Micro-Finance Business Booms in Palawan
| Posted by Jodelen Ortiz in Business News,Featured SMEs on 17th April 2007 |
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By Jodelen O. Ortiz
Rain or shine, it’s business as usual for the vendors outside the Provincial Capitol of Palawan patiently waiting in their uniform rolling stores given to them by the Provincial Government. These vendors are just a few of the hundreds of micro-entrepreneurs in Puerto Princesa City alone selling buckets full of barbeque, balot, peanuts and chicken parts.
The giving out of rolling stores or booths is one of the projects of the Palawan local government in support of the growing micro-business in the area. The Capitol Park Square has already become an entertainment center with different social, cultural, musical, and dance activities being held almost every evening. This has become a free venue to showcase the Palawenos’ talents. A traffic of potential customers is what the Capitol was able to achieve to help the vendors in the area.
These small-time businesses are considered micro-enterprise by the Department of Trade and Industry and this sector has been a top priority through its Small and Medium Enterprise (SME) Programs. Through the leadership of its Regional Director Rosenda Fortunado, DTI was able to coordinate, facilitate and conduct various free trainings on food processing, packaging, savings mobilization and the likes.
This is also in cooperation with the Department of Science and Technology headed by its Director, Pacifico Sariego. The two agencies comprise a formidable team and has encouraged the participation and support of other government and non-government entities, including the microfinance institutions.
Microfinance is the provision of financial services to those who are unable to access services from commercial institutions. Banks don’t usually cater to this market segment because the marginal entrepreneurs don’t usually have acceptable collateral. Banks would gladly accept their savings, but the nature of transactions hardly benefit the small entrepreneurs, unlike loans and consultancy assistance.
The informal creditor (the more popular of this type is sometimes referred to as “bumbay”) on the other hand, offers excellent credit service except that the interest is very high to realistically help the clients. The notorious “5-6” is actually equivalent to 400%-600% in effective annual interest.
The Microfinance Institutions (MFIs) bridge the gap between the services of the banks and the “bumbays”. It offers a more simplified credit transaction than of the banks and a more acceptable rate for the borrowers. And it also mobilizes its resources to provide training, business development services, savings discipline, strengthen the collective discipline and unity among clients and enhances the creditworthiness of the marginal entrepreneurs for their future transactions and bigger credit needs.
The interest rate usually being charged by the MFI is 3%-5% per month, with no collateral but caters mostly the permanent resident in the community with existing marginal enterprise and it relies also to peer pressure and group guarantees.
In Palawan, there are around fifteen (15) recognized microfinance institutions. The more famous are: Javlon Microfinance, Inc., the first non-bank private financing institution in the country; Taytay sa Kauswagan, Inc., an MFI with lots of presence in the country; Dungganon, that reaches to the farthest municipalities in Palawan; and Palawan News Network, Inc., the umbrella organization of NGOs that has expanded service to include microfinance funded by a prestigious funding agency.
The microfinance institutions also provide salary loans for employees of the government and private companies.
Unlike other types of business, microfinancing does not need to worry much on how to get clients. There is one borrower who said that this is the business that would still earn clients even if it’s located at the center of a forest. Why? People will still go to it because money is a necessity and that’s what microfinance institutions provide.
Almost all microfinance institutions aim to expand their presence throughout Palawan. However, due to its somewhat loose requirements, collection returns that started high at 95% – 100% have declined dramatically. This is blamed primarily on the no collateral policy, and secondly, on the existence of many competing MFIs. With no collateral, the borrower may just disappear without any worry regardless of threats of suing.
Since there have been the presence of lots of MFIs in the area, one borrower tend to think that it’s okay to have bad debt record in one MFI because another MFI will easily approve his or her loan application.
In a way, there must be some form of a regulatory board that must ensure that the MFIs’ concerns are being addressed. This could be done by the MFIs themselves. Right now, in Palawan, the time has not yet arrived for a concerted effort on this matter. The basic element of competition is still upheld, MFIs remaining independent on its regulations.
Most microfinance institutions have re-written their rules to include a collateral requirement depending on the loan applicant’s record. As with the need for additional funding, some have turn to funding agencies for support targetting a particular segment in the society as beneficiary. The Asian Development Bank recently had provided funding for microfinance needs of tricycle drivers.
Microfinance, like other kinds of businesses, must be creative in all sense. The old style of running a microfinance company is slowly proving obsolescence with the entry of new players, the giant ones being the banks. The challenge is left on the hands of the management these institutions.
What must remain regardless of the length of micro-industry is this: Microfinance is intended to support economic development of the marginalized Filipinos, and it must always be. Or else, the purpose of having one would be defeated. The government’s intervention is needed to ensure that the interest of the micro-entrepreneurs are well-guarded and protected.
There are thousands of people in Palawan who rely on microfinance institutions to help them either start their business or expand it. Microfinance is essential in Palawan’s economy. The street vendors, the market vendors, the fishermen, the farmers, the dressmakers, the furniture makers, the drivers – most of them don’t have the education needed to find stable jobs. Helping them with their businesses means helping them sustain their families hoping that the next generation would have a much better life.
Tags: Palawan Micro Finance Business, Palawan SMEs, Philippine Business Tips, Philippine Business
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