From March 15 to April 14, 2020, SEDPI conducted weekly rapid commuity assessments to determine the economic impact of COVID-19 microenterprises it serves. The organization provides microfinance services to its members.
After a month of lockdown, 41% of microenterprises closed their operations; while 18% and 35% reported significant and severe weakening of their livelihoods respectively.
Low demand; mobility restrictions in barangays; supply chain disruption; inability to deliver goods and services; and prohibition to open non-essential businesses were the main reasons given for stopping or weakning of their livelihoods.
Respondents reported very limited cash assistance from the government (11%) while majority were able to receive relief goods that were good to last for 1-2 days (60%). On the bright side only 2 of the 6,071 respondents are persons under monitoring which may be a sign of containing the rapid spread of the virus.
Recommendations during community quarantine
Faster government cash assistance and relief
The government needs to release cash assistance and relief goods faster to microenterprises. These will alleviate their burden and enable them to survive the community quarantine.
Prohibit interest accrual on MSEs loans
Interest accrual for loan of micro and small enterprises during the quarantine period should be prohibited. On April 3, Ateneo-SEDPI Microfinance Capacity Building program released a position paper regarding this.
The continued charging of interest during community quarantine is socially unjust. This gives additional burden to micro and small enterprises at a time when they can barely survive. It is an unnecessary additional expense that will make their lives even harder during the rebuilding and recovery phase.
Prioritize mass testing to suspect and probable COVID-19 individuals who belong to low income groups, especially in urban centers, where spaces are cramped and transmission could happen faster.
Free testing services should be provided to make sure that transmission in low-income groups is prevented and managed properly. Local government units should have isolation areas for PUIs and PUMs to prevent the spread of the disease in rural and urban poor communities.
Recommendations immediately after community quarantine
The rapid community assessment showed that 77% of respondents request for cash assistance to restart their livelihood after the community quarantine. Many of the members or 35% would still need relief goods, especially food, immediately after the quarantine and a few or 12% need work to have source of income.
Cash assistance to restart livelihoods through MFIs
Request for cash assistance to restart livelihoods should be coursed through microfinance institutions (MFIs) to eliminate dole-out mentality. The cash assistance should be given, at the minimum, as 0% loans to microenterprises and the informal sector.
MFIs are well positioned to provide this intervention since they would need to support the rebooting of the livelihoods of their client base. The cash assistance will be collected alongside restructuring of existing loans of clients so that financial service delivery will continue.
Bail out MFIs
MFIs access funds from commercial banks and government financial institutions that they extend as microcredit to low income groups. Based on the Consultative Group to Assist the Poor’s (CGAP) estimate, an 85% repayment rate in MFIs would only have sufficient cashflow to last in the next six months.
The impact of the pandemic will surely negatively impact repayment rates of MFIs. Based on the figures of those negatively affected, SEDPI estimates that repayment rates in the next three months after the quarantine period may hit as low as 20% to 30%. Due to this, most MFIs will experience liquidity problems.
Government should intervene and infuse capital in the form of equity to MFIs to fund the proposed cash assistance intended to restart microenterprise livelihoods. Another way of doing this is to temporarily convert debt obligations of MFIs from commercial banks and especially from government financial institutions to equity, to ease pressure in debt repayments.
MFIs will eventually pay this equity back, perhaps even at a premium, once they recover from the crisis. SEDPI strongly suggests moving away from debt-based development assistance since interest will ultimately be passed on as additional burden to microenterprises and the informal sector.
This strategy is similar to the bailout of governments to large financial institutions during the 2008 financial crisis. If governments are willing to bail out large corporations, they should also be willing to do the same to MFIs that directly help those at the bottom of the pyramid
Pay for work programs
Development organizations and government should provide pay-for-work programs to spur local economic development. This will create temporary employment and give purchasing power that will augment efforts to restart livelihoods.
0% SSS and Pag-IBIG calamity loans
Microenterprises and informal sector who are members of SSS and Pag-IBIG could benefit from the calamity loans offered. Per published policy of these two organizations, members are allowed to borrow calamity loans against their personal contributions.
The interest rate for calamity loan is 5.95% for Pag-IBIG and 10% for SSS. It is highly recommended to bring the interest on the calamity loans to 0%, since these are drawn from personal contributions of members anyway.
Long term solutions
The pandemic magnified challenges in in accessig basic services from the government that were already felt before. This could be taken as opportunity to improve systems and procedures that favor vulnerable groups.
Part three of the rapid community assessment will present long term solutions that will improve access to government benefits and services among low income groups.
Sources of information and practical tips on money management
Mga bagay na dapat mong malaman sa insurance
Mga iba pang babasahin tungkol sa insurance:
- Iba’t-ibang klase ng insurance
- Must-have insurance for people in their 30s
- Ang pinakamatatag na insurance company sa Pilipinas (Part 1)
- Ang pinakamatatag na insurance company sa Pilipinas (Part 2)
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- Gusto kong paghandaan ang future ng anak ko, tama bang investment-linked insurance ang kinuha ko?
- Paano gumagana ang ibinabayad na premium sa insurance para mabigyan tayo ng proteksyon sa panahon ng emergency
- Kung akala mo insurance ang education plan, basahin mo ito
- Insurance para sa mahirap
- Bakit mahal ang VUL o investment-linked insurance
Mga bagay na dapat mong iwasan sa insurance
Ito ang listahan ng mga articles na isinulat ko at videos na nagawa ko tungkol sa VUL para makakuha tayo ng mas sulit at mas epektibong insurance coverage.
- Bakit mahal ang VUL?
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- Epektibong paggawa ng BTID upang masulit ang pinaghirapang pera sa insurance at investment
- Paanong mas maliit ang fund value sa VUL kaysa sa BTID?
- Ok ba talaga ang VUL kasi protected ka nito beyond 65 years old compared to term?
- Ok ba talaga ang VUL para sa estate taxes?
- Why Not VUL?
- Anong gagawin ko kung may VUL na ako? Paano ko ito ititigil?
- Pagkakaiba ng savings sa VUL
- Mga terms and conditions na kailangang hanapin kung bibili ng VUL
- Paano pumili ng mabuting insurance agent
Different kinds of investments
Preparing for retirement
How are articles on retirement
- 10 Commandments of retirement
- Mga kinakatakutan ng retirees at paano ito paghahandaan
- Magkano ang matatanggap mong SSS pension upon retirement
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