IJEBMR_02_124

International Journal of Economics, Business and Management Research
Vol. 2, No. 01; 2018

ISSN: 2456-7760
MICROFINANCE IN THE PHILIPPINES: A TOOL FOR ECONOMIC

DEVELOPMENT, OR PERPETUAL DEBT? EVIDENCE OF ITS SUCCESS
AND CHALLENGES IN THE PROVINCE
Bryan W. Rich
Research Fellow
Palawan State University, Philippines
Abstract
This paper examines the socioeconomic impact of the largest microfinance institution, from the
perspective of the borrower, in a rural community in Puerto Princesa City, Palawan, Philippines.
Thirty members from the Center for Agriculture and Rural Development were interviewed to
better understand their motivation to join a microfinance institution, and the spending and
savings habits after receiving micro-credit loans. This paper examines the most common reasons
for participating: life insurance; a savings account; education; and, the cycle of perpetual debt. It
also examines the most successful borrowers, the more common types of businesses members
engage in, and why some women borrow money for their husbands. Although a few members
have achieved financial success through micro-credit loans to grow their business, most
members interpret these loans as another opportunity to borrow to makes ends meet and for
consumption smoothing.
Keywords: microfinance; Philippines; economic development; poverty; debt; CARD
Introduction
The Center for Agriculture and Rural Development, or CARD, began as a small social
development cooperative in 1986and by 1989, had designed a micro-lending program based on
the Grameen microfinance system. It has since grown to one of the largest MFIs in the
Philippines, accounting for a substantial portion of the MFI market share (Habaradas, 2013). In
2011, it entered the provincial island of Palawan, one of the country’s least developed areas.
Although it was not the first MFI to be established in the province, it has since become the
largest microfinance institution for Palawenos, offering a variety of financial services including
micro-credit loans, life and accident insurance, education and housing improvement loans.
There were four primary economic factors that led to the need for formal and informal borrowing
and lending schemes: poverty; unemployment and underemployment; education expenses; and, a
high birth rate. The poverty threshold of Palawan is 10,097 pesos per month1 (slightly more than
200 USD) and the food threshold is 7,051 pesos per month, for a family of five (Yap, 2016).
Despite a rapidly growing tourism sector with products and services to support it, Palawan still
suffers from high unemployment and underemployment rates. Although specific employment
1
At the time of writing 1 USD = 49.70 pesos
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and under-employment data are not available, it can be interpreted through casual observation. A
common option of financial relief for families is the sideline, an activity of supplemental income.
Outside of their normal routine, someone may belong to a multilevel marketing scheme such as
AVON, or buy bulk items to sell in smaller quantities. Combined with depressed wages, money
lending services, both formal and informal, provide many with economic relief to make ends
meet.
Education accounts for a substantial amount of a family’s monthly expenses. Although public
schools are touted by the government as free, there are many supplemental fees a family must
commit to. The more children a family has, naturally, the more money must be allocated to their
education expenses. It is not uncommon for a larger family to choose which children will attend
school, and which will enter child labor. Although the birth rate has dropped from 7 in 1960,
today, the average Filipina will have 3 children over her lifetime. This can be compared to
neighboring countries: Malaysia, 2.1; Indonesia, 2.4; and, Thailand, 1.5, children per family
(World Bank). The economic stagnation of the poorest provinces, including Palawan, coupled
with a high birth rate have created a need for targeted financial lending and borrowing services.
Figure 1. The house of one of my informants in New Princesa with concrete flooring and local
coconut fibers used for the walls. Corrugated steel is commonly used for roofing.
The most visible formal money lending service in the country and in Puerto Princesa is the pawn
shop. As of 2012, there were more than 120 in the greater capital (with considerably more now)
(PSA 2013).Today, there are more than 40 pawn shops in greater Puerto Princesa City to serve a
population of 255,000. Many offer competitive interest rates depending on the length of the loan.
For example, 1% interest for one month, 2% for two months, etc. are commonly advertised at
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their store fronts. However, as gold jewelry is the predominant collateral required,the poorest are
excluded from availing a loan.
The most common informal money-lending practice is the 5-6, or Bombay, as it is colloquially
known because of its association with Indian-nationals. The term “5-6” comes from its
repayment scheme: he or she borrows 5 and typically repays 6 in a week. More often, the lender
will collect daily, which my informants revealed they did not care for since this required more
pressure to maintain a specific daily income. The interest rates can vary from 5 percent to 20
percent, depending on the amount of the loan, the length of time to repay, and the relationship
between lender and borrower. This business is not regulated and takes place surreptitiously.
Since the pawn shop is out of reach for the city’s poorest due to its collateral requirements and
the 5-6 offers higher interest rates and a cost prohibitive repayment scheme, more residents have
turned to micro-credit loans through government regulated microfinance institutions. The
Philippine government has also publicly promoted MFI products and services. The financial
weight of assisting its poorest citizens has led the Philippine government to weigh in on its
purported efficacy:
As stated by the Center for Business Research and Development, Republic Act 8425
(Social Reform and Poverty Alleviation Act) identified microfinance as a central strategy
for poverty reduction. The Central Bank of the Philippines defines microfinance as the
“provision of a broad range of financial services such as deposits, loans, payment
services, money transfers and insurance products to the poor and low-income households
and their microenterprises.”
According to the Central Bank of the Philippines, the three core principles of
microfinance are: 1)that the poor need sustained access to financial services and products
and this sustained access is a primary issue over interest rates, 2) that the poor have the
capacity to repay their loans and to save and, 3) that microfinance institutions can be
operationally and financially self-sufficient.
Application Process. One reason for CARD’s success is its membership requirements. There are
two fundamental requirements prospective members must satisfy. First, each must be a resident
of their respective Barangay2 for at least two years. Second, she must be able to show ownership
in some form of entrepreneurial business. Though, what may qualify as a ‘business’ is
subjective. Fishing, Buy & Sell, and sari-sari stores are the most common owner-operated
businesses in provincial Philippines due to its low initial investment, overhead, and flexible work
schedule. In some circumstances, the applicant may join without a current business if she can
present a good case for a future business and is able to present proof of its planning. Lastly, and
not publicly advertised, applicants without a business or plans to create one can join if she is
vouched by a good-standing member, as observed during this ethnography. Although this is
ultimately anathema to the overarching mission of the microfinance industry, it is a peak into the
2
Equivalent to a neighborhood or district.
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patronage system that still runs deep in many circles of Philippine society.A co-signer is
required, to offer an element of inclusion, which is most often satisfied by the husband. For
women who are separated (divorce is illegal in the Philippines) or widowed, an immediate
family member can satisfy this requirement.
Attached to the loan application, and obligatory for an applicant’s first loan, is the Progress Out
of Poverty Index (PPI), (see Table 1), which is based on the 2004 Annual Poverty Indicators
Survey (APIS). Each response is given a score. The ten scores are tallied to provide CARD a
‘Total Poverty Score’. The lower the score, the more impoverished the applicant is assessed to
be, while a higher score is more indicative of the member repaying her loan, due to a higher
standard of living, as long as she is not indebted for household products. My informants did not
know how the PPI was used beyond the application, nor were member sever contacted regarding
it.
Table 1. Questions from the PPI used to assess first time loan applicants’ ability to repay
loans.
1. How many in your family are under 14 years

old?
2. Are all the children in your family, aged 6-
14, in school?3
3. What is the highest level of education of the
women who is the head of household or the
wife?
4. Is there any member of your family
receiving a regular salary?
5. What materials were used for the walls of
your house?
6. What materials were used for your roof?
7. What kind of restroom or toilet does your
family have?
8. Do you own a refrigerator?
9. How many TVs do you own and are
working?
10. Do you have a washing machine that is
working? Is it yours?
Once the complete application is submitted, the Account Officer, a CARD employee, and the
Center Manager, a volunteer member, go to the house of the prospective member to ensure the
accuracy of the application, with foremost attention paid to the business claimed by the
3
The Philippines recently moved from a K-10 system to the K-12 school system, whereby grades 11 and 12 are now obligatory for public and
private school pupils. Adolescents now graduate 12th grade at 17 or 18 years old.
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applicant. The application is approved or denied at the main CARD office in town. The entire
application process may take 2 to 3 weeks and once the applicant is approved, the member
receives a CARD photo identification and a passbook to document their savings, insurance and
loan amortization.
Membership and Loans. Members join with their first loan. Most loans start at 3,000 pesos,
with a negotiable repayment schedule, ranging from 2 to 3 months. The maximum first loan is
5,000 pesos, all of which is dependent on the ‘credit worthiness’ of the applicant. However,
those who already have a successful business, may apply for a first loan for as much as 10,000
pesos known as a Small Business Loan. For any business loan above 10k, the Unit Manager from
CARD visits the house of the member to validate the application and to justify the need. After
the successful repayment of a loan, the member may apply for another in increments of 3,000
pesos. Once a loan is above 20,000 pesos, two co-borrowers are required. The only financial
requirement for a member to acquire a loan is to maintain a savings account balance of at least
20 percent of their current loan. A member borrowing 10,000 pesos, must maintain 2,000 pesos
in her savings account throughout the duration of the loan.
The other financial obligations of members are weekly contributions to a savings account and
life insurance fund. Each insurance payment is 20 pesos and the minimum savings contribution
is 50 pesos. CARD provides a generous payout to families of members who become seriously ill
or die.
Additional loans are available to members who have maintained ‘good standing’. After one year,
school loans are for the children of members and are offered for elementary, high school and
university level students at 3k, 5k, and 10k, respectively. Like business loans, they have flexible
repayment options and competitive interest rates. After three years, members may avail loans for
home repairs and miscellaneous loans for members to use at their own discretion.
The perpetual need to borrow money among the rural poor in the Philippines created a perfect
storm for microfinance institutions to offer its financial services. Given the lack of financial
services available to the rural poor prior to the presence of MFIs, it made great business sense to
enter this untapped market by offering microcredit loans, life insurance and savings
opportunities. Although CARD was not the first MFI to enter Palawan, it has since emerged as
the leading agency by offering a flexible lending system, more suited to needs of provincial
Filipinos. Has CARDs services been a catalyst for economic development in Palawan? Or, has it
evolved into just one more money lending scheme, placing Filipinos into a familiar cycle of
debt? This paper attempts to answer these questions by revealing the borrowing habits and
financial aspirations of 30 CARD members from Puerto Princesa City, Palawan, Philippines.
Methodology
I approached this ethnography with an interpretive methodology to subjectively and qualitatively
analyze my observations. Although I include financial and other demographic statistics in
support of my findings, this research predominately centers on my dialogue with 30 CARD
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members. My informants were randomly selected from among the members at the New Princesa
CARD center located in Barangay Tiniguiban, with the help of my interpreter and long-time
CARD member, Jocelyn Z.
I began my research in November 2016 by observing the weekly CARD meetings in New
Princesa. This was to understand the social makeup of each meeting and how members
interacted with one another. I also wanted to become a familiar face to as many members as
possible to facilitate my one-on-one interviews to be conducted later. My attendance also
allowed greater understanding of the application and loan process, as discussed earlier.
At the time of my research, the CARD center in New Princesa, had 57 members. Meetings were
held every Tuesday morning, with Group A meeting at 8am and Group B at 9:30am. Two
separate groups are needed at this center due to its size. Once a group exceeds 40 members, an
additional group must be formed.
After a few months attending its meetings and understanding its organization and
responsibilities, I began my ethnographic interviews of 30 members from the New Princesa
CARD center, making up almost half of its total members. I worked with a set number of open-
ended questions, which often led to follow-up questions and a free-flowing dialogue between my
informant, my assistant/interpreter and me. I conducted interviews from March to June, 2017.
All 30 interviews, except for three, were conducted at the informant’s house. The three who
could not be interviewed at their house were held at their place of business. Some follow-up
interviews were needed seeking clarification on conflicting information received from other
interviews. This was particularly required when it was revealed the interest rates stated on
members’ forms differed from the actual calculated rate they were paying. This is further
explained below.
My findings were collected from attending CARD meetings and from my informants during my
interviews. Other than the Progress Out of Poverty Index, discussed above, and references to the
CARD website and other government agencies referenced throughout this paper, I did not
conduct interviews of CARD staff or government agency employees.
Questions. My interviewees appear below in the order in which they were asked. After asking
about the size of each family and how each interviewee and their husbands earned a living, I
asked about their membership in CARD and how much borrowing they had done in the past and
planned to do. Many of my interview sessions naturally strayed off course, particularly when
family members and friends were present and chimed in about particular questions.
The question which attracted the most discussion from my informant’s kin was one of my
follow-up questions regarding the discrepancy between the loan interest rate stated on the loan
application form, versus the actual interest rate paid. This is highlighted below in the Key
Findings section.
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Table 2. Thirty Interviews and Their Answers

Other MFI
Year Current or 5-6 Plans to have Highest Plans to
Current Husband's Joined Most liked Loan(s) in Most before or another loan after Education expand AMI (,000)
Name Age Children job job CARD about CARD ,000 Pesos Borrowed now? current? attained? biz? Pesos
Deodora P. 50 0 Sari-Sari City Employee 2013 Life Insurance 14 B current 5-6 now Yes, rolling loans Elementary Yes 5 to 10
Lucena A. 53 7 Tailor Fishing 2011 Life Insurance 3 E / 10 E n/a no Taking a break High School No up to 5
Margielin B. 29 2 Buy&Sell Grocery Clerk 2013 Savings Account 20 B current 5-6 before Yes, rolling loans Some College Yes 5 to 10
Resort low interest Plans to take a housing

Odette R. 49 1 Manager Driver 2011 loans none 35 5-6 before repair loan soon College Grad n/a 15 to 20
Rosita R. 64 2 Buy&Sell Separated 2017 Life Insurance 3B current MFI Yes, rolling loans Elementary Yes up to 5
Direct Barangay
Lovely G. 31 2 Selling Security 2012 Life Insurance 18 B / 3 E / 2 M current MFI Yes, rolling loans Some College Yes 5 to 10
Irene F. 26 1 Resort Clerk Fishing 2017 Life Insurance 3B current No no High School No 10 to 15
Winnie G. 24 3 Buy&Sell Construction 2016 Life Insurance 5B current MFI Yes, rolling loans Some High School Yes 5 to 10
Merilyn R. 49 5 Buy&Sell Construction 2011 Life Insurance 20 B current no Yes, rolling loans Elementary No 10 to 15
Internet Accident
Annabelle O. 39 2 Sari-Sari Installation 2013 Insurance 5B/3E current MFI Yes, rolling loans College Grad No 5 to 10
Morena A. 48 5 Fishing Construction 2014 Life Insurance 3B 6 no Yes, rolling loans High School No up to 5
Elena A. 54 2 Buy&Sell Widowed 2011 Life Insurance 10 B current MFI Taking a break Elementary No 10 to 15
Edenyl A. 30 2 None Construction 2013 To Borrow None 3 no Educational Loan in June High School n/a n/a
Grace A. 30 1 Buy&Sell Construction 2012 To Borrow 4B/3E 6 no Yes, rolling loans High School No up to 5
Janitor +
Mailyn R. 42 3 Buy&Sell Fishing 2013 Life Insurance 8B /5H/3E current MFI Yes, rolling loans Elementary No 10 to 15
5-6 before and

Femie P. 24 2 Recycling Recycling 2011 To Borrow 69 B / 10 H / 3 E current now Yes, rolling loans High School Yes 30 to 40
Lejardine T. 21 1 None Mechanic 2016 To Borrow None 9 no Taking a break Some College n/a n/a
Alanie Z. 48 4 None Carpenter 2011 Life Insurance None 6 no Taking a break Some college n/a n/a
Carly A. 35 1 Sari-Sari Shipping 2011 Individual Loans 7B/ 3E current no Yes, rolling loans College Grad Yes up to 5
Sari-Sari /
Elsa D. 49 2 Lending Civil Servant 2012 Life Insurance 1B 8 no Taking a break High School No 30 to 35
Lechon
Judice I. 44 6 Stand Lechon Stand 2013 Life Insurance None 45 no Education Loan in June Some College Yes 30 to 35
MFI before
Maleony P. 47 7 Buy&Sell Fishing 2013 Life Insurance 7B/4E current and now Yes, rolling loans Some College Yes 5 to 10
MFI before
Evelyn R. 41 1 Food Stall Tricycle Driver 2014 Life Insurance 5B current and now Taking a break High School Yes 5 to 10
Life Insurance MFI before

Leticia P. 54 9 Fishing Fishing 2011 for Family 11 B 12 and now Yes, rolling loans Elementary No 5 to 10
Direct
Irene N. 34 6 Selling Fishing 2015 To Borrow 9B /4E current no Yes, rolling loans High School Yes 5 to 10
MFI before Will take an Education

Rizza M. 28 2 Sell Fish Fishing 2015 Life Insurance none 8 and now loan in June High School No 10 to 15
Melissa V. 36 4 None Fishing 2011 To Borrow 8B current no Yes, rolling loans High School n/a n/a
MFI and 5-6

Marina N. 44 3 Sari-Sari Sari-Sari 2012 Life Insurance 40 B / 5 E current before Yes, rolling loans High School Yes 30 to 35
Mary A. 29 1 Caretaker Cook 2014 Life Insurance 3B 5 no Yes, rolling loans Some College No 5 to 10
Direct Fishing /
Jocelyn Z. 41 3 Selling Construction 2013 Life Insurance 5B 10 MFI Yes, rolling loans Some College Yes 5 to 10
AMI= Average Monthly Income
B= Business / E= Education / H= House / M= Miscellaneous
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Summary of Findings.
 Average Age is 39
 Average number of Children is 3
 Average Year joined CARD was 2013
 Favorite aspect of CARD was Life Insurance, followed by Savings, then Borrowing
 Average Current Loan is 11,300 pesos
 17 members reported their highest loan was their current loan
 16 members had done some type of MFI or 5-6 loan before
 19 members plan to have reoccurring loans
 Most reported income was 5 to 10 thousand pesos, or 100 – 200 USD
Key Findings.
 The three members who were most successful with their businesses, with the largest
income, Femie P., Judice I. and Marina N., were business partners with their husbands.4
 13 members operate a sari-sari or Buy&Sell as their business.
 Femie P. employs 7 people to pick up scrap metals and plastics.
 5 members used their loans for their husbands’ businesses. Lucena A., Irene F., Irene N.,
Rizza M., and Melissa V.
 7 reported they would take a break from borrowing after their current loan:
o 2 received loans for their husband (Lucena A. and Irene F.);
o 2 had no current employment (Lejardine T. and Alaine Z.);
o 1 did not need to borrow because of her income (Elsa D.);
o Elena A. is widowed; and,
o Evelyn R. is the only respondent without an anomaly.
 All informants paid a higher interest rate on their loans than what was officially stated on
their loan agreement forms.
o A typical 6-month loan for 4,000 pesos was given an official interest rate of 4.9%
on the loan agreement form. Simple math revealed the real interest rate to be
14.72%.
Discussion
 4
Elsa D. has a large AMI because she recently sold her property in New Princesa for 1 million pesos. She has used some of that
money to lend to others, which she collects bi-weekly payments. She also used some of her money to open a sari-sari, which is run by
her son.
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The following analysis is divided into two parts. First, is an analytical interpretation of the most
common answers from my informants, taken from the Summary of Findings. These include their
motivation for joining CARD (i.e., insurance; savings; and borrowing for education), and the
unintended consequence of perpetual debt. The second part includes an analysis of the Key
Findings: 1) the most successful borrower; 2) the micro-enterprises of the sari-sari and Buy &
Sell; and, 3) the members who borrowed for their husbands’ business.
Figure 2. Four examples of typical sari-sari stores in New Princesa.
Part 1.
Insurance. Despite my informants’ stagnant economic situation, they were more attracted to
CARD’s insurance benefits, than the opportunity to borrow. For only 20 pesos a week, and after
three years of membership, their family is entitled to 100,000 pesos of life insurance in case of
the member’s accidental death. In case of death by disease, 50 percent is paid. It has been paid
out before in Tiniguiban and the wait time is only 3 days. Families of members who have been
with CARD for less than 3 years still receive a payout, but it is much less. This is revealing for
two different reasons, of which shines light on the strength and importance microfinance is
playing in the rural Philippines. As the primary caretaker, life insurance provides maturation of
this familial obligation. But, perhaps because life insurance was never an option to poor families
before microfinance entered the Philippines, it was never a consideration for families. Before
MFI, life insurance was not even a peripheral option for my informants. However, its obligatory
role in CARD is the surprising attraction for the majority of its members.
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Second, premature deaths, particularly in provincial Philippines, is unfortunately common.

Workplace deaths, car accidents and disease strike, or seem to, at a higher rate in the province.
While poor families often do not have the financial foresight for lack of how and when money
may come in, the availability of insurance provides, for many families, the first opportunity to
financially plan for the future.
Compulsory Savings. Nearly all my informants who stated the life insurance benefits as what
most attracted them to CARD, were quick to add that the compulsory savings account was also a
motivating factor to join. Members appreciated the “forced hand” to help them save, even though
the weekly requirement was only 50 pesos. Many new members contribute substantially more to
their savings accounts since each loan requires a minimum savings balance of 20 percent.
Therefore, a 5000-peso loan requires a savings balance of 1000 pesos. Dialogue with some of my
informants about this requirement to save revealed a surprising opinion of financial foresight.
My informants wanted to save, even if their financial obligations proved otherwise. For many
women, this was their first chance to save on their own at their discretion. One more popular
component of the obligatory savings was that only the member has access to the money. Even
though their savings and loans supported their family, they considered their savings accounts to
be “theirs”.
Most of my informants could only maintain their minimum balance required for loans due to
reoccurring costs of raising a family. School fees for their children, transportation and making
ends meet for their family resulted in the ebb and flow of their savings accounts. A few
informants who had built a robust savings account were the exception. They were older, with
either no children at all, or none in the house.
Education. After basic living expenses, education accounts for most of a family’s disposable
income. Free public schools require families to purchase uniforms and school supplies, in
addition to daily public transportation costs, as most families do not own a car. Families are also
hit with periodic supplemental fees for school projects, field trips and special events, which add
to their financial burden.
Even though many of my informants only had an elementary or secondary education, they were
trying to break the cycle of the poorly educated by availing education loans to keep their children
in school. Most felt fortunate to have access to education loans for their children. How the poor
interpret education in the Philippines is a mixed blessing. For some, they perceive it as a tool to
get a good job and work abroad or emigrate overseas. Others perceive it as a waste of time,
particularly for the communities that are still largely agrarian. One bright note is the export labor
market. Although the local labor economy remains depressed, more Filipinos are temporarily
migrating overseas to remit money home to support their families. This market requires a
particular education and skills suitable for overseas employment.
Education loans from microfinance institutions, like CARD, provide the financial relief and hope
for many families for a better future. Ten families currently have these loans and the new
members intend to take once they have been a member for a year.A few informants confided that
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they took advantage of the low interest by using loan money for miscellaneous expenses, rather
than their child’s education.
Perpetual Debt. High rates of underemployment and unemployment have spurred personal
financial debt. As the cost of living continues to increase, many in Puerto Princesa have
patronized personal lending services to make ends meet and for consumption smoothing. To fuel
this personal debt crisis has been a sharp increase in consumerism. Shopping malls, motorcycle
and car dealerships have sprung up, making this quiet capital town a city catching up with the
rest of the country’s appetite for better goods and services.
During one of my interviews, it was revealed that CARD prefers members not to go without a
loan for more than 3 months. This makes strong business sense for the company, but places
pressure on the member to constantly have a loan. One of my informants revealed that since she
does not need to borrow money, she maintains a 1000-peso loan to remain in good standing to
maintain her insurance benefits. While this may tilt the lending axis towards predatory lending,
my informants did not seemed bothered by this requirement. At the time of this research, many
of my informants divulged that they need access successive loans to maintain their standard of
living.
More than a few of my informants raved about the low interest rates for their business and
education loans. The advertised rate for business loans and as understood by the members, was
2.5%. The interest rate for education loans, as understood by its members, was 1%. However,
after reviewing the loan documents from a sample of my informants, the actual rate of interest
for their current loans(s) was much higher. The 2.5% and the 1% loans are the starting rates for
each, for the minimum length of a loan, which is three months. However, Jocelyn Z. currently
has a 6-month business loan at more than 14% and an education loan for 4 months at more than
8% interest. An interest rate of more than 14% was typical for many of its members.
However, what most concerned them was not the interest rate, but the weekly payments. If the
weekly payments are manageable, the rate of interest does not matter. This state of mind is also
reflective of the nearly unanimous unfavorable opinion of the 5-6 lending scheme, which collects
payments daily.
Part 2.
Successful Borrowers. Of my 30 informants, the most successful business owners in terms of
business size and income were from those who operated in partnership with their husbands. At
only 24 years old, Femie P. and her husband run a successful recycling business. They started
five years ago with a small loan from her father in-law to buy a tora-tora, a motorcycle with an
uncovered metal cage welded to its side supported by a third wheel, used to collect metal scraps.
Today, they employ seven local men who ride tora-toras around town to collect scrap metals and
plastics from businesses and garbage discarded on the side of roads. Since joining CARD in
2011, they continuously borrow money to maintain their business. She and her husband also had
the largest revolving loan of 69,000 pesos.
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They also borrow from a trusted 5-6 lender, with whom they have been doing business for a few
years, when it is time to load and ship a 40-footcontainer full of recyclables bound for Manila.
The shipment requires a large one-time payment in cash, which Femie and her husband cannot
afford themselves. This loan is repaid quickly as they are paid for their recyclables once they
reach their destination in Manila.
Sari-sari and Buy & Sell. The sari-sari is one of the more common business opportunities for
women in the province. It requires the least amount of startup costs, its working hours are
flexible and its maintenance costs are suitable for many budgets. For women who run a sari-sari,
their time is flexible to tend to family needs, they can close shop when they want, and pull food
from their inventory, when times are tough. They are also a point of social interaction within the
barangay where people discuss local politics, enjoy a cold beer, flame the local rumor mill, or all
three. Most are either directly attached to one’s house, or small separate and simple structures
butting up against the road to attract passersby.
Buy & Sell opportunities are also attractive to entrepreneurs for many of the same reasons as the
sari-sari. Rather than buying and selling a variety of snacks and sundries as one would find in a
sari-sari, the Buy & Sell entrepreneur will concentrate on only one or a few items to sell. She
will buy one or two items in bulk and break the quantity down into smaller amounts to sell
around the barangay. She may buy a 50-liter drum of cooking oil, to sell one liter at a time. She
may purchase fish directly from a fisherman and sell house to house. This may be ideal for the
mother with children at home, providing a flexible work schedule by which she can tend to her
family’s needs.
Borrowing on behalf of the husband. Reflective of international demographics of MFI
participants, all members of this CARD center were women. Even though microfinance
guidelines in place by the Philippine government does not discriminate between men and
women, CARD has deliberately focused its resources on microcredit loans for women, like other
MFIs in developing countries. These measures have increased agency for poor women and has
provided a significantly underrepresented percentage of its citizens access to financial
independence. However, deliberate male exclusion, or their perceived exclusion, can
theoretically only potentially solve half of the problem of poverty.
My research did not capture the attitudes my informants’ husbands had about CARD. What may
inadvertently shed more light on this issue is that five members joined CARD and borrowed
money on behalf of their husbands’ business. Three of these five members were among the
poorest of my interviewees, living in a fishing compound with shared running water, no
electricity and no concrete flooring. What this may suggest is gender roles and extreme poverty
may inhibit men from joining a women’s financial organization.
Conclusion
With the exception of the most successful borrowers and those availing housing loans, my
informants did not have an overt increase in their standard of living since joining CARD. That
Vol. 2, No. 01; 2018

ISSN: 2456-7760
said, it would be easy to be critical of MFIs and CARD, and their failure of its participants to
increase their standard of living and pull themselves from poverty. However, there is more to
consider than statistics of success.
Success of MFIs in rural Philippines should be interpreted differently. To the outsider, the
interpretation of these data and ethnographic research can conclude that microfinance is not
spurring economic growth and helping families out of poverty. To the MFI participant, however,
the situation is different. Micro-credit loans and life insurance allows these families to make ends
meet, send their children to school, and give them a sense of agency in their lives. They are able
to do what every mother wants to do, provide for their children. MFI loans help make that
happen, regardless of the perpetual debt they acquire.
It is premature to think that microcredit loans by themselves help families out of poverty.
However, if other services are not available, citizens have nothing but these loans to help them.
As Chowdry states in his study, other inputs are required, such as identification of livelihood
opportunities, selection and motivation of the micro-entrepreneurs, business and technical
training…”. Without a concerted effort on the part of MFIs to educate their members on business
strategy and savings, the goal of poverty alleviation will remain out of reach.
Despite recent studies and media reports criticizing the success of micro-credit loans to a
country’s poorest as means of alleviating poverty through entrepreneurship, it is more
constructive to measure its success at the micro-level. Although this study is of only 30
participants, compared to the millions of participants, the intimate details described above should
shed more light on the needs, wants and overarching behavior of what motivates some to
participate in microfinance institutions.
References
Almario, Joselito and Eduardo Jimenez and Pia Bernadette Roman (2006). “The Development
and Implementation of a Uniform Set of Performance Standards for All Types of
Microfinance Institutions in the Philippines: The P.E.S.O Standard. Essays on
Regulation and Supervision. No. 19.
Asian Development Bank https://www.adb.org/countries/philippines/poverty
Bakhtiari, Sadegh (2006) “Microfinance And Poverty Reduction: Some International Evidence”
International Business & Economics Research Journal – December 5(12).
Central Bank of the Philippines bsp.gov.ph/about/advocacies_micro_facts.asp
Central Bank of the Philippines, bsp.gov.ph/banking/pawndir.pdf
Charitonenko, Stephanie and Anita Champion “Expanding Commercial Microfinance in Rural
Areas: Constraints and Opportunities” Paving the Way Forward for Rural Finance: An
International Conference on Best Practices.
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ISSN: 2456-7760
Chowdry, Anis (2009). Microfinance as a Poverty Reduction Tool – A Critical Assessment.

DESA Working Paper, No. 89, December
Garikipati, Supriya, Susan Johnson, Isabelle Guerin & Ariane Szafarz (2016) “Microfinance and
gender: issues, challenges and the road ahead” The Journal of Development Studies,
DOI: 10.1080/00220388.2016.1205736
Habaradas, Raymund B. and Mar Andriel Umali. “The Microfinance Industry in the Philippines:
Striving for Financial Inclusion in the Midst of Growth.” Working Paper 2013-15.
Center for Business Research and Development
Kring, Thomas (2004) “Microfinance as an Intervention Against Child Labour in Footwear
Production in The Philippines” Melbourne University Private School of Development
Studies Working Paper No. 12.
Microfinance Council of the Philippines, Inc. Social Performance Country Report 2016.
Downloaded from microfinancecouncil.org
Nilakantan, Rahul and Saurabh C. Datta, et. al., “The Impact of Microfinance on Women
Empowerment: Evidence From Eastern India” International Journal of Development
and Conflict 3(2013) 27-40.
PSA, Philippine Statistics Authority https://psa.gov.ph/quickstat/palawan
Rooyen, C. Van, R. Stewart and T. De Wet (2012) “The Impact of Microfinance in Sub-Saharan
Africa: A Systematic Review of the Evidence” World Development 40(11) 2249-2262.
Rosenberg, Richard (2010). Does Microcredit Really Help Poor People? CGAP No.59, January
Shigetomi, Shinichi (2006) “Organizational Capability of Local Societies in Rural Development:
A Comparative Study of Microfinance Organizations in Thailand and the Philippines”
Institute of Developing Economies, Discussion Paper No. 47.
Siebel, Hans Dieter and Dolores Torres “Are Grameen Replications Sustainable, and Do They
Reach the Poor? The Case of CARD Rural Bank in the Philippines” Journal of
Microfinance (1) 1.
World Bank. Data on fertility, births per
woman.https://data.worldbank.org/indicator/SP.DYN.TFRT.IN/
Yap, DJ. 12 Million Filipinos Living in Extreme Poverty. March 18, 2016
http://newsinfo.inquirer.net/775062/12m-filipinos-living-in-extreme-poverty

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International Journal of Economics, Business and Management Research

Vol. 2, No. 01; 2018

MICROFINANCE IN THE PHILIPPINES: A TOOL FOR ECONOMIC

Vol. 2, No. 01; 2018

Vol. 2, No. 01; 2018

Vol. 2, No. 01; 2018

1. How many in your family are under 14 years

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Table 2. Thirty Interviews and Their Answers

Resort low interest Plans to take a housing

5-6 before and

Life Insurance MFI before

MFI before Will take an Education

MFI and 5-6

AMI= Average Monthly Income

B= Business / E= Education / H= House / M= Miscellaneous

Vol. 2, No. 01; 2018

Vol. 2, No. 01; 2018

Figure 2. Four examples of typical sari-sari stores in New Princesa.

Vol. 2, No. 01; 2018

Second, premature deaths, particularly in provincial Philippines, is unfortunately common.

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Vol. 2, No. 01; 2018

Vol. 2, No. 01; 2018

Vol. 2, No. 01; 2018

Chowdry, Anis (2009). Microfinance as a Poverty Reduction Tool – A Critical Assessment.

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