by Jaime Aristotle B. Alip
Founder of CENTER FOR AGRICULTURAL AND RURAL DEVELOPMENT
MUTUALLY REINFORCING INSTITUTIONS (CARD MRI)
2008 Ramon Magsaysay Awardee, Philippines
Filipinos have strong family ties, relying more on the family as an economic unit that provides goods and services, and less on the market and on the government for social insurance. Studies show that with strong family ties, home production is higher, while geographical mobility and labor force participation of women and youngsters are lower. Families with strong family ties are larger, consistent with the idea of the family as an important economic unit.
The Philippine Statistics Authority (PSA) 2020 Census shows that there are roughly 26.39 million households in the Philippines, with an average size of 4.1. Poverty incidence in 2021 was at 18.1%, equivalent to 19.99 million Filipinos living below the poverty line. Subsistence incidence was at 3.9%, equivalent to 1.04 million poor families whose income is not enough to meet even the basic food needs.
This paints a grim picture, underscoring the need for the government and the private sector to work hand in hand in alleviating the plight of the Filipino family.
Microfinance stimulates economic growth by providing credit, savings, insurance, remittance and other services to segments of the population not served by formal banking institutions. It provides poor people, small businesses, and the informal sector access to capital for their microenterprises. It also enables them to prepare for future needs and unforeseen risks.
Interestingly, participation in microfinance is predominantly female. Women are disadvantaged due to poverty and social norms; microfinance institutions (MFIs) target women both in an effort to encourage economic growth and promote gender equality. Women make up about 80% of microfinance borrowers worldwide.
Women are crucial to economic development.
Studies show that income in the hands of women has effects on household expenditure that differ from those of income in the hands of men. Women ensure that a larger share of the household budget is devoted to human capital, such as household services, health, education and child welfare. Women heads of low-income households will make great personal sacrifices to achieve favorable child outcomes. More importantly, the earning power of women in the current generation influences the allocation of food, health, and educational resources to female children, ensuring the welfare of the next generation.
Empirical studies in the Philippines show that women have a very special role in the family in the context of microfinance. The organization that I am affiliated with, the CARD MRI is a case in point. Ninety percent of our members are women.
Family is always the priority for our women clients. They use the proceeds of microfinance services (whether savings, loans or insurance) to support activities that will benefit their families. They are able to convert loans into income-generating activities for the family, no matter how small the loan is. And when income is derived from these ventures, the first priorities of women are food, clothing and education for their children.
The same is true for other MFIs. Those that started in the mid-1990s and early 2000 (e.g. ASHI, TSKI, TSPI, ASKI, NWTF and KMBI) have data to show that their clients’ children graduated from college. With the Nanays (mothers) putting a premium on their children’s education and the help of these MFIs, poor families were able to turn out thousands of professionals—teachers, accountants, health practitioners, engineers, social development workers. These children broke the intergenerational cycle of poverty and are now supporting their parents and helping siblings to live a better life.
Starting with small microfinance loans, many Nanays have pulled their families out of poverty. They embody what development is all about: ensuring the betterment of the next generation.
Women are crucial to economic development. In my decades of microfinance practice, I have seen this first-hand.
Our women clients have a near-perfect repayment rate. They save and strive to increase their asset base. They regularly attend meetings and participate actively in center activities to improve their knowledge and skills. They welcome opportunities to be better managers of their homes and businesses. You can give a loan to the Nanays for income-generating projects and after the loan cycle, you can be sure that they will pay. (You do not even have to remind them!) What is exciting is that the moment they convince their husbands to join, the repayment rate goes even higher. The husband imbibes the value of credit discipline. Their children also learn to save. Such is the influence of women in their families.
These Nanays are beacons of hope: a testament that the poor and the marginalized can transform their lives and pave the way for positive changes.
Family dynamics change as the Nanays’ relationship with the microfinance organization deepens. There are many stories of women who have grown several enterprises out of their microfinance loans, becoming their families’ primary providers. Nanays would usually start by taking a small loan to fund a home-based enterprise (like food selling or sari-sari store) or to expand an existing venture. Because we train them on financial literacy, credit discipline and business development, they become better entrepreneurs. Because we also offer complimentary services (like heath, insurance, educational loans and scholarships for their children), loan proceeds are used for income-generating activities rather than consumption. With access to capital and other services, the Nanays are able to grow their enterprises. When this happens, their husbands usually become interested in helping the business. They quit jobs that earn them only daily wages (sometimes below minimum rate) to help their wives; some even join and also take out microfinance loans to augment their capital. Husbands and wives become partners in a myriad of ways. Women become more empowered.
A loan in the hands of a woman has a better chance to change not just her life, but to improve her children’s opportunities and her society’s prosperity.
There are other benefits. Income increases enable families to pursue higher education for their children. Business expansion generates not only family employment but livelihood for others in the community. There is reduced dependence on political patronage; if there is death, health issues or calamity in the family, they rely on the microinsurance offered by MFIs to cope with unforeseen events.
Many of our clients have become de facto leaders in their communities; a number of them have even become local elected officials – serving as barangay chairpersons, and sanggunian (council) members. These Nanays are beacons of hope: a testament that the poor and the marginalized can transform their lives and pave the way for positive changes. They have become the new leaders in their own localities, sharing the vision of eradicating poverty among their constituencies. Their stories of struggles and triumphs have to be written to inspire the government, the private sector, and development partners to continue supporting women and microfinance.
A loan in the hands of a woman has a better chance to change not just her life, but to improve her children’s opportunities and her society’s prosperity. By supporting women in microfinance, we help not just Filipino families; we also secure a better future for the country.
Dr. Jaime Aristotle Alip is a poverty eradication advocate and founder of the Center for Agriculture and Rural Development Mutually-Reinforcing Institutions (CARD MRI), a 2008 Ramon Magsaysay Awardee. CARD MRI received Asia's premier prize and highest honor for "its successful adaptation of microfinance to the Philippines, providing self-sustaining and comprehensive financial services for half a million poor women and their families."