The idea of providing the poor with access to credit through
microfinancing has become widely accepted around the world, but questions remain
as to how much such projects can contribute to long-term prosperity of
underprivileged communities.
While it is important to focus on
how to structure each microfinancing project, what ultimately determines its
long-term success is whether the loans target the right kind of borrowers,
experts say.
The likelihood of success for
microfinancing projects will improve if the borrowers are entrepreneurs,
according to Frede Moreno, an outside consultant for the International
Technology Management Corp., a Philippines-based development management
consultancy.
"As a tool for poverty
reduction, microcredit is applicable only to the enterprising poor," Mr.
Moreno, a professor at Western Mindanao State University in Zamboanga City,
wrote in a working paper published in December by the Alliance for
International Education. "The use of microcredit to assist poverty groups
is recommended to be based on existing livelihood activities and
micro-entrepreneurial skills and capabilities."
According to the Manila-based Asian
Development Bank, microfinancing plays a particularly significant role in the
Asian-Pacific region, where more than half of the world's poor live despite the
region's strong economic growth over the past decade.
Some of the attempts to make
microfinancing projects work more effectively are emerging in the Philippines,
one of Asia's poorest nations, where a quarter of the estimated population of
92 million are living in a state of poverty, according to the government's
National Statistics Office.
Former television personality
Paolo Benigno Aquino—a cousin of Philippine President Benigno Aquino III—and
Mark Ruiz, a former executive of Unilever PLC, got together in 2006 and formed
MicroVentures Inc., a social business enterprise that aims to help the poor in
the Philippines. In 2007, MicroVentures launched the Hapinoy Store program, a
project aimed at helping the owners of small family-run stores across the
country. The company is one of 12 finalists in The Wall Street Journal's Asian
Innovation Awards.
There are about 700,000 sari-sari
stores—"sari-sari" means "variety" in Tagalog—across the
Philippines. They can be found in most towns, and are fixtures in poor
neighborhoods where housewives run sari-sari stores to supplement their otherwise
meager family incomes.
A recent study by market-research
firm Kantar WorldPanel on Philippine households' spending showed that around
47% of Filipino consumers still buy fast-moving consumer goods from sari-sari
stores—usually small nooks carved out of the owners' houses.
In addition to food, many of them
sell a broad range of household products, from toothpaste to cooking gas to
credits for mobile phones.
Those stores are flexible in
responding to the needs of their communities: They sell candies by the piece,
cigarettes by the stick, shampoos in sachets, and vinegar and cooking oil in
smaller packets. In some areas, they even provide money-transfer services.
Still, business practices at most
sari-sari stores haven't kept up with the times. Their inventory management and
accounting practices remain rudimentary. For many of the owners, traveling to
distant wholesale markets to buy goods poses a challenge.
The Hapinoy program—a word
combining "happy" and Pinoy (Filipino)—tries to make the lives of
sari-sari store owners easier and their ventures profitable. In each town or
province, the program organizes local sari-sari stores into a group, and turns
one of the stores into a large "Community Store" that doubles as a
wholesale market where the owners of other smaller stores in the area can
procure the goods they need. The project also helps sari-sari stores gain
access to loans, with capital provided by the Center for Agriculture and Rural
Development, or CARD, a microfinance institution that has partnered with the Hapinoy
program.
In the program, small sari-sari
stores benefit from lower procurement costs thanks to the unified sourcing of
goods at the Community Store, which serves as a hub for as many as 120 stores
in the area.
Mr. Aquino said that CARD, the
micro-financing provider modeled after Bangladesh's Grameen Bank, asked
MicroVentures to build a business that identifies and supports borrowers.
"So we decided to focus on the sari-sari stores, which are run by
micro-entrepreneurs," Mr. Aquino said.
Because many owners of sari-sari
stores are housewives, the Hapinoy program could also provide women with more
power and capital to take control of their own businesses.
The program's focus on women
brings it back to the roots of microfinancing. Muhammad Yunus, the Grameen Bank
founder who helped to establish the concept of microfinancing, has said that,
if the poor, particularly women, can gain access to credit and generate their
own income, that could consequently address the problem of poverty.
After five years, Hapinoy says it
has helped thousands of sari-sari stores and has extended its reach to 14
provinces in the main island of Luzon. It is now starting pilot projects in the
central region of the Visayas and the southern region of Mindanao. Services
offered by Hapinoy stores have also evolved, even providing solar-charging
stations for communities without access to electricity.
"You get to see the
transformation on the ground," said Mr. Aquino, whose years as head of the
country's National Youth Commission, a policy-making body, have left him
frustrated and led him to become a social entrepreneur.
Mr. Aquino said that when they
started Hapinoy, MicroVentures had problems getting corporate and funding
support for the program. "A lot of companies turned us down," he
said. As the program developed, modules were continuously adjusted and the
approach to implementing projects had to be modified to a bottom-up approach
from top-to-bottom previously. Mr. Aquino also said that it is a constant
struggle to inculcate among Hapinoy participants better working habits and
processes.
Mr. Ruiz said their main gauges
for measuring the program's success are store sales and improvement in the
lives and self-confidence of shop owners. Mr. Ruiz said that Hapinoy is
currently conducting self-assessment surveys with shop owners to determine
their level of satisfaction with the program.
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