August 2008

The Philippines is known as one of the most hazard-prone countries in the world. In a 2008 World Bank study, the country was identified as a natural disaster hot-spot with approximately 50.3% of its total area and 81% of its population vulnerable to natural disasters. The United Nations University Institute of Environment and Human Security’s (UNU- EHS) 2012 World Risk Report, the Philippines is the third most disaster risk country worldwide.

Filipinos are known to be resilient but how do we, specifically the poor, exactly cope in times of disaster or emergency?

The top coping mechanism is accessing loans.

There were 653 respondents in the research conducted through 59 focus group discussions in Eastern Visayas.

Eight out of ten of the respondents coped through accessing loans and finding additional work while six out of ten respondents sought the assistance of their family members.

The top coping mechanism of the poor is through accessing loans. Eight out of ten poor family will access a loan as a coping strategy in times of disaster and emergency. This is not surprising but a lot are not aware that this coping mechanism is not good for one’s financial health. Loans should be used for productive purposes only. This is a cardinal rule when accessing loans. Clearly, loans will be used for consumption in times of emergency – to buy food, rebuild or repair houses, medicines for the sick etc. The loan purpose is not bad but the financial tool used is incompatible with the purpose.

The appropriate financial tool used should be insurance and savings. It is a stark contrast that these two are at the bottom of the coping mechanism strategies of the poor while accessing loans is on top. Insurance is specifically design as a protection strategy against emergencies and external shocks. Savings on the other hand provides a cushion or a buffer to smoothen the impact of financial shocks.

The research result is an illustration that the poor have low financial literacy levels. This is why (L)Earning Wealth is embarking on financial literacy programs to improve the financial wellbeing of the poor. Through the sale of its book, (L)Earning Wealth: Successful Strategies in Money Management, it will donate one book to conditional cash transfer beneficiaries (CCT), and students in public high schools and state universities. It will also be conducting seminar workshops to these target groups.