multi-Livestock Development Plan of the Department of Agri-culture-Bureau of Animal Industry (DA-BAI) financed livestock breeding to increase the livestock population, e.g. carabao, cattle, goat and swine. The Coconut Industry Investment Fund (CIIF) offered financing for coconut-related projects and any other viable livelihood program. A credit line of PhP7 million from the Agricultural Credit Policy Council (ACPC) was offered for high-value crop projects with land being taken as solid collaterals. The LBP focused on rediscounting facilities. The Agrarian Reform Support Project (ARSP) created to improve food production, plantation crops and to enhance ecology by Agrarian Reform Beneficiaries (ARB) and selected Agrarian Reform Communities (ARC) was a substantial fund source. The ARSP is a grant from the European Union (EU) on Special Time Deposit converted into common shares of stocks in the name of deserving cooperatives and/or people’s organizations. Other fund sources for micro-lending were PCFC and NLDC. NLDC lends out to ARBs and non-CARP ARCs. Until the present, ICCO of the Netherlands continues to support microfinance services.

FINANCIAL PRODUCTS AND SERVICES Financial intermediation is PBCI’s core business. Its products serve the fi-nancial needs of the poor, enhancing their income-generating activities (IGA), livestock production and breeding. The bank also provides funds for education, house repair and for generation of solar power. BSP Circulars, new financial products were added, (a) Agri-microfinance (AMF) with funds from the Department of Agriculture (DA), and (b) agri-micro insurance, a subsidized insurance scheme by the Philippine Crop Insurance Corporation (PCIC). Through the MCPI, PBCI was introduced to Entrepreneurial Develop-ment Training in Community Based Agro-Industrial Program and Value Chain Financing to farmer-entrepreneurs. “Socialized” lending to rice and corn farmers and short-term loans to small vendors is a source of pride of PBCI. Medium and long-term loans were offered for plantation red crops such as rubber, coffee and cacao and for

acquisition of small farm machines and work animals. Industrial loans were offered for small industries such as cacao processing, blacksmithing, tailoring/dressmaking, etc. while salary loans were offered for low-salaried permanent employees.

MICROFINANCE

Microcredit and community organizing has always been important strate-gies of PBCI in reaching the poor in rural areas. Following the creation of the National Strategy for Microfinance (NSM) in the late 1990’s, the other basic features of Grameen banking model, e.g. financial literacy training and group lending scheme, were adopted. Financial literacy instilled val-ues and skills in managing income, credit and other assets. Lending groups were organized, trained and went through “group recognition test” prior to approval and release of loans. The tests ensured collective responsibil-ity, peer pressure and individual accountability for the group’s loan repay-ment. Collection Officers met the Groups on a weekly basis to monitor loan usage, discuss the progress and address problems of micro-enterprises, and aas well, collected loan payments. Modifications to the Grameen model were made based on the profile of clientele, on capacity and needs and/or peculiarities of the locale.



Mainstreaming of microfinance and amendments to the General Banking Law (GBL), lifting the moratorium for creating branches led to the bank’s rapid expansion. PBCI undertook market studies and expansion areas were identified. When a sufficient number of clients, at least 300, is reached a Loan Collection Disbursement Point (LCDP) is established.

Box 6. Reaching the unserved

PBCI’s branch in Sibagat (border town of Agusan del Sur and Agusan del Norte) was estab-lished in 2001. In 2003, a market survey was conducted to identify potential expansion areas. Rural but well-populated and thriving barangays of Ampayon, Taguibo and Sumilihon (of Butuan City) were found to have no significant MFI presence. Without any competition the 2 development officers deployed in the area and easily reached the target of 300 clients. The following year, the first area supervisor was assigned and in 2006, a LDCP was established and a staff house was provided for 2 supervisors and 6 development officers who were re-sponsible for promotion, collection and processing. By 2015, these areas were integrated into the Sibagat branch of PBCI increasing Sibagat client base to 3,000.

200 salary loans – PhP35 million portfolio

60 agriculture loans – PhP20 million

150 commercial loans – PhP12 million Meanwhile, in 2010, another branch opened in Cabadbaran City (capital of Agusan del Norte) which also covered the farming town of RTR and fishing town of Tubay with 50 clients each. The Cabadbaran branch had a total of 2,300 clients. In 2011, a Microfinance Business Office (MBO) opened in Kitcharao, Agusan del Norte. Cabadbaran expanded east towards the Surigao del Norte towns of Mainit, Placer, Tubod, Sison and Bacuag, while Sibagat branch’s expanded west towards Butuan City where an MBO was later established.

-o0o-

Clientele The over whelming majority of clients were in the microfinance sector: farmers/settlers including Agrarian Reform Beneficiaries (ARB) and Agrarian Reform Com-munities (ARC), indigenous people, fisherfolks, urban poor, women were served. Farmers were served by all branches and MBOs while ARBs and ARCs were mostly based in Talacogon. Indigenous people were served among the Manobo and Agu-sanon tribes in Talacogon, Veruela, Sta. Josefa and Bunawan. Manobo, Mandaya, Kalagan IPs were served in Toril, Kapalong, Compostela Valley and Digos while fisherfolks were served in coastal towns of Tubay, Agusan del Norte, Hinatuan, Surigao del Sur and Magsaysay and Gingoog in Misamis Oriental. Most clients were either cooperatives members and/or lending groups of women. Regular banking serviced small and medium enterprises of the private sector. The branch in Oroquieta City is now more focused on private business sector. Loan amounts and repayment periods varied according to loan use. Loans of up to PhP300,000.00, still considered within the microfinance bracket [BSP Circular 744], has a one year amortization period. On the whole, most loans were in the range of PhP50,000 and below, clustered around PhP3,000.00 to PhP20,000.00. Loans were used to finance economic activities: farm inputs and labor; fishing nets and motors for fishing boats; goods for sari-sari stores. Those in the PhP100,000 – 300,000 were loaned out to private businessmen.



Table 7 . PBCI Loan Amount by amortization period

Loan Amount by amortization period

Performance Among its products, PBCI considers microfinance program as the most robust, fulfilling and rewarding. It has reached the poorest and improved their lives: “from a hand-to-mouth existence, they could now have three meals a day, send children to school and improve their houses. A fairly large exposure in Hinatuan, Surigao del Sur, mostly in fisherfolk communities, the poorest among the basic sectors. PBCI was the only MFI in the study that measured its own performance. The Annual Poverty Index of the National Statistics Office (NSO) is used to establish some anti poverty indicators. New clients fill-up a form that indicate their living conditions – household size, number of dependents, education of HH members, number of income earners, housing condition and type of toilet used, type of household appliances/assets used. This form is updated every two years. Additionally, FRIEND conducts ‘Client Satisfaction Survey” which helps the bank to determine which of the products and/or services are well-appreciated and areas that need im-provement. Among the most appreciated products was microcredit while livelihood skills training had the highest score among its non-financial services. The slow developers as well as those that had often experienced sudden reversals in farmers’ socio-economic condition were not-ed with much concern.

MICROFINANCE PLUS

PBCI is a Microfinance Plus institution from Bangko Sentral ng Pilipinas (BSP) definition: “Microenterprise Loan Plus or Microfinance Plus as loans from PhP 150,001 - PhP 300,000 to borrowers with track record of at least two microfinance loan cycles in the PhP 50,000 - PhP 150,000 range; demonstrated success of the enterprise; increasing credit demand and capacity to pay.” BSP’s Microfinance Plus applies only to rural, cooperative and thrift banks.

On the other hand, PBCI’s past and current practice (as MARA and as Rural Bank of Talacogon) has long demonstrated its MF+ character. As most Microfinance Plus, PBCI recognizes the limi-tations of microfinance in the social-economic uplift of the poor. Non-financial services are linked to financial products, such as training in financial management or marketing support that ensure the viability and sustainability of micro-enterprises. There are also stand-alone ser-vices that enhance human capital and indirectly their economic activities.[Lensik, R.]

FRIEND Non-financial products and services, in the case of PBCI, are offered by the bank, but mostly by its own Foundation for Rural and Industrial Equipment for National Development (FRIEND). FRIEND was established soon after PBCI set-up its microfinance unit. A PCFC accredited service provider, FRIEND has a training center in a 10 hectare organic production-demonstration farm. The farm generates income also from fruit trees, crops, flowers and livestock. FRIEND has an annual average budget of PhP8.4 million. The 15 staff members are young, 25-35 years old, and trainers with varied specializations in research, food processing and agriculture.

Amount Amortization period

1,000 - 3,000 25 weeks /6 months

3,001 - 5,000 25 weeks/ 6 months

5,001 - 8,000 25 weeks/6 months

8,001 - 15,000 25 weeks/6 months

15,001 - 20,000 25 weeks/6 months

100,000 - 300,000 6 months - 1 year

1,000,000 Commercial building/store



As a training arm of the bank, FRIEND conducts in-house training for PBCI staff and microfinance facilitators in the various branch-es. Regular training courses are “Community Development and Leadership” and “Financial Management”. For highly specialized courses, FRIEND takes resource persons such as Punla sa Tao on Disaster Risk Reduction (DRR), NLDC on Customer Service; SBC on “Operational Analysis; LBP on Cash Flow and Microfinance Best Practices. Human capital development Livelihood and business development services take a greater part of PBCI’s non-financial services which directly relate to its core business. Innovations in farm-ing systems were introduced to Isa-isang Sama-Samang Pag-unlad (ISAPA) the bank’s organized farmers groups. Rice-Duckery System and Sakahan-Palaisdaan (rice and fish farms) are some examples. Skills training in sewing and food prep-aration for rural and urban poor women are offered. Indirectly related but equally crucial are training programs in health and re-sponsible parenthood, environmental protection and disaster risk manage-ment. Creating supply-value chains The bank also ventured in providing marketing support to its clients. It organizes “Micro-Negosyo Fairs” where clients’ products are brought to various towns and link them to potential markets and seeks out markets for specialized products. Calamansi (small, green sour lemon) growers of Sta. Josefa were linked to buyers in Davao City, a central wholesale market (bagsakan) in the region. Calamansi in raw form is highly perishable. Without an assured market, growers easily lose out and find themselves deep in debt. PBCI assisted cassava farmers to assemble-consolidate 80-100 tons minimum volume and to forge a 3-year marketing agreement with San Miguel Corporation (SMC).

Microfinance Plus brings together financial resources, knowledge and skills, builds confidence and innovative spirit among clients, creating multiplier effects and impact on communities. [Westly, Jacqueline M. 2007]

CORPORATE SHARED VALUE Cacao and Kennemer A more recent venture of PBCI-FRIEND is partnering with Kennemer Foods International. The bank felt strongly about low yields and productivity among farmers, their lack of access to markets, despite availability of financial resources. In need of a steady supply of quality cacao beans for trading in the international market, Kennemer Foods entered the scene. Kennemer Foods International is a Philippine agribusiness company specializing in the growing, sourcing and trading of high quali-ty agricultural crops such as fermented cacao beans sourced from smallholder farmers. Established in 2010, it started as a post-harvest and buying center in Davao. With thousands of farmers in Mindanao and some in Visayas the company soon discovered sourcing problems of insufficient volume and quality supply of cacao beans. Smallholder farmers were not motivated to go into vigorous production because of a multitude of problems. Limitations to market access, lack of training in Good Agricultural Prac-tices (GAP), knowledge and technology, lack of technical support from government, and affordable financing discouraged small-holder farmers from replenishing the old and diseased cacao trees. In any case, they had little or no knowledge training in disease control and management.



Cacao trees grow best in tropical climate and can be intercropped with coconut trees for shade. Cacao beans have varied use, from food to cosmetics. Cacao trees grow best in tropical climate and shady areas, an excellent intercrop of coconut trees. A perennial tree, cacao starts fruiting in 18 months from planting. With proper care, it can produce good quality fruits for 25 years before major pruning/regrating is done. The production and industry potential in the country for cacao was not lost to Kennemer. Rather than moving to other sources, it shifted from simply a buying station to encompassing a complete agricultural value chain from planting mate-rials, training, agri-technology to market. Kennemer identified customer needs (smallholder farmers) and redesigned product and services.(Potter, M and Kramer, M. HBR. 2011)

PBCI’s mission for “social uplift of the poor and less privileged through desirable financial services, capacity building and the use of suitable technologies” found much common ground with Kennemer’s re-stated mission “committed to developing rural com-munities by promoting market transparency, providing fair value pricing for produce, boosting farmer productivity and imple-menting sustainable farming practices. In 2014, Kennemer and PBCI signed the Cacao Production and Purchase Agreement”. Figure 4: CSV Stakeholders shared value-benefits

Kennemer supplies seeds and seedlings from its nurseries at PhP23.00 per seedling and provides technical assistance in cultiva-tion and care. Fresh cacao beans are bought from the farmers at prices not lower than prevailing market price (currently PhP35-40 per kilogram). Fermenting of beans is done by Kennemer to ensure quality. PBCI provides P60,000-70,000 production loans to individual farmers payable at harvest time or a term loan of 3 years at an interest rate of 20% per annum. Farmers are required to submit land titles, Deed of Donation or Tax Declaration as proof of ownership. As of 2015, 687 farmers with 3-5 hectare land have planted 687,000 trees in 860 hectare land. The trees are now at the flowering/pruning stage.

Resource and value sharing in the service of poor farmers and indigenous communities is a model for inclusive growth, a “win-win-win” proposition of private and basic (social) sectors. The welfare and well-being of poor farmers, in this case, is largely in the hands of the private sector to address the gaps in the industry. The traditional view that promoting common good and shared wealth is a job for government and NGOs, is being chal-lenged by a new perspective in value creation.

SHARED RESOURCES-STAKES

Basic Sectors PBCI-FRIEND Kennemer

Land Organizing Seeds/seedling

Labor Financing GAP-Technology

Water & other inputs Monitoring Market-buying stations

SHARED VALUE-BENEFITS

Higher-better yield Increased customer Sufficient-quality supply

Increase income Assured repayment Customer satisfaction

HUMAN & COMMUNITY DEVELOPMENT-IMPROVED QUALITY OF LIFE



CONCLUSION

Going back to calamansi, a more strategic response must go beyond providing markets for raw prod-ucts. Processed calamansi in bottles, soft packs, and in powder form, are now on the shelf. It would do well for any or all sectors to take up the challenge.

It does not matter which of the wealth creating sector/s creates

value as long as it benefits the people and uplift them from

poverty. Creating the most value for the poor achieving the

most impact on society, financial, social and environmental

impacts is a desirable objective for CSV.

Figure 5: Intersection of value chains

People’s Bank of

Caraga, Inc.

KENNEMER FOODS

International

Basic Sector

(FARMERS)

PROCESSING

MARKETING

TECHNOLOGY

GROWING

HARVESTING LOANS

ORGANIZING

INPUTS

(SEEDLINGS)

LOAN PAYMENT

Sources: 1. FGD

Participants to the PDTF Capabil-

ity Building sessions – 29 women

micro-entrepreneurs and farm-

ers (San Francisco, Sta. Josefa,

Bunawan, Trento) April 17,

2015;

Participants to 2 FGD sessions

among fisherfolks and micro-

entrepreneurs in barangays Bin-

uangan and Tinigbasan, Tubay,

Agusan del Norte (June 22,

2015);

45 participants from IP and

farmer-settlers sectors in La Paz,

Agusan del Sur (June 23, 2015)

2. Key Informants

Ms. Lita Bilaoen, President and

CEO; April 16, 2015

Ms. Darlene Bulaon, Executive

Director, FRIEND Foundation

and (June 23, 2015)

Mr. Berny V. Amoy, Assistant

Project Director on Microfinance

Mr. Ariel Maligro, Assistant Branch Manager, Cabadbaran City Branch (June 22, 2015)



PATANOM Credit Cooperative (Pagduso sa Agrikultura sa Tingob nga Aksyon sa mga

Organisasyon sa Mang-uuma-Patanom) Barotac Viejo, Iloilo

Case Study: Cooperative Plus

Introduction There is no such entity as Cooperatives Plus (Coop+), yet. Under the definition of the Bangko Sentral ng Pilipinas (BSP), since coop-eratives are not banks, they do not qualify as microfinance plus17. MFI Plus are loans granted by microfinance oriented banks to the basic sectors on the basis of borrowers cash flow for their growing microenterprise businesses that demonstrate success in their businesses. According to BSP there are only 200 banks and microfinance-oriented banks permitted to provide MFI Plus. (BSP)

On the other hand, it is a microfinance institution (MFI) integral to the microfinance industry. Microfinance experts and research-ers define microfinance plus “is the provision of non-financial services in coordination with financial services.” (CGAP Gateway, Aghion and Morduch, 2005) MFI+ is predicated on the idea that access to financial resource alone cannot result to poverty allevia-tion and human development. The poor should have access to wide range of assets and services, such as water, electricity, roads, productive assets other than financial, as well as knowledge and skills in making enterprises viable and sustainable. (Lensik, et.al.) PATANOM is a Credit Cooperative18 and an Agrarian Reform Cooperative19. It is typical of small rural credit cooperatives com-posed of agrarian reform beneficiaries (ARB). PATANOM Credit Cooperative has its main office in the municipality of Barotac Viejo, but its 29 member cooperatives, farmers and women’s associations are spread in 9 municipalities, in Iloilo province. It has more than 3,000 individual members. Non-government organizations (NGO-PHILDDHRA, PAKISAMA-Akbayan, PROCESS-Panay and Kadanaran Foundation Center-Central Philippines University), were instrumental in organizing the Agrarian Reform Beneficiaries (ARB), farmers cooperatives and wom-en’s associations while the National Irrigation Authority (NIA) organized the various Irrigators Associations. Municipal Profile The Municipality of Barotac Viejo is found on the northern part of Iloilo province facing the strait of Guimaras and the island of Negros. Its total population is 39,071 in 7,925 households (BHW, 2007) mostly concentrated in the lower part of the town. The total land area is 18,578 hectares, almost 90% classified as agricultural. Most of the people are farmers (95%) who grow rice, coco-nut, sugarcane, corn and vegetables. A 3rd class municipality, Barotac Viejo has 26% poverty incidence. Background of PATANOM The current coop members of PATANOM are organizations that used to operate independent of each other. They would some-times come together to discuss and address common issues, mostly problems that had to do with land distribution, high cost of farm inputs and control of traders over prices of products. The issue of environment and ecology became a common issue because of successive crop failures due to extreme weather changes and pestilence. The over-arching concern among the ARBs was their inability to pay amortizations to Land Bank (LBP) for land awarded by the De-partment of Agrarian Reform (DAR), which came up in many discussions and in some cases, led them to make petitions. The search for a solution was the immediate impetus for the establishment of a Multi-Purpose Cooperatives of ARBs (ARB-MPC) in September 1994. The ARB-MPC was registered with the Cooperatives Development Authority (CDA) in 1999. It had 8 staff members. The member cooperatives, including ARB-MPC operated like any other cooperative doing savings and capital-build-up (CBU), and credit provision. It also established a cooperative store of farm inputs.

17 BSP Circular 744 defines microfinance plus as loans from PhP150,000 to PhP300,000 provided by microfinance oriented banks to borrowers who have a track record of at least two microfinance loan cycles in the PhP50,000-PhP150,000 range, increasing credit demand and capacity to pay. 18 Cooperative Code of the Philippines. A credit cooperative is one that promotes and undertakes savings and lending services among its mem-bers. It generates a common pool of funds in order to provide financial assistance and other related financial services to its members for produc-tive and provident purposes. 19 An Agrarian Reform Cooperative is one organized by marginal farmers majority of which are agrarian reform beneficiaries for the purpose of developing an appropriate system of land tenure, land development, land consolidation or land management in areas covered by agrarian re-form



Meanwhile, the issues related to issuance of Certificates of Land Ownership Award (CLOA), resistance of on the part of some recal-citrant landowners, cases in court, etc. continued to hound the farmers. In 1998, the PATANOM Alliance was organized to do edu-cation and advocacy. It was an organizational response to a reducing grant funds. However, ARB-MPC having operated for some years, could not adequately address the problem of land amortizations. Relying on savings and CBU for credit needs of members was taking a long time. Moreover, the lobby of PATANOM Alliance for issuance of Certificates of Land Ownership Award (CLOA), and petitions against recalcitrant land-owners was draining what little resource it had. Moreover, ARB-MPC was not adequately prepared to run the cooperative. There were just too many problems and obstacles that farmers faced. Lack of knowledge and competence in management and staff, the ARB-MPC floundered. Donor funds were no longer forthcoming. The successive typhoons that visited the area resulted to successive crop failures. ARBs and other farmers continued to experience the so-called “tig-gurutom” or hunger months (August – October).

CRISIS AND OPPORTUNITY

Despite the difficulties, the staff of ARB-MPC and PATANOM Alliance continued to work, sometimes with delayed salaries and eventually some, without being paid. Some members made voluntary contributions just to convene meetings and training activi-ties. Short of cash, members revived the practice of labor exchange. All was not lost. In 2012, a PATANOM Alliance leader who attended a national meeting of PAKISAMA brought back the news about a People’s De-velopment Trust Fund (PDTF). The ARB-MPC applied and the grant amount of PhP517,000.00 was approved on February 21, 2013. The first tranche was released on May 16, 2013. It gave ARB-MPC some breathing space and the opportunity for training its Board and staff on the technology and mechanics of microfinance. With a lot of difficulty, ARB-MPC came up with its counterpart of PhP250,000.00. In addition to the training of ARB-MPC on management enhancement and microfinance system, the grant was also used to train 50 women in organic agriculture and production planning. Having the Municipal Planning and Development Officer (MPDO) of Barotac Viejo and local agriculture and DENR officers, the PDTF grant went a long way. In the same year, the Land Bank of the Philippines came to the rescue advising PATANOM to transform the ARB-MPC into a credit cooperative. This way, it would qualify to access financial and other types of support from government. The ARB-MPC became the PATANOM Credit Cooperative and received support from the Agricultural Credit Policy Council (ACPC) and Agrarian Productivity Credit Program (APCP), a Land Bank managed funds. After the PDTF training LBP gave PATANOM a loan of PhP42 million in 2014 from the Agricultural Productivity Credit Program (APCP) – PhP40 million for the credit cooperative and PhP2 million for the cooperative store. This is part of the DAR assistance to enhance productivity of ARBs. A credit scheme was adopted by the cooperative separate from its regular loan20: Corn farmers can access up to PhP32,000 per hectare loan of which PhP10,000.00 in cash was for land preparation and PhP20,000.00 was for farm inputs. Farm inputs in-kind was provided by the coop store. Sugarcane farmers can access up to PhP65,000.00 for new sugarcane planting, and up to PhP60,000.00 for “raton” (second to third growth of canes) per hectare. The requirements were not so complex: a) PhP50.00 membership fee; b) PhP500.00 CBU per cropping; c) PhP8,000.00 authorized capital; and d) Certification as ARB from the Depart-ment of Agrarian Reform (DAR) through the Municipal Agrarian Reform Office (MARO). Borrowers shall pay a percentage of net income for land amortization. Loan interest was 1.6% per month. All PATANOM clients are insured with the Philippine Crop Insur-ance Corporation (PCIC) for PhP1,742.00 per hectare. ARBs received their insurance payment during typhoon Yolanda. The credit scheme was a great relief to PATANOM members. Before this, they would avail of regular loans from ARB-MPC which was not always enough for their farm needs. Other loans were taken from local MFIs at 5% per month interest or from informal lenders and traders at 7-10% interest per month. The aggregate area covered by PATANOM members is 400 hectares for rice production alone. If PATANOM would be able to in-crease the number of clients and/or increase bigger hectarage, LBP would add another PhP50 million to the current loan. As of 2015, PATANOM had no past due account. The loan package included capability building, a series of training courses, a joint pro-gram of the Department of Agriculture (DA), ACPC and DAR. The problem of loan payments for the awarded land was getting ad-dressed.

20 PATANOM’s regular loan has a 2.5% interest per month.



BENEFITS AND OTHER OUTCOMES PATANOM started to access and benefit from other government services and support, loans for Irrigators under the SIKAT-SAKA program of the LBP; livestock and poultry dispersal by the DA and the local governments. The Board and other officers had leader-ship training and some are now members of the Municipal Development Councils (MDC). Petitions and through the MDC repre-sentatives, PATANOM and other civil society organizations were able to access the Development Fund of local government in a significant number of barangays. The Development Fund is mandated by law, which is 10% of the LGU budget. Organic farming practice is now widespread among PATANOM members. Salngan ARB-MPC is now fully organic and the local gov-ernment provides subsidy for organic fertilizer. The target of PATANOM is to fully organic in 5 years. PATANOM’s one time venture into rice marketing, consolidating the produce of members, was highly risky and it almost cost it to lose PhP100,000. But for the quick thinking of some leaders, the business ended up with a profit. It had a crippling effect on the operations of local traders. The venture was not repeated, more because of lack of capital and a warehouse. PATANOM does some sporadic check among members using NAPC poverty indicators such as income increase, basic needs, toi-lets, potable water.

Box 7. PATANOM Women Training

Fifty women representatives of the various cooperatives, women and Irrigators Associations participated in 15-day training program. The training courses were on: financial literacy-credit management, farm planning and produc-tion management, organic agriculture, marketing, disaster preparedness and climate change. The women were rice farmers, vegetable gardeners or sugarcane growers. Before the training they used chemicals for their farm inputs. After the training, they became converts of and advocates for organic farming. The women found all the courses extremely useful in their day-to-day life:

Ofelia: “Multiple cropping helped my family through the hunger months.”

Gina: “In the past, I did not consider market prices when I farmed. Now, I check out prices of vegetables in the market and decide what crops would fetch a good price, at what time”.

Judelyn: “When we get sick, it is not compounded by lack of money.”

Hilda: “My savings is separate from that of my husband. I don’t have to rely on him for all my needs. With my own money, I am more confident about my decisions.”

Gladys: “We have been farmers all our lives but we never thought of making a farm plan. With a plan, we learned to make budget for the farm and for family needs.”

Rennie: “I adopted integrated organic farming. Nothing is wasted - rice hull, corn cobs and molasses are used for making organic fertilizer and save on expenses for farm inputs”.

Marlene: “We used to have ‘self-reliant’ pigs, letting them roam around the yard. Now we built a pen, our yard is much cleaner and sanitary. I wash our clothes in the stream next to our house. We collect their waste for composting.”

Linda: “I had a stroke three years ago. I was bedridden and could move. Someone told me to go organic. My diet is organic black rice, vegetables and fruits. I am here now, able to walk, travel and most importantly, work in my farm. This is my testimony.”

Lucy: “My children used to be ‘walking debts’ to me. Everytime they needed something in school, I would take out a loan. Those days are no more. I managed to budget my money and managed to pay my loans. Only then that I realized I was making extra income.”

-000-



PROBLEMS AND NEEDS

Some of the problems of PATANOM and its members were addressed. But the road to growth, in the words of farmers, and is still full of “potholes”. Capability building of the basic sectors should not be limited to training and livelihood skills development. With-out the means to practice the skills, they will be lost over time. In agricultural production, there is an urgent need for post-harvest facilities such as rice mill, drying facilities, warehouse and a marketing center where they can bring and consolidate their products. To apply integrated farming system, they need bigger capital to finance each component. They have access to credit for their main crops of rice, corn and sugarcane. Surplus can finance smaller ventures such as composting and organic fertilizer production. How-ever for livestock and poultry raising, consolidated marketing, they would need additional capital. Basic infrastructure and services by government is also critical. Most farmers live and farm far from the urban centers and mar-kets and are without road and bridges. They walk or take single motors which are expensive for them. Without access to afforda-ble transport, farmers are discouraged from bringing their products to the market. In addition, many of them have no access to potable water in their homes and irrigation water. Electricity is likewise a problem. The farmers feel that many government officials in decision-making positions remain insensitive to their needs. Corruption and lack of political will led the PATANOM Alliance to petitions. In the words of one elderly farmer, the volume of petitions they sent to the government was “enough to boil a kettle of water” (maka-init sang usa ka takore). Tractors and harvesters from the national government were appropriated by officials for their personal use and rented them out to farmers. This was just one of the subjects of their petitions. There are still many barangays who do not provide the 10% Devel-opment Fund. Access to the Women and Development Fund (GAD) is still being lobbied for. Many LGUs use the GAD Fund, for beauty contests, community dancing events, and the like. PATANOM members feel for the non-ARBs who are without land and cannot access the same subsidized credit of ARBs. Many non-ARBs are still tenants. They are required a tenancy certification from their landowners many of whom are absentee owners. PATANOM is finding ways to provide the same services to non-ARBs. PATANOM is likewise concerned about the situation of fisherfolks who are the poorest among the basic sectors in the area. They are looking into other options livelihood and income sources and how the cooperative could extend assistance. Permanent hous-ing is another problem of fisherfolks. PATANOM Credit Cooperative is only for ARBs. There are many more non-ARB cooperatives of farmers and other basic sectors that need government assistance. They lack capacity to access government services and to provide counterpart financing and lack knowledge and systems for efficient governance and management of cooperative enterprises. Barangay-based cooperatives can hardly pay for its operations. Education is seen as another issue that needs to be understood. Most coop members felt the need to learn about entrepreneur-ship and building enterprise. They have expressed disdain on the 4Ps program as dole-out and promoting dependency. Recommendations for an effective PDTF: 1. Target beneficiaries who need assistance most. Small, rural cooperatives that serve the needs of the poor in the rural areas

should be given priority. Appropriate criteria and indicators must be established. 2. Building the capability of the basic sectors to improve their lives need beyond “software” like skills development. To make

them capable of improving their lives they also need “hardware” such as infrastructure and basic services, post-harvest facili-ties, machines and equipment.

3. Post project monitoring should be conducted to determine the efficacy of PDTF funded activities. For example, monitoring should be made to compare yields of organic and inorganic farming.

Cooperative Plus PATANOM provides financial and non-financial services that qualifies as a microfinance plus as well as a multi-purpose coopera-tive. Its non-financial services, such as marketing support, advocacy, participation and representation in government bodies, were crucial factors in addressing their immediate problems. The credit coop through the PATANOM Alliance worked collectively in advocacy work. This could be a legacy of the NGOs that proved to be effective in getting results. On the other hand, except for the rice marketing venture, the change had been mostly at the household level. There is, however, an interest in collective enterprise,



in addition to the credit coop itself and the coop store. The “hardware” needs of a rice mill, drying facility, warehouse, “bagsakan” are presumably towards collective ownership. Responding to this need would also improve household enterprise in a value so chain. Training and education on cooperativism in enterprise development should precede such support to affirm that it is the coops initiative and not government-driven. Cooperatives are by its character are cooperatives plus as it caters to the multiple needs of its members. In a situation where members are in extreme poverty with newly acquired land as the starting asset, there is a need for defining category of Coopera-tives Plus and corresponding support from the government. PATANOM also promotes cooperatives by reaching out and being in solidarity with non-ARBs, fisherfolks and smaller barangay-based cooperatives. However, it is constrained to incorporate them into the PATANOM credit cooperative being limited to ARBs only. By defining and supporting Cooperatives Plus initiatives is promoting the spirit of cooperativism as an approach to poverty reduction and people centered development.

Sources: Florencio Natalio – Vice President of PATANOM Credit Cooperative FGD of 9 women participants to PDTF supported training Hermineo Agsalona – PAKISAMA Board Member and AKBAYAN member Mark Pidal, MPDO, Barotac Viejo M. Zaldariaga – PATANOM member Soc Cervantes – Patanom member



Municipality of Dumingag & Bakas

Zamboanga Peninsula

Case Study: Social Economy

BAKAS (a Bisaya term for joining resources/forces as leverage) is an aggregation of 6 geographically contiguous municipalities of Sindangan and Siayan in Zamboanga del Norte and Dumingag, Mahayag, Midsalip and Sominot in Zamboanga del Sur. Its mem-bers were among the poorest municipalities in the country. Siayan had the highest poverty incidence of 97.5% in 2009. This has since reduced to 79.9%, but remained the highest in NAPC’s list of 600 poorest municipalities. In 2010, Sindangan’s poverty inci-dence was 73%, while Dumingag was 93% in 1997. Barring Sindangan is a coastal town along the Sulu Sea, with rich fishing grounds and productive coconut farms. The other BAKAS members are all landlocked and quite far from city centers of Ozamis, Dipolog and Pagadian. The region has wide plains and hilly terrain devoted to rice and corn production. The six LGUs came together under a common platform with coordinated projects on poverty reduction. BAKAS started in 2012 from a vision of the local government of Dumingag, led by its Mayor, to build internally-driven economic growth by adopting organic production, developing value-adding manufacturing, consolidating common products and generating an internal market. Dumingag became the first convenor of BAKAS. Below is a description of the Development Pathway of Dum-ingag. (http://www.dumingag.com) Municipal Profile Dumingag is a 2nd class municipality with a total land area of 61,850 hectares. It is landlocked and surrounded by the mountain ranges of Malindang, Dapiak, Midsalip and Siayan. It lies northwest of the fertile Salug Valley, originally jungles and marshland. Today, mined-over and logged-over mountains are being reforested and also planted with commercial trees such as rubber, coco-nuts and cacao. The marshlands have been transformed into rice farms, mostly by settlers from neighboring provinces and from Iloilo and Bohol in the Visayas. Of the 44 barangays, 33 are on the mountains and hills while 11 barangays are on plains and val-leys. Only 2 barangays are considered urbanized. The population of 46,500 (NSO, 2010) is ethnically diverse with majority belonging to the Subanen tribe, its original inhabitants. They are concentrated in 23 upland barangays and their ancestral domain covers 21,000 hectares or 34% of total land area. Be-cause of their nomadic farming system, the Subanen kept on moving and the settlers occupied, developed and claimed ownership of the lowlands. A small number of Muslims live in lowland barangays. The Subanen are the poorest. Challenges to the new administration Poverty incidence in 1997, when the mayor started on his first term, was 93%. Dumingag was one of the poorest in the country. The majority of the people were farmers, 75% (37,200) and 31,248 (84%) were among the poorest. They grow rice, corn, coconut, cassava and bananas. At least 1,168 farmers were unschooled. According to the mayor, the lack of an entrepreneurial mindset among the people is a main problem in the municipality. Income from harvest went to repay financers and the little left were set aside for their own needs until the next harvest. Farm and farm-ers productivity was extremely low. Processing of farm products is not practiced. Residual income of households went to vices such as drinking liquors, gambling and other unproductive activities such as cock fighting. There are more idle people than those in the work force. Dumingag today It took fourteen years for Dumingag to reduce poverty to 42.8% (2011) a decline by 53.9%. The is now considered as one of the peaceful and prosperous towns in the country. Its people are well disciplined and economically progressive. Through education, job generation and legislative fiat vices had significantly reduced. People use their time and income more wisely and have invest-ed in farming, in acquiring new assets, and other productive activities. The rime rate is very low. Farm productivity rate and yield increased significantly. The municipality produces organic products in commercial quantity: rice, corn, vegetables, fertilizers, coffee, tea, vinegar, livestock, food supplements, herbal-based medicines. Processed organic products are: bread, cakes and cookies, ice-cream. Handicrafts include bags and mats and house decors.

http://www.dumingag.com



The municipality is now well-known as an advocate of organic farming. Local foreign groups including other LGUs had been trained in organic agriculture at the Dumingag Organic Academy and are issued certificates which are recognized in many places. The LGU personnel are more motivated and are conscious of their performance and output. Department heads and local line agencies spend more time in the field working with the people. A hands-on mayor served as model of hard work, humility and concern for its constituents. The 15 point Genuine People Agenda (GPA) gave hope to the LGU and the people, especially the farmers. What is the GPA? Vision: Dumingag shall become an ecologically balanced, productive and abundant agricultural community, nurtured and man-aged with God –loving and responsible stewards in distinct ethnic origins, reliant and assured towards sustaining a sufficient de-velopment. Mission: The Municipality of Dumingag, deriving its mandate from executive Order No. 283, dated December 27, 1957, has the mission of uplifting the quality of life of its constituents through maximizing agricultural production, integrated ecological solid waste management, adoption of optimum utilization of all natural and material social resources and with a corps of public serv-ants with utmost sincerity and dedication.

Goals:

Develop the economy by intensifying agricultural activities and improving productivity;

Liberate people from poverty, sickness and hunger through organic agriculture.

Diversify economic activities and income sources Strategy: SOLVE POVERTY FIRST – to establish a local economy based on people’s empowerment and sustainable organic agricul-ture focused on food sufficiency.

Some features of the GPA: 1. Poverty assessment

A survey on poverty incidence was conducted using the Community Based Monitoring System (CBMS). Three survey teams were formed involving 8 enumerators who were hired and employed to conduct a survey of households in 22 barangays. The data gathering commenced in October 2007 and data encoding, digitizing and processing were complet-ed by August 2009. The results showed high poverty incidence due to lack of access to assets, resources and services. Most of the barangays were inaccessible due to poor roads. Although the municipality had six river systems, there was high number of households that had no access to potable water and irrigation. Chemical inputs in farming were expen-sive. Drinking, gambling and other vices were commonly practiced.

2. More responsive LGU

Based on the results of the survey, the LGU officers and employees were made to understand the extent of poverty of the people and its causes. The objective was to build the basic foundation for genuine public service and make the LGU sensitive and responsive to the needs of the people. The GPA was drawn-up with a coherent program. Based on the GPA, each department formulated its own plans and programs.

3. Livelihood Development Coordinators (LDC)

A system of employing Livelihood Development Coordinators was adopted. LDCs were responsible for bringing the GPA to the barangays and organizing the people at the barangay level. They assisted the Barangay government units to local-ize the GPA. LDCs were the development advocates who carried out capacity building activities, led in implementation and monitoring of programs and projects. They were accountable to the people and to the Municipal LGU.

4. Capability building

The second step was building the capability of the people. The LGU promoted democratic participation and collective action. Cooperatives and associations were organized according to industry or economic activities. A total of 32 coopera-tives were organized, mainly among farmers. However, due to mismanagement and lack of funds, only half continued to be active. Organized women and youth groups were engaged in weaving, production of traditional medicine, processed food, etc. The Dumingag Business Asso-ciation was organized with more than 200 members composed of market vendors, food services, RTW businesses and “sari-sari” stores.



5. Organic agriculture and organic-based economy The program was for farmers to learn “skills on simple, culturally acceptable, economically viable and environment-friendly farming system.” Organic farming and gardening was introduced convincing people about the health benefits of organic food. Building the capability of people to go organic was holistically approached. Actual research in the farms that showed that organic farming yield was 3 times more than chemical-based production was only part of the buy-in process. The LGU gave out organically grown seeds and seedlings.

6. Environmental protection, increasing productivity The LGU is actively mobilizing the people to plant trees along the roads, in vacant lands in the urban centers. The balding mountains are planted with rainforest trees while on the hills are grown rubber cacao, coffee and coconuts. Even though the town is safe from typhoons because of the mountains, trees must be planted to prevent erosion and depletion of soil fertility, according to the LGU. It even encourages the use of military helicopters to sow the seeds in inaccessible moun-tainous areas. Planting trees along the rivers is another campaign of the LGU to save the riverbanks from erosion. Wet-lands are left to grow marshland vegetation.

7. Diversifying economic activities and income source

Other economic activities in the farm were promoted such as native chicken raising, backyard livestock, and aquaculture. The LGU has dispersed livestock and continues to provide training in livestock care and management and regular de-worming services.

8. Entrepreneurship and local value chain

The LGU promotes the value and practice of entrepreneurship among its constituents and the establishment of social enterprises. The LGU established the Farmers Information and Technology Services (FITS) for farmers, processors, trad-ers and entrepreneurs. Farmers were taught to make their own organic fertilizer from vermin-compost. Entrepreneurs learn to process and market local products. The Dumingag Organic Academy is equipped with basic processing machines and equipment, but only for experimental and low capacity production. Manufacturing as a value and employment cre-ating sector of the economy is and must be championed. It can start at the household level with a vision of growth into small and medium scale manufacturing enterprises.

There is an organic culture village with an organic restaurant. The campaign for organic agriculture is promoted among school children. Dumingag is now a member of the International Federation of Organic Agriculture Movement (IFOAM). It also received the “One World Award” from Germany.

9. Infrastructure development

The LGU acquired heavy equipment and continues to construct farm to market roads and bridges. At present, most of the barangays are reachable by land transport. This project shad been supported by “Ang Tulay ng Pangulo”, a project of the national government which started in 2000.

10. Monitoring and evaluation

The LDCs collect data from its monitoring and evaluation reports. It is still the national government agencies, the NSCB that collects data that measures incomes and poverty incidence. The LGU and also the Siayan LGU are proposing a sim-plified monitoring and evaluation system on poverty reduction. This would be relevant in measuring the impact of the GPA.

11. Fair and just sharing of resources and benefits

The LGU promotes economic justice and works towards fair sharing of benefits from economic activities. It continues to search for a paradigm where workers are paid justly and fairly for their labor, e.g. tappers and rubber farm owners, and fair prices charged for products, e.g. organic fertilizers, seeds and seedlings, processed products. At the moment, the prevailing market system has a dominant influence. The LGU has a continuing program of generating and storing its own seed varieties to reduce dependence on external sources. The LGU encourages traditional non-market practices that promote the spirit of solidarity and mutual exchange of re-sources. A number of organic practitioners are increasingly practicing hunlos, (reciprocal labor sharing) especially among cooperatives and upland farmers and Subanen communities.

Analysis The Dumingag experience represents an alternative pathway for reducing, if not eliminating, poverty. It is a public sector driven strategy to generate internally driven growth that centers on the people and their development. The stages involve development



of: (a) values, mindset and practices of entrepreneurship among the people, (b) resource-based management and environmental protection through organic agriculture, and (c) manufacturing and trading to create local value chains. The aim is to increase in-comes of local people, increase their purchasing capacity, and create a vibrant domestic market. With organic products, people would live healthier and more productive lives, reduce medical and hospital costs. While this strategy addresses poverty at the level of households first, the vision as held by the Mayor, was to bring about growth and development at the broader community-social level. Thus economic development has been pursued by means of growing social enterprises—businesses that achieve a social, as well as an economic, goal. The resultant changes have seen the growth of what we could call a ‘social economy’ in which there are diverse economic activities, including traditional non-market practices that promote collective action, and a variety of forms of asset ownership and income sources. (Amin, 2009; Gibson, 2010). Social entrepreneurship is an innovative social value-creating activity that can occur within and across the social sector, business and government” (Harvard Business Review, 2000). In the BAKAS project the LGU became a public sector entrepreneur leading the path to a social economy. It promoted the development of small family business and cooperatives, within a supportive politi-co-economic context. By generating value-added production of farm outputs and developing marketing opportunities, intercon-nections between different local businesses were strengthened. Experimentation with building a social economy around organic agriculture involved trial and error and the surmounting of re-sistance. In 2007, when organic agriculture was started, the Department of Agriculture discouraged the project. It did not believe in its viability and productivity as compared to inorganic farming. Since then, the local producers have demonstrated that organic farming is indeed viable. A key element of the strategy was to create a road map for the next 6 years. This longer term perspective aided the slow devel-opment of an economy of interdependence, rather than a set of small unconnected initiatives. By taking a regional perspective, there were economies of scale that could be deployed by, for example, consolidating product across the LGUs for shipping to Cebu, in the case of yellow corn. There was more opportunity for coordination within and with national line agencies. Finally the flow of information was both upwards from the grassroots via meetings of focal persons, across LGUs, and down from Mayors giving feedback to the initiatives. In this way the value and viability of the social economy was continually tested out. Only time will tell what the long term, macro-level impact of this case of internally driven economic growth will be, but all indications are that this approach to building a local social economy is a promising one. Figure 6: Capability Building framework-components

HUMAN RESOURCE DEVELOPMENT BASIC SECTORS

MOBILIZATION

LOCAL GROWTH DEVELOPMENT Healthy Happy

Community

ASSESSMENT LIVELIHOOD

JOBS ORGANIZING

TRAINING EDUCATION

SERVICES INFRASTRUCTURE CAPITAL FUNDS

EQUIPMENT/ MACHINES

TECHNOLOGY



Alter Trade Foundation, Inc. (ATFI) Bacolod, Negros Occidental

Case study: Social Enterprise

Sugar Industry: a brief background The Philippines is the 9th biggest sugar producer in the world and 2nd to Thailand in the Association of Southeast Asian Nations (ASEAN). It was believed that Arab traders first brought sugarcane cuttings from Celebes to Mindanao and later to Visayas and Luzon. Sugarcane was already widely grown before the Spanish colonial period. The growth of the industry, however, came only after 1850’s when British Vice-Consul Nicholas Loney worked to provide crop loans to selected sugar growers in Iloilo, introduced new cuttings from Sumatra and brought machinery from England. As the industry grew, several prominent landed families from Iloilo moved to Negros Occidental to open new plantations. By late 1850’s, the Visayas began exporting sugar to the United States, England, Australia and Spain. From 1700 to 1970’s, sugar became the most important agricultural export of the Philippines and a major source of wealth for the country’s elite. Negros Occidental is the prime sugar producer of the country, known as “sugarlandia”. Huge tracks of land called “haciendas” were devoted solely to growing sugarcane. A vestige of the encomienda system or land grants to Spanish conquistadores or to the Catholic church, haciendas were owned by a hacendero who were obligated to attend to welfare of its “serfs”, in this case, the sugar workers.

Today, some 700,000 sugarcane workers are directly employed in the 19 sugar producing provinces. Negros accounts for 51% of

the country’s total production and in 2007-2008, sugar accounted for PhP18 billion of Negros Gross Domestic Product (GDP), the

lifeblood of the economy. The industry and the sugar elite benefited a lot when the country became a colony of the United States

through a protected market and quota system with the US. This ended in 1974 and Philippine sugar had to compete in the world

market. But the profligate lifestyle of sugar barons in Negros, who invested almost nothing in the industry by way of improved

machines, production technology and improving the situation of its sugar workers led to its decline. It was smothered by the sug-

ar industry of Thailand that grew by leaps and bounds.

In 1974, the world price of sugar increased dramatically to around US$0.67 per pound. Then it fell to less than US$0.10 and in the

1980’s it went to its lowest at US$0.03 per pound. Negros suffered the most with the industry losing PhP11 billion in 1974 and

PhP14 billion in 1983. It was quite late when the government admitted that there was a crisis in the sugar industry. Starting in

1984, almost all haciendas stopped production. Farmers and farm workers lost their jobs.

Twenty five per cent (25%) of all farm workers in Negros were employed in the sugar industry. Haciendas employed 350,000 farm workers and another 20,000 were workers in sugar mills. Farm workers were paid PhP71.00 (US$1.40) average daily wage. Wom-en were paid half the men’s wages. Child labor was a common practice in plantations-haciendas.

The hunger that stalked the families of farmers and farm worker in Negros was severe and widespread. Children, especially, suffered from severe malnutrition as a result of a diet excessively high in carbohydrates and low in protein. Images of the situa-tion drew attention from local and international organizations prompting the launch of fund-raising campaigns.

COOPERATIVISM

Alter Trade Japan and other consumer cooperatives in Switzerland, Germany and Italy came to the support of the sugar farmers and workers. They had a grasp of the crisis and the sugar industry and saw certain opportunities to revitalize sugar production and rally farmers and farm workers through cooperative relations between consumer/citizen groups in their countries and pro-ducer groups in the Philippines. In collaboration with local activist groups, Agrarian Reform Beneficiaries (ARB), farmers and farm workers were organized into cooperatives with the purpose of capacitating them to produce their own sugar for a new fair trade market. These efforts led to the establishment of the Alter Trade Corporation (ATC) - Philippines, in 1987. ATC’s main objective was to “revive sugar production in Negros and increase income and productivity of farm workers by providing post-harvest facilities and technology services”21. Importantly the ATC provide new and fair markets.

21 AlterTrade foundation, Inc. documents



The Balangon Renewal Program, revived crop production of a specific variety of banana, and was the first undertaking by ATC. It was funded by Alter Trade Japan and Japanese consumers, who prefer these bananas, became a reliable market. Self-help, not dole-out, was the defining character of the support given by the cooperatives from overseas. Cooperatives in the Philippines are mostly agricultural credit cooperatives designed to meet the credit needs of farmers and to bring agriculture on a par with other industries in the country. Despite tremendous increase in the number of cooperatives, with more than half agricultural and credit cooperatives, they have not made a dent in rural poverty. Lack of education and training has been identified as the main reason for the failure of cooperatives in the country. (Sibal, Jorge. Another is the small number of democratically run producer cooperatives. This is what distinguishes the ATFI case. In countries where cooperatives are vibrant, such as Spain, Italy, Germany, Austria, the Netherlands, their contribution to the GDP is increasingly significant. Worker-owned and run cooperatives are found in important industries such as agriculture, bank-ing, construction, business and social services including health care, housing, transport. Worker-owned cooperatives are jointly-owned and democratically-controlled enterprises rooted in the values of self-help, self-responsibility, equality, equity, democ-racy, and solidarity. People, not profit are at the center of a cooperative's economic activity. Members participate actively and equally in making decisions and setting policy. Capital is generated mainly from savings and/or contributions of members and profit is reinvested into the cooperative. Members get preferential treatment in access to goods and services and more favora-ble conditions of work.”22

Cooperativism is opposed to unethical labor practices and can offer an alternative to the disempowerment of the poor in the economy. They can contribute significantly to the development of the local economy and respond to the needs of members and the local community.

SOCIAL ENTREPRENEURSHIP

Could poverty be addressed when the sugar industry itself was in crisis? The ATC pooled ideas together, unpacked the multiple but interrelated and layered problems into logical and doable components. A step-by-step framework and strategies began to unfold. Vision: a system that is economically just and ecologically sustainable rooted in self-reliance and self-determining communities. Mission: To be a dynamic and innovative social enterprise geared towards eliminating poverty and rural marginal communities by enhancing economic through sustainable agriculture, social entrepreneurship and fair trade. Goals:

1. Transform farm workers into farmer-social entrepreneurs; 2. Acquire and enhance assets to increase productivity;

Strategy: 1. Build the muscovado supply chain and increase the value and benefits at every stage. 2. Establish diverse economic activities.

Figure 7: Development Framework

22 www.id-coop.eu/en/KeyConcepts/Pages/Cooperativism.aspx

http://www.id-coop.eu/en/KeyConcepts/Pages/Cooperativism.aspx



The framework was straight-forward, involving down-to-earth conventional knowledge and common sense solutions, devoid of technocratic jargon. The challenge was for farm workers and tenants who had been patron-dependent all their lives to transform themselves into independent decision-making risk taking entrepreneurs. The ATC had few illusions and anticipated a long and arduous struggle of changing mindsets. Strategies were broken down into practical work packages and on ground actions began. In 1987, ATC was registered as a corporation with the Securities and Exchange Commission (SEC). Organizing and human resource development Having set the vision-mission, goals and strategies, the next step was choosing the first cohort of farmers that showed greatest potential to carry the vision through. The initial groups were dependent landholders who would not be intimidated by a landown-er: (a) organized farmers groups (association or cooperative) who were holders of Certificate of Land Ownership Awards (CLOA) or agrarian reform beneficiaries (ARB); (b) as a group, have at least an aggregate area of 20 hectares; (c) willing to abide by the principles of cooperativism; and (d) prepared to engage in sustainable agriculture-organic farming and fair trade. A 20-hectare land was important in reaching a production scale of some significance. It was more cost-efficient and would have some leverage. Stewardship was the bottom line approach to organizing farmers into a collective productive force.

The first work package was building capacity of farmer-members through intensive education and training - Holistic Organization-al Empowerment – HOE. Orientation topics-courses were on (a) cooperativism and the cooperative movement; (b) assets and community resource management such as human resource, finance and investments, natural assets, environment and ecology; (c) production process and activities. Organization development training courses were about: (a) community development; (b) strategic planning; (c) sustainable farming and management systems; (d) marketing strategies and planning; and (e) project plan-ning, monitoring and evaluation.

Production skills and product diversification Sustainable Production and Area Development Enterprises (SPADE) focused on two components: sustainable organic agriculture and building social enterprises. Increasing productivity and care for the environment were viewed as mutually supportive rather than opposing goals. Training courses were highly technical and equally intense: (a) Agro-Ecological Farm Systems Analysis and Planning; (b) Bio-Organic Conversion Program, Inspection and Certification; (c) Organic Soil Nutrient Management; (d) Crop Production and Harvest Planning; (e) Diversified Crop and Livestock Production; (f) Climate Change Risk Reduction, Adaptation and Mitiga-tion; (g) Farm Equipment and Enterprise Development. Some approaches to train-ing and learning, in addition to classroom-type lectures, involved participatory technology development, farmers’ field school-demonstration farm, and cross-farm visits.

Sugarcane had been intensively grown as a mono-crop that affected soil fertility. The logic of introducing organic farming technol-ogy was to restore soil nutrients with the expectation of reducing production cost. It would also allow for the cultivation of other foods and short-term cash crops to cover the so-called “hunger months”, August and September, just prior to harvest. High value crops such as rice, coffee, vegetables, peanuts were grown around the sugarcane fields. Poultry and livestock and even wine were some of the other income earning products.

Funds from Japanese and European cooperatives enabled ATC to acquire machines and build a sugar mill to produce Muscovado, an unrefined brown sugar. A supply chain through to overseas consumers was built around the production of organic muscovado.

Credit plus (Credit+) A Credit Access and Savings Program (CRASP) provided affordable credit for farm production and enterprise capital. CRASP helped educate members on management of credit and capital, investment planning, asset accumulation and management. Finance management systems were installed in each cooperative/association and were required to submit annual audit reports. Partici-pants were also trained in feasibility study and business plan making.

Credit plus (credit+), that is credit, savings and financial education was considered as the holistic approach in the provision of fi-

nancial services. It increased the number and quality of members’ participation in project planning while improving management

of finance and other assets at the household level enabling them to save and generate modest surplus.

What credit+ did which was most significant was to build confidence based on actual experience. Cooperatives and members

were able to resume production without depending on land-owners and loan sharks who were just too eager to see their ven-

tures fail and turn to them for help. Moreover, capital build-up helped them to buy and increase shares and secured their owner-

ship of the enterprise.



Marketing and fair trade The importance of marketing cannot be overemphasized, according to ATC. A major cause of the failure of many emerging enter-prises, especially social enterprises, is its lack of access and knowledge of the dynamics and vagaries of the market. The overseas cooperatives helped them to understand the dynamics of fair trade, sharing their very own experiences.

The little experience members had of the market had always left them the feeling of being in a trap. “When we buy goods, sellers dictate the price. But when they sell theirs, e.g. vegetables, bananas, etc., the buyers also dictate the prices.” Admittedly, marketing was one of the more painstaking parts of the education and training activities of ATC. Members were quite overwhelmed when introduced to the fair trade movement and and the standards and requirements to be met. But eventually, they became part of fair trade and were able to market their product overseas.

ISSUES AND NEEDS

Doubt and trust Organizing and training ARBs into cooperatives was certainly a tough challenge. Most ARBs with only elementary level education, dispersed across inaccessible corners of sugarcane plantations, had mixed feelings about the project. They recognized that it was an exciting prospect, but they could not help having doubts and apprehensions. Moving out of poverty! But they had been poor all their lives to begin with, what was there to lose. Trust was on the side of Alter Trade, a group of people who had been with them through the many years of struggle.

Passion and pesos But like any project, Alter Trade needed cash. Its bold and innovative venture caught the imagination of some donors. Bread for the World (BfdW-a Protestant funding agency from Germany) offered to help. BfDW had some knowledge about social enterprises, but as a donor agency it could not provide funds for a business corporation. On the other hand, social enterprises have no legal person-ality - that would define its goals, principles, scope of work, etc. and especially, what it can and cannot do as a business under Phil-ippine laws. In 1997, ATC created and registered a non-stock, non-profit foundation, AlterTrade Foundation (ATFI). The following year, grants were received from BfdW. Slight changes were made within ATC’s operations. ATC remained as the social enterprise of farmers-cooperatives and focused its work in marketing and fair trade. ATFI, now a non-government organization became its business development service arm (NGO-BDSP). It was responsible for organizing, training and education and business incubation. Its mission-objective was to “enable farmer-ARBs to build their business enterprise that would address poverty among their ranks and become economically empow-ered.”

The organizing of farmers cooperatives, farmers associations and two NGOs (MIARBA and HECARBA) as Small Producers Organiza-tions (SPO) started in 1994. Trained in organic farming system, these SPOs produced organically grown sugarcane and processed organic muscovado. In 2002, all the SPOs reached First Grade, that is, “Certified Organic and Fair Trade”. By 2009, they advanced to Second Grade. Mission shift-mission drift The business venture did so well, with the demand for organic muscovado, especially in the overseas market, growing. But SPOs production capacity had difficulty coping with the increased demand.

Discussions and disagreements arose regarding the mismatch between demand and supply. On one side was the ATC group who wanted to meet the demand and proposed ways to increase production volume and sales. On the opposite end was the ATFI group who stood for gradual increase so as not to compromise product quality. The main constraint of the enterprise was the limited pro-duction area of member SPOs. The underlying conflict was the diverging development approach. ATC viewed development from a more conventional business perspective while ATFI from a social enterprise standpoint. Unable to reach an agreement, ATC and ATFI in 2011 parted ways. ATC continued and operated as a corporation that revolved around the business of marketing and pro-moting fair trade.

ATFI and NOFTA ATFI focused on strengthening the SPOs and assisted them in establishing Negros Organic Fair Trade Association (NOFTA). NOFTA

which is composed of SPOs continued to expand its membership. In 2014, NOFTA had a total membership of 13 SPOs. ATFI contin-

ued to assist the SPOs, especially the new members to develop organic production and comply with the requirements for fair trade

certification. NOFTA also acts as the marketing arm of SPOs enabling them to access the market of fair trade network in Asia and

Europe.

23 ATC Website, Vision-Mission and Core Principles



ATFI operates in 5 municipalities of Negros Occidental where agrarian reform beneficiaries are concentrated: Murcia, Bago City, La Carlota City, La Castellana, and, Don Salvador Benedicto. It serves business development needs of 13 SPOs – 8 farmers associa-tions, 3 farmers cooperatives and 2 NGOs - with a total membership of 734 (342 males and 392 females). Household members totaled 3,645.

SPOs are stable organizations and are fair trade certified having complied with FLO standards. NOFTA receives fair trade premi-ums of about PhP2 million every year. Export markets are in Switzerland, Germany, France and Italy in Europe and in Asian coun-tries: Japan, South Korea, Malaysia and Indonesia. Annual production is estimated at 1,381.5 metric tons.

Domestic market development A new marketing program called “Move Out From Farm Gate”, helps SPOs to establish, develop and sustain domestic market tar-geting local fair trade network and mainstream markets such as malls. It helps develop a national fair trade movement and builds producer-consumer solidarity.

Advocacy and network Advocacy in sustainable agriculture-organic farming and fair trade is carried out among other ARB organizations and through par-ticipation in local government development planning bodies, engaging government agencies in anti-poverty and related issues.

Expansion AFTI started to engage fisherfolks in the coastal and protected areas of Negros Occidental. The fisherfolks sector is the poorest in the country. Depleting fishery resource and climate change are working against the livelihood of the fishing sector. Interventions focused on the production of salt and crabs culture.

Figure 8: Alter Trade Value Chain



OUTCOMES ARE CHANGING LIVES

According to AFTI, 69% of SPO member-households have increased incomes and are no longer among the “poorest of the poor” while 100% are already food sufficient. Most of them have replaced their nipa huts with houses made of concrete. They are able to send children to school. Assets acquired during the SPO period include farmlands, house appliances, e.g. television, and refrigera-tor. Fairtrade premiums were used for community and enterprise needs such as electricity, training centers, and in acquiring hauling trucks. Diverse capacity, activities and products NOFTA is in the process of product diversification, such as producing centrifugal sugar. They no longer engage in tricycle driving during off season. Instead they are tending their vegetables and other crops and livestock. With additional income, “hunger months” have become a thing of the past. Modelling and replication ATFI and NOFTA model and practices have been replicated by some government agencies and government financial institutions (GFI).

NOFTA and ATFI led the formation of the Negros Island Fair Trade Federation, an island-wide organization of 52 SPOs and supported by the Provincial Government of Negros Occidental.

The Department of Agrarian Reform has replicated HOE with other CLOA beneficiaries.

The Land Bank of the Philippines has adopted the Credit Plus program. It has also been adopted by some NGOs and micro-finance institutions (MFI).

Figure 9: Transforming farm worker to rural entrepreneur

1. Domestic market development ATFI and NOFTA still have to develop a significant domestic market share of muscovado. Advocacy and education are fo-cused on the health benefits of muscovado compared to refined white sugar.

2. Lack of capital ATFI is still dependent on grants from donor agencies. This source of funds is constricting and getting more difficult to ac-cess. Diversifying sources of organizational funds is undertaken. Generating their own income from their social services and enterprises is one option.

Credit +, is the current source of capital of SPOs and NOFTA but this is not adequate. For the enterprise to sustain itself, to

grow, and become a significant player in the industry and contribute significantly to the anti-poverty goals of government,

far bigger capital is needed.



3. Technology and facility An expressed need of ATFI and NOFTA is for better post harvest facilities, such as sugar mills and concrete solar dryers, a Shared Service Facility (SSF) for common use of SPOs. At the moment muscovado is processed in private sugar mills. SPOs should be able to access the latest and efficient technology in sugar production and processing. This is a need that Department of Trade and Industry (DTI) through its SSF can assist.

4. Lack of government support Sugar industry players around the world have invested substantially in them. They have access to state of the art tech-nology, post-harvest facilities, and a larger share in the global market. Governments in many of these sugar producing countries support the sugar industry in a holistic way, including Research and Development (R&D) and ensure that they remain competitive globally. In the Philippines, R&D budgets are insignificant and those who benefit are the big land-owners. Social enterprise ventures such as AFTI and NOFTA are still outside the radar screen of government industry assistance. Moreover, very little is being done if at all with smuggled sugar.

The Bureau of Rural Workers could be strategic in the use of the sugar workers’ Social Amelioration Fund (SAF) for sugar workers by prioritizing capital needs of social enterprises such as AFTI-NOFTA.

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References:

Books and articles Aldaba, Fernando T., and Sescon, Alfredo T., R.A. 8425 and NAPC: A Review and Assessment. Ateneo de Manila

University, Economics Department. Almario, J. Providing Financial Services for the Poor. A presentation paper presented during the Development-at-Work Forum initiated and co-organized by the students of the Executive Master in Development Management (EMDM) in Public Finance Program. 2014. Ash, Amin. Ed. The Social Economy, International Perspectives on Economic Solidarity. Zed Books, New York. 2009. Asia Resource Center for Microfinance (ARCM). Philippine Country Profile. Retrieved from ARCM website. Banerjee, Abhijit, et.al. The Miracle of microfinance? Evidence from a randomized evaluation. Massachussets Insti-tute of Technology, Department of Economics, Working Paper 13-09, Cambridge, MA 02142, USA. April 10, 2013.

Bangko Sentral ng Pilipinas, National Baseline Survey on Financial Inclusion, Inclusive Finance. Advocacy Staff (IFAS), July 1, 2015. Article in PDI quoting BSP: Paolo G Montecillo, “Why borrowers prefer informal fund sources , August 19, 2015, B5-2). Bateman, Milford. Why Doesn’t Microfinance Work?, University of Juraj Dubrila Pula.

Buyske, G. Microfinance Ratings Market Assessment. Multilateral Investment Fund. April 2014. Chowdhury, Anis. Microfinance as a Poverty Reduction Tool. UN DESA Working Paper No. 89, December 2009.

Community Economies Collective and Katherine Gibson, 2009, Building community-based social enterprises in the Philippines: diverse development pathways” in A. Amin (ed) The Social Economy: International Perspectives on Solidarity London: Zed Press pp. 116-138.

Dees, Gregory J.et. al. Enterprising Non-Profits: A Toolkit for Social Entrepreneurs. John Wiley & Sons, Inc. New York, 2001. Dees, Gregory J. et.al. Strategic Tools for Social Entrepreneurs: Enhancing the Performance of Your Enterprising Non-Profits..

De Vera, Ben O. Poverty Incidence, Philippine Daily Inquirer. July 24, 2015. Esguerra, Jude, Presentation Notes at the MCPI Micro-Finance Summit, July 24, 2015.

Gibson-Graham J. K., et. al. Take Back the Economy. University of Minnesota Press. 2013. Guadalquiver Nanette. Land Reform Fails to Reduce Poverty. Sun Star Bacolod Oct. 6, 2015 Habaradas, R. and Umali, M. A. (September 2013). The Microfinance Industry in the Philippines: Striving for Finan-

cial Inclusion in the Midst of Growth. CBRD Working Paper 2013-05. Habito, Ceilito, Economic Growth for All. No Free Lunch column. Philippine Daily Inquirer. June 25, 2012.

Lensink, Robert, et.al., “Should Microfinance Institutions Specialize in Financial Service?. Karnani, Aneel. Microfinance misses its mark. Ross School of Business, Michigan State University, Summer 2007.

Martin, R.L. & Osberg S. Social Entrepreneurship: The case for definition. Stanford Social Innovation Re-view. Graduate School of Business. Leland Stanford Jr. University. 2007.

Meyer, Richard L. Microcredit and Agriculture. Challenges, Successes, and Prospects. Micu, Napoleon. State of the Art of Microfinance. March 2010. Morduch, Jonathan, and Haley, Barbara. Analysis of the Effects of Microfinance on Poverty Reduction. NYU Wag-

ner, Working Papers 10-14, New York, NY 10003, USA, June 28, 2002. Pearce, John. Social Enterprise in Anytown. Calouste Gulbenkian Foundation. United Kingdom Branch. 98 Portland

Place. London. 2005.

Raquiza, Marivic. Poverty and Inequality: After the rhetoric of the past, a look into the future, www.socialwatch.org/mode 15622 accessed 22 Sept 2015.

Sibal, Jorge V. A Century of the Philippine Cooperative Movement. University of Wisconsin Center for Cooperatives and UP Solair, Diliman, Quezon City.

Social Enterprises in the Philippines, A Pathway to Development, a video presentation of Australian Na-tional University and Unlad Kabayan, 2009.

The other goals of MDG. (May 24, 2015). Retrieved from http://www.nscb.gov.ph/stats/mdg/assessment.asp.

Reports and related documents. National Anti-Poverty Commission. Reports and related documents. People’s Credit and Finance Corporation. Villasana B. Poverty Count, NAPC, 9/16/2014, Poverty is defined as a monthly income below PhP7,778

for a family of five that cannot meet basic needs of food and other necessities.

http://cdm.aim.edu/academics/executive-mdm-in-public-finance

http://cdm.aim.edu/academics/executive-mdm-in-public-finance

http://www.socialwatch.org/mode

http://www.nscb.gov.ph/stats/mdg/assessment.asp

http://www.nscb.gov.ph/stats/mdg/assessment.asp



Wei-Skillern, J., Austin, J. E., Leonard, H., Stevenson, H. Entrepreneurship in the Social Sector. Harvard Business School. SAGE Publications.2007.

Westley, Jacqueline Marie. Microfinance Plus: Non-financial Services Offered by Microfinance Institutions and their Impact on Predominantly Female Clients, Monitor Journal of International Studies, Volume 12, Number 2, Spring 2007.

Internet sources Agrifinanzas Bangko Sentral ng Pilipinas. http://www.bsp.gov.ph Global Security: http//www.globalsecurity.org Mix market Organization. http://www.mixmarket.org National Anti Poverty Commission. http://www.napc.gov.ph National Statistical Coordination Board. http://www.nscb.gov.ph Official Gazette of the Philippines. http://www.officialgazetteofthephillippines.gov.ph People’s Credit and Finance Corporation. http://www.pcfc.gov.ph Philippine Statistics Authority: http//www.psa.gov.ph Trading Economics: http://www.tradingeconomics.com/articles/03122015021126.htm Wikipedia: https://en.wikipedia.org/wiki/Income_inequality_in_the_Philippines; https://en.wikipedia.org/wiki/Poverty_in_the_Philippines; https://en.wikipedia.org/wiki/Agriculture_in_the_Philippines; https://en.wikipedia.org/wiki/Land_reform_in_the_Philippines

http://www.bsp.gov.ph

http://www.mixmarket.org

http://www.napc.gov.ph

http://www.nscb.gov.ph

http://www.officialgazetteofthephillippines.gov.ph

http://www.pcfc.gov.ph

https://en.wikipedia.org/wiki/Income_inequality_in_the_Philippines

https://en.wikipedia.org/wiki/Poverty_in_the_Philippines

https://en.wikipedia.org/wiki/Poverty_in_the_Philippines

https://en.wikipedia.org/wiki/Agriculture_in_the_Philippines





Institutional respondents, location and informants

Respondent Location Founded Informants/FGD

MFI

Abuyog St. Francis Credit Cooperative Abuyog, Leyte 2003 Manager, Staff, Board, FGD

AlalaySa Kaunlaran, Inc. Nueva Ecija 1984 Officers

Community Rural Bank of Catmon, Inc. Carmen, Cebu 1973 Microfinance officers, staff

Mindanao Microfinance Council Davao City 2003 Executive Director, members

NATTCO Quezon 1977 Training Officer

PATANOM Credit Cooperative Barotac Viejo, Iloilo 1994 Manager, Board, FGD

PhilSEN Leyte 2003 Executive Director, MARADECA

PATANOM Iloilo 1994 Manager, BOD, FGD, MPDO

People’s Bank of Caraga, Inc. San Francisco, Agusan del Sur

1972 Managers, staff, FRIEND staff, FGD

Taytay SaKauswagan, Inc. Iloilo City 1986 Director, Staff, FGD

BDS-NGO

PhilSEN Quezon City 2003 Executive Director, MARADECA Executive Director

Local Government

Bagac Municipal Government Bataan PDTF Focal person, MPDO

Lian Municipal Gov’t Batangas Mayor, DENR, MAO, FGD – BS

Mt. Province Provincial Government Mt. Province MAO, BS beneficiaries

Tadian Municipal Government Mt. Province MAO, BS-Farmers – 3

Non-Grantee

AlterTrade Foundation Bacolod City, Negros Occi-dental

1984 Executive Director

Dumingag Municipal Gov’t Zamboanga del Sur Mayor, Focal person for BAKAS

Paglaum Multi-Purpose Cooperative Plaridel, Misamis Occi-dental

1992 Savings & Credit Operations

Siayan Municipal Gov’t Zamboanga del Norte Municipal Mayor, BAKAS

BAKAS Zamboanga Norte, Sur LDC, Municipal Department Heads, BA-KAS Coordinator

KEY INFORMANTS

Commission for Filipinos Overseas Secretary Ms. Imelda Nicolas

Land Bank of the Philippines Director Mr. Gerardo Bulatao

National Anti-Poverty Commission

Undersecretary Mr. Jude Esguerra

Former MF Officer Mr. Flor Rosal

LACMS Director, & person-nel

Ms. Jhecy Rebete, FGD

People’s Credit and Finance Corporation PDTF Personnel Mr. Erwin Idong, FGD

SEDPI CEO, COO Mr. Ms. Emilen Kate Sacdalan

BS-Basic Sectors

LDC-Livelihood Development Coordinators



ANNEXES

Reference tables, figures, graphs and boxes

1. Philippine annual poverty incidence of families and population, 2003-2012

2. Philippine annual subsistence incidence of families and population, 2003-2012

3. Philippine poverty incidence, first semester, 2013-2014



4. Distribution of poor and non-poor households in rural and urban areas, 2006

5. Flagship programs of National Agencies

Source: Internet

Place Poor Non-poor Poverty Incidence

Rural 73.06 42.69 37.84

Urban 26.94 57.31 14.32

Total 100.00 100.00 100.00

Agency Responsibility in Poverty Reduction

NEDA Formulation of PDP NAPC Coordination of KALAHI programs

Promotion of CBMS DOH Formula 1 Dep-Ed Basic Education Reform Agenda CHED Scholarship programs DSWD KALAHI-CIDDS 4 Ps DTI Credit to mSMEs

OTOP Technical Assistance to MSMEs

DOLE Coordination of Public Employment Service Offices Coordination of emergency & public workfares Livelihood and training programs for displaced workers

DA Ginintuang Masagana Organic Farming

DAR Agrarian Reform Communities DILG Minimum Basic Needs Indicators

Promotion of CBMS & Local Poverty Action Offices HUDCC Community Mortgage Program

Resettlement Programs NDCC Hazard mapping

Disaster preparedness for LGUs National Nutrition Council Philippine Plan of Action for Nutrition & Hunger Mapping Philhealth Membership promotion with LGUs, Coops & NGOs PCUP Anti-demolition & community mortgage program NCIP Land Tenure program & IP human rights CDA Registration of cooperatives

Regulatory guidelines and standard setting NSO-NSCB Barangay registry

Training and capacity building for LGUs LGUs (Province, City, Mu-nicipality, Barangay)

Forefront in the delivery of basic services & poverty reduction projects, e.g. models found in Galing Pook Awards



6. Philippine poverty incidence, first semester, 2013-2014

Source: Habaradas & Umali

7. PDTF grantees by type

8. Top 10 MFIs in the Philippines

Source: Microfinance in the Philippines by Dr. Raymund B. Habaradas & Mar Andriel Umali, Sept. 2013



9. Respondents’ (MFI-Client) profile

Clients’ Profile

Almost half of respondents were household heads, 109 or 47.3%. Majority were women, 78%. Slightly more than 1/3 were farmers, 33.9%. Average age was 50 years old. More than half had some high school education. Average household size was 6. More than half of total households (51.7% or 119) had dependents, children and elderly. Dependency ratio was high. Men comprised 22%, or 51 of total respondents. Majority were in their 50’s, 31% while those in their 40’s were 29.5%. Those in their 30’s were 16% while senior citizens, 60 and above comprised 10.8%. The younger ones in their 20’s were 14% of total. The youngest respondent was below 20 years old while the oldest was a 75 year old fisherman. More than half of respondents had some high school education, 53%. Those who reached college were the same number as those who had elementary education, 21% each. Four respondents had post-graduate education and another four (4) had vocational education. By sector, 1/3 (33.9%) or 78 were farmers, followed by indigenous people, 9.6% or 22 respondents; workers in the infor-mal sector were 22 or 9.6%, while fisherfolks were 20 or 8.7%. Five respondents (2.1%) were workers in the formal sector, including one Overseas Filipino Worker (OFW). Only one was urban poor and one youth. Senior citizens comprised 10.8% or 25 respondents. Those who put their sector as women were 22 or 9.5%, as cooperative member, 9 (3.9%). There were 3 NGO workers, 1.3%. Multiple sector identity: 1/5 or 47 respondents said they were members of cooperatives, mostly women-farmers; 17 (7.3%) said they were victims of disasters. Other categories were those in business, 36 or 15.6% and professionals, 3 (1.3%). Women were the majority in all sectors-categories. More than 2/3 of farmers were women (53 or 67.9%); 96.3% (19) were indigenous women. Women in the informal sector comprised 61.9% or 13 out of 21. Among fisherfolks, 65% were women. Thirty-four (34) were women in business (75.5% of all those in business). Two of 3 professionals were women. All the 5 workers in the formal sector were women. . By occupation, almost 1/3 of respondents were farmers (27.8%), followed by those engaged in business, 19.5% (45 re-spondents). Most businesses mentioned were sari-sari stores, petty trading, food preparation and vending and the like. Larger business concerns were computer shop-internet cafe, furniture making (2), and livestock and poultry (contract) growing. Wage/salaried workers were 14 or 6%, government employees (Barangay Health Workers-BHW and Nutritionist-BNW) and employees of private business (security guard, clerks, coop official). Those engaged in fishing were 13, or 5.6%. Informal sector workers were 19 or 8.2%, e.g. drivers-6, carpenters and labourers-5, community miners-2, and do-mestic worker, laundrywoman, masseuse, caretaker, tuba gatherer, one each. Respondents who said they were jobless comprised a significant 12.1% (28) and housewives, 12 or 5.1%. More than 1/3 of households had single income-earners, 42%, another 31.7% households were double income earners, while 18 households had 3 income-earners (2.6%) and 6 households had 4 income earners (1.7%). Only 1 household had 5 members who were economically active. Farming was the only economic activity of 44.3% while 18.6% were farming and were also doing other activities. Micro-enterprises were the main economic activity of 23.4% while those in fishing was 11.3%. ed but also engaged in Some 102 respondents 44.3% were engaged in farming. Farming was the major economic activity and source of income of 59, or 25.6% while 43 (18.6%) were farming but also had other economic activities. Running microenterprises as main economic activity were 54 respondents or 23.4% while those in livestock and poultry growing business were 29 respondents (3.4%). Fishing as main livelihood were 26 or 11.3%. The rest were salaried/wage earners-30, jobless-28 and full-time housekeep-ers-4, altogether, 62 or 28.2%.

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10. MFI Clients-respondents by sector

11. MFI clients-respondents by sector by sex

12. MFI clients-respondents by occupation



13. MFI clients-respondents by economic activities

14. MFI clients by age

15. MFI clients by educational attainment



16. MFI – clients and savings

17. MFI clients and micro business

18. MFI clients and investments



19. Challenges encountered by MFI clients-respondents

20. MFI-Clients’ suggestions on improving income

21. NSA respondents’ awareness about PDTF



22. Amount of PDTF grants: Approved and actual released (December 2014)

Source: PCFC, PDTF Progress Report, December 31, 2014



23. PDTF grantees and respondents by type

Source: PCFC, PDTF Progress Report, December 31, 2014 24. Perceptions on poverty (Cause) by MFI clients-respondents

TYPE OF OPERATION Total # of

GRANTEES % to Total Grantees

RESPONDENTS % to Type of

Grantees

Banks

Rural Banks 3 8.5 1 33.3

Privately-owned Rural Banks 1 2.9 1 100.0

Cooperative Rural Banks 2 5.7 - 0

Sub-Total 6 17.1 2 33.3

Microfinance-NGO Providers

Microfinance Institutions 9 25.7 2 22.2

MFI Councils (National) 1 2.9 1 100

MFI Councils (Regional) 2 5.7 1 50.0

Sub-Total 12 34.3 4 33.33

Cooperatives

Multi-Purpose Cooperative 1 2.9 - 0

Credit Cooperatives 3 8.5 2 66.6

Federation of Credit Cooperatives 3 8.5 1 33.3

Sub-Total 7 20.0 3 42.8

BDS Providers

NGO 3 8.5 - 0

NGO with microfinance unit 1 2.9 0 0

Network of NGOs 1 2.9 1 100

Total 5 14.3 1 20.0

Local Government Units

Municipal LGU 4 11.4 3 50.0

Provincial LGU 1 2.9 1 100.0

Sub-Total 5 14.3 4 57.1

OVER-ALL TOTAL 35 100.0 14 37.8



25. Region according to Poverty incidence, 2014

Source: Villasana, NAPC, 16 September 2014. 26. Top 15 poorest provinces, 2014

Source: Villasana, NAPC, 16 September 2014.

RANK REGION POVERTY INCI-

DENCE OF FAMILIES

1. ARMM 48.7

2. Eastern Visayas 37.4

3. SOCCKSARGEN 37.1

4. Zamboanga Peninsu-la

33.7

5. Northern Mindanao 32.8

6. Bicol 32.3

7. CARAGA 31.9

8. Central Visayas 25.7

9. Davao 25.0

10. MIMAROPA 23.6

11. Western Visayas 22.8

12. CAR 17.5

13. Cagayan Valley 17.0

14. Ilocos 14.0

15. Central Luzon 10.1

16. CALABARZON 8.3

17. NCR 2.6

RANK PROVINCE POVERTY INCIDENCE

OF FAMILIES

1 Lanao del Sur 67.3

2 Eastern Samar 55.4

3 Apayao 54.7

4 Maguindanao 54.5

5 Zamboanga del Norte 48.0

6 Sarangani 46.0

7 North Cotabato 44.8

8 Negros Oriental 43.9

9 Northern Samar 43.5

10 Western Samar 43.5

11 Bukidnon 41.5

12 Lanao del Norte 41.4

13 Camiguin 41.0

14 Masbate 40.6

15 Sultan Kudarat 40.4



27. Profile of FGD participants

Profile of FGD Participants Focus Group Discussions were of three types: first, FGDs with personnel who participated in institutional enhance-ment training: ASKI, AFCCO, CRBCI, PATANOM, MMC, PhilSEN and TSKI. Participants included managers of coopera-tives, MFI unit managers, account officers, area unit coordinators, loan processors, cashiers, bookkeepers and tell-ers, and members of the Board of Directors and officers of member cooperatives. Majority of training participants were women, although more of them in the rank and file. AFCCO participants were all women – officers and rank and file. Five FGDs were conducted. The second group of FGDs were participants from among clients of AFCCO, PATANOM and PBCI. The five (5) FGDs had 73 participants majority or 86% were women farmers, fisherfolks, indigenous women and urban poor. Third was the meeting-FGD in Siayan, with 56 participating municipal officials and Barangay Livelihood Coordinators (BLC) from the six municipalities of BAKAS, predominantly women, 74.7%. The municipal mayor of Siayan and the BAKAS Focal Person, both of them women, took part in the discussions. Participants in the various discussions were quite animated and more forthright in sharing their experiences and opinions. Particularly those in the second and third types of groups, anecdotal data were gathered on the specific experiences and how these were applied in their daily life. BAKAS participants expressed their frustration in their efforts to apply the CBMS. BLCs found it an expensive exercise given the terrain and distances of areas. They also performed other functions dispensing materials and advice on health, agriculture, education, etc.

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PDTF MONITORING REPORT (Template) Proponent: Title: Duration: Date of Approval: Approved Amount: Date Monitoring Conducted: _________________________________________________________________________________ Activities conducted

Monitoring Highlights: Findings /Observations

Recommendation (For PDTF ExCom Information and Action)

Plan of Action

Rate the Project using the following Criteria. Consolidated from 10 respondents. Rate 1, 2, 3, 4, or 5, where 5 as the highest, and 1 as the lowest.

Relevance : Extent to which objectives of a development intervention are consistent w/ clients’ requirements and community needs

Efficiency : Extent of cost-efficient, meeting objectives on time, implemented in most efficient way

Effectiveness : Extent to which development intervention’s objectives were achieved, or are expected to be achieved, taking into account its importance

Usefulness : Reach intended participants and areas. Provided or failed to provide with assistance proportionate to their need

Sustainability : Continuation of benefits from a development intervention made

Replicability : Prospect of replication to other MFI is strong

Name of Respondents:

Prepared by: NAPC PDTF Secretariat Date of Submission:

Noted by:

Activity Date Participants



GLOSSARY OF TERMS Absolute poverty – refers to the condition of the household below the food threshold level.

Basic sectors – refers to the disadvantaged sectors of Philippine society, namely farmer-peasant, artisanal fisherfolk, workers in the formal sector, migrant workers, workers in the informal sector, indigenous peoples and cultural communities, women, differ-ently-abled persons, senior citizens, victims of calamities and disasters, youth and students, children and urban poor.

Capability building – (RA 8425) refers to the process of enhancing viability and sustainability of micro finance institutions through activities that include training in micro finance technologies, upgrading of accounting and auditing systems, technical assistance for the installation or improvement of management information systems, monitoring of loans and other related activities. The term capability building shall in no way refer to the provision of equity investments, seed funding, partnership seed funds, equity participation, start up funds or any such activity that connotes the infusion of capital or funds from the government or from peo-ple’s development trust fund to microfinance institution as defined in this Act. Capability building precludes the grant of any loan or equity funds to the microfinance institution.

Collateral free arrangement – a financial arrangement wherein a loan is contracted by the debtor without the conventional loan security or a real estate or chattel mortgage in favour of the creditor. In lieu of these conventional securities, alternative arrange-ments to secure the loans and ensure repayment are offered and accepted.

Cooperative – refers to a duly registered association of at least 15 persons, majority of whom are poor, having common bond of interest, who voluntarily join together to achieve a lawful common social and economic end. It is organized by the members who equitably contribute the required share capital and accept a fair share of the risks and benefits of their undertaking in accordance with the universally accepted corporate principles and practices.

Corporate shared value (CSV) – The concept of shared value can be defined as policies and operating practices that enhance the competitiveness of a company while simultaneously advancing the economic and social conditions in the communities in which it operates. Shared value creation focuses on identifying and expanding the connections between societal and economic progress.

Corporate social responsibility (CSR) – encompasses not only what companies do with their profits, but also how they make them. It is fundamentally about taking resources from the business, and investing those resources in being a good corporate citi-zen: recycling, giving money to social causes, reporting on social and environmental impacts, and engaging employees in commu-nity works. Source: Moore, C. Corporate Social Responsibility and Creating Shared Value: What’s the Difference? Heifer Interna-tional. May 14, 2014.

Entrepreneur – literally means someone who undertakes an important task or project. (Dees) Entrepreneurship – The pursuit of opportunity beyond the tangible resources that you currently control. (Wei -Skillern, J., et.al.) The word entrepreneurship is a mixed blessing. On the positive side, it connotes a special, innate ability to sense and act on op-portunity, combining out-of-the-box thinking with a unique brand of determination to create or bring about something new to the world. On the negative side, entrepreneurship is an ex post term, because entrepreneurial activities require a passage of time before their true impact is evident.

Human development index – refers to the measure of how well a country has performed, based on social indicators of people’s ability to lead a long and healthy life.

Micro-enterprise – any economic enterprise with a capital of PhP 150,000 and below. This amount is subject to periodic determi-nation of the Department of Trade and Industry to reflect economic changes.

Microfinance – a credit and savings mobilization program exclusively for the poor to improve the asset base of household and expand the access to savings of the poor.

Microfinance is the provision of a broad range of financial services such as deposits, loans, payment services, money trans-fers, and insurance to poor and low-income households and their microenterprises. It supports the concept that low-income individuals are capable of lifting themselves out of poverty if given access to financial services.

Microfinance plus (MF+) – the provision of financial and non-financial products and services.

Minimum Basic Needs – refers to the needs of the Filipino family pertaining to survival (food, nutrition, health – water and sanita-tion, clothing) security, shelter, peace and order, public safety, income and livelihood and enabling basic education and literacy, participation in community and development family and psycho social care.



Non-government organizations (NGO) – refers to duly registered non-stock, non-profit organizations, focusing on the upliftment of the basic or disadvantaged sectors of society by providing advocacy, training, community organizing, research, access to re-sources and other similar activities.

People’s organizations – refers to a self-help group belonging to the basic sectors or disadvantaged groups.

Poor – refers to individuals and families whose income fall below the poverty threshold as defined by NEDA and cannot afford in a sustained manner to provide the minimum basic needs of food health, education, housing and other essential amenities of life.

Poverty alleviation – refers to the reduction of absolute poverty and relative poverty.

Relative poverty – refers to the gap between the rich and the poor.

Social economy – a third sector among economies between the private (business) and public sectors (government). It includes organizations such as cooperatives, nonprofit organizations, social enterprises and charities. Social economy theory attempts to situate these organizations into a broader political economic context.

Social enterprise (SE) –

Social enterprises have a social objective and blend social and commercial methods. Social enterprises are businesses that trade to tackle social problems, improve communities, people’s life chances, or the environment. They make their money from selling goods and services in the open market, but they reinvest their profits back into the business or the local com-munity.

Social enterprise is an organization that applies commercial strategies to maximize improvements in human and environ-mental well-being - this may include maximizing social impact rather than profits for external shareholders. Social enter-prises can be structured as a for-profit or non-profit, and may take the form (depending in which country the entity exists and the legal forms available) of a co-operative, mutual organization, a disregarded entity, a social business, a benefit corporation, a community interest company or a charity organization

Social entrepreneur –

Social entrepreneurs are entrepreneurs with a social mission in mind.

Social entrepreneurs are individuals with innovative solutions to society’s most pressing social problems. They are ambi-tious and persistent, tackling major social issues and offering new ideas for wide-scale change.

The social entrepreneur, however, neither anticipates nor organizes to create substantial financial profit for his or her investors – philanthropic and government organizations for the most part – or for himself or herself. Instead, the social entrepreneur aims for value in the form of large-scale, transformational benefit that accrues either to a significant seg-ment of society or to society at large.

Social entrepreneurship –

Social entrepreneurship is an innovative, social value-creating activity that can occur within or across the non-profit, busi-ness, or government sector.

Social entrepreneurship having the following three components: (1) identifying a stable but inherently unjust equilibrium that causes the exclusion, marginalization, or suffering of a segment of humanity that lacks the financial means or political clout to achieve any transformative benefit on its own; (2) identifying an opportunity in this unjust equilibrium, develop-ing a social value proposition, and bringing to bear inspiration, creativity, direct action, courage, and fortitude, thereby challenging the stable state’s hegemony; and (3) forging a new, stable equilibrium that releases trapped potential or alle-viates the suffering of the targeted group, and through imitation and the creation of a stable ecosystem around the new equilibrium ensuring a better future for the targeted group and even society at large

Social entrepreneurship is (1) about applying practical, innovative and sustainable approaches to benefit society in gen-eral, with an emphasis on those who are marginalized and poor; (2) A term that captures a unique approach to economic and social problems, an approach that cuts across sectors and disciplines grounded in certain values and processes that are common to each social entrepreneur, independent of whether his/ her area of focus has been education, health, wel-fare reform, human rights, workers' rights, environment, economic development, agriculture, etc., or whether the organi-zations they set up are non-profit or for-profit entities; and (3) It is this approach that sets the social entrepreneur apart from the rest of the crowd of well-meaning people and organizations who dedicate their lives to social improvement.

Social reform – refers to the continuing process of addressing the basic inequities in Philippine society through a systematic, uni-fied and coordinated delivery of socio economic programs or packages.



Urban poor – refers to individuals or familes residing in urban centers an urbanizing areas whose income or combined household income falls below the the poverty threshold as defined by the NEDA and or cannot afford in a certain manner to provide their minimum basic needs of food, health education, housing and other essential amenities of life.

Workers in the formal sector – refers to workers in registered business enterprises who sell their services in exchange for wages and other forms of compensation.

Workers in the informal sector – refers to the poor individuals who operate businesses that are very small in scale and are not reg-istered with any national government agency, and to the workers in such enterprises who sell their services in exchange for sub-sistence level wages or other forms of compensation.

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pdtf as a tool for poverty reduction: a study for policy review

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