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Two in three microenterprises are hopeful to bounce back two months after lockdown

By April 29, 2020 Microfinance, News

SEDPI Rapid community assessment on the impact of COVID-19 Update 4

A week before the easing of Enhanced Community Quarantine in Agusan del Sur and Surigao del Sur, two out of three microenterprises are confident to bounce back if they have sufficient capital to restart their livelihoods. The remainder said they will be able to bounce back after two months.

The research is part of a series that determines the economic impact of COVID-19 lockdown to microenterprises and the informal sector as the lockdown unfolds. SEDPI, a microfinance institution (MFI), performed the survey from April 18-24 with 4,269 respondents.

Market confidence among microenterprises

Most microenterprises or 85% were confident to access supply they need to restart their livelihood. On the demand side, 49% said that there would be a lot of returning customers as soon as they open their livelihoods again. Slightly lower than this figure ot 44% said they expect to only have a few customers when they reopen.

Financing options

All respondents are SEDPI members who accessed financial services such as loans, savings, insurance as well as financial literacy trainings. Ninety-five percent are women who have loans up to PhP20,000 payable in six months to finance their livelihoods such as sari-sari stores, carinderia, farmers, fisherfolks, dressmaking and vending. The loans bear an interest rate of 3.33% per month which is comparable to credit cards interest rates.

After the lockdown, 47% of the respondents prefer to continue repaying their loans without need for refinancing or restructuring. Due to the short term nature of the loans, members are able to repay this quickly and could access repeat loans immediately.

A significant number or 36% request for restructuring their existing loan for another six months to allow them more time to cope and recover. The remaining 17% are requesting for restructuring with refinancing.

MFIs as essential service amidst COVID

Based on data from the Bangko Sentral ng Pilipinas, microfinance is a PhP335 billion industry as of September 2019. There are currently around 159 rural banks, 3,881 credit cooperatives and 2,861 microfinance NGOs in the Philippines. SEDPI estimates that there are approximately 8 million low income households in the Philippines.

MFIs are frontliners in the delivery of financial services to low income groups who find it difficult top open deposit accounts and access loans from commercial banks. They now face the challenge of extending financial services to their clients and the demand for liquidity due to the impact of COVID-19.

Microenterprise closures

The percentage of closed microenterprises is 69% shooting up from 41% the previous week. This may be due to the increasing number of those who received cash assistance from the government. Recipients increased from 11% the previous week to 48% this week.

With the cash assistance, microenterprises were able to afford and chose to stay home to observe quarantine measures closer to avoid the spread of COVID-19. Almost all or 94% were able to receive relief goods from the government which was only enough to last from 1 to 4 days since the lockdown started.

Containing COVID-19

This week there were no reported suspect, probable or confirmed case of COVID-19 among the respondents, an improvement from the reported 2 suspect cases among the respondents last week. Perhaps this is a clear indicator that the quarantine measures are working and the government is succeeding in flattening the curve.

The tradeoff of this positive impact is the undeniable negative effect to microenterprises. The research shows a ray of hope that rebuilding and recovery may happen faster if the right support to microenterprises are provided at the right time.


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