Beyond the Outbreak

Dr. Jaime Aristotle B. Alip
CARD MRI Founder and Chair Emeritus

It is around this time of the year when our farmers would harvest the produce they have tirelessly
worked hard on for months. Instead of a full table and an income that would support their family
until the next harvest season, they are left with uncertainty and instability due to the COVID-19
outbreak that none of us expected.
Focusing on protecting people from COVID-19, the local and national government declared
lockdowns and community quarantines in many cities and municipalities across the nation. This
severely curtailed movement and public gatherings that made the operations of microfinance
institutions untenable. In response, microfinance institutions, declared a suspension of operations in
their covered areas, including moratorium on loan payments while the community quarantine is in
effect. Many of these institutions are members of APPEND and MCPI whose combined outreach is 9
million poor and low-income families served by more than 50,000 staff and an estimated 70B loan
portfolio.
With the expected decrease in business activities, the reprieve will allow clients to channel their
budget to basic needs. Even so, an unsettling voice still lingers: is the delay in the collection of loan
payments ever enough to sustain their needs after all of this is over?

The bigger picture
With significant experience in community development, microfinance institutions (MFIs) have seen
poverty-stricken families rise above poverty through access to and ownership of financial and non-
financial services. Because of the COVID-19 outbreak, all of this could potentially go down the drain.
The low-income sector, who are mostly clients of MFIs, are greatly distressed by the effects of the
pandemic and the necessary measures imposed by the government.
Since main bank branches of CARD Mutually Reinforcing Institutions (CARD MRI) nationwide are still
open for services like withdrawals and remittances, our skeleton workforce still has interactions with
our clients. Field staff have also remained connected with clients through cell phones and/or social
media that enabled them to communicate to management what was happening to their
communities. Our Regional Directors have reported that many of the clients are experiencing
devastating effects on their livelihoods. Most of them have products to sell but are restricted by the
physical barriers of community quarantine, severely affecting their income to support their own
families. For example, in the National Capital Region and elsewhere, in order to implement social
distancing, marketing hours were imposed, compelling many small eateries and stalls in the public
markets to close.

Microentrepreneurs in the agriculture sector also have a crucial role in society. Most of our farmer-
clients in Luzon end up selling their produce at bargain prices, or giving them away to neighbors, or
worse, leaving them to rot because they could not travel to the market due to strict rules on
movement being implemented. In Masbate and Marinduque, our clients can neither send their
seafood products to key cities nor let their wholesale buyers come because seagoing vessels are no
longer allowed to leave or enter their ports.
Come post-quarantine, enough capital would be needed by these farmers to buy inputs such as
seeds and fertilizers. But given the situation we have today, transporting and selling their produce
becomes a challenge. If they cannot sell their products, then they would not be able to farm again.
Ultimately, it is not only the farmers who would face the consequences. We might be dealing with a
possible food shortage if our supply is not enough to meet our country’s demands.
Some of these microentrepreneurs also employ other members of the community, therefore
contributing to the enrichment of the local economy. While the success of one microentrepreneur
has proven to affect a community positively, its downfall can also ripple to many families and
eventually, to the whole community.

Post-quarantine dilemma
With all these challenges faced by microentrepreneurs, the microfinance industry anticipates
reduced capacity of clients to pay after the outbreak. Even with the high risk of low repayment, MFIs
continue to provide financial and non-financial services to the low-income sector during the period
of quarantine. In fact, industry leaders continuously think of ways that could still support the
economic activity of these microentrepreneurs.
However, we recognize that we could not do it alone. Expecting negative effects on liquidity, MFIs
are seeking for potential interventions to continue its business of eradicating poverty in the country.
MFIs are looking for support from organizations and institutions who can provide additional credit
facilities and funding to support its cause in helping people improve their lives while facing this
global health emergency. We are also convening partners and industry leaders to discuss this
pressing issue to mitigate the effect of the pandemic in the industry.
Most importantly, the support from the government is most crucial at this time. The Philippines has
proven to be a conducive environment to implement microfinance. Bangko Sentral ng Pilipinas has
repeatedly recognized MFIs as champions for financial inclusion. Further, laws such as RA 10693 or
the Microfinance NGOs Act, which was signed on November 2015, enables Microfinance NGOs to
expand outreach to greater number of poor people especially in the hard-to-reach areas and
implement community development programs funded by tax incentives. These programs include
medical missions, scholarships, and livelihood trainings, among others.
We encourage you to think about the low-income sector; the landless farm workers, the small
farmers, the fisherfolks, the maglalako, the sari-sari store owners, and other microentrepreneurs.
The lockdown and community quarantine may end soon but if we do not act now, their sufferings
will worsen even after the outbreak. Because health protection and financial inclusion goes hand in
hand, may we not forget to balance the scale in favor of one over the other. Let’s ensure no one gets
left behind.
As a Consultative Group to Assist the Poorest blog concludes: “It seems likely that without significant
support and concerted action, many MFIs are at risk in the coming storm. The question is: what

steps can we take now to ensure the industry survives and can contribute to the eventual economic
recovery? Without taking on hard questions and beginning to put plans in place for COVID-19, it
won’t be poverty that is in a museum, but potentially the modern microfinance movement.”

About the Author
Dr. Jaime Aristotle B. Alip is the founder and chairman emeritus of CARD Mutually Reinforcing
Institutions, a group of 23 institutions that envisions to eradicate poverty in the Philippines. He is the
recipient of the 2019 Ramon V. del Rosario Award for Nation Building.