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Update 2: Community assessment and recommendations for support to microenterprises and the informal sector during and after COVID-19

SEDPI is a group of social enterprises that provides capacity building and social investments to development organizations and directly to microenterprises. Today, I will share to you the community assessment we conducted first when the community quarantine started on March 14; and an updated community assessment we recently concluded yesterday – two weeks after.

We serve 6,600 microenterprises in Agusan del Sur and Surigao del Sur, two of the poorest provinces in the Philippines. Most of our members, about nine in ten, are women with an average age of 42. These women are typically into vending, farming, fishing, dress making, selling food and livestock bakyard raising.

Community assessments

SEDPI conducted community assessment research with its members on March 15, March 30 and April 5 through rapid survey via text messaging and calls with our members.

In conducting quick community assessment to determine the economic impact of COVID-19 to our members, we asked them whether their business was unaffected, weakened or stopped. We also asked if they or or any of their family experienced symptoms of COVID-19. The tables show the results of our survey.

March 15 community assessmentMarch 30 community assessment

All microenterprises were negatively affected due to COVID-19. With families having to stay home, the percentage of microenterprises that stopped operating because of community quarantines increased from 34% during the first week to 51% in the second week.

The decrease in microenterprises reporting that their livelihood weakened from 66% in the first week to 49% is the second week meant that those who experienced weakened livelihoods on the first week were eventually forced to stop operations.

Many livelihoods have been affected due to the following:

  • Inability to buy supplies to keep their business going
  • Traveling is difficult because some barangays prohibit entry of non-residents; and other can’t go to work since place of work is on locked down
  • Few to no buyers of goods and services because schools and business operations are closed
  • Few to no transport vehicles because of the lack of passengers
  • Delay in salaries of spouse or other household earners

During the March 15 and 30 community assessments, none of the members were persons under investigation nor persons under monitoring. On April 5 community assessment, 2 members were reported as persons under investigation from Rosario branch.

It is important to have quarantine measures to contain the spread of the virus. However, it is also important to consider the well-being of most low-income groups and provide them enough economic support and social safety nets.

The sudden implementation of quarantine is difficult for microenterprises. Many of them earn only enough to meet their daily needs and are living a hand-to-mouth existence.

April 5 community assessment

The April 5 community assessment focused on assistance of government to microenterprises. Ninety percent (90%) have not received cash assistance and 57% have not received any relief goods from the government. Most of the members or 82% also expressed that the PhP5,000 monthly cash assistance is not enough to cover their household needs.

So what happens now?

It is important that emergency relief is distributed to families and make sure that there’s enough food on the table. Microfinance institutions (MFIs) can do this efficiently and almost instantly as shown during the relief operations of Typhoon Yolanda. MFIs could be tapped to distribute relief goods to avoid red tape and patronage politics.

SEDPI started moratorium of loan collections since March 14. We’re also taking this opportunity to shift from conventional microfinance to social microfinance. We will transform all loans we extended as capital to our members and treat them as business partners rather than maintain a creditor-debtor relationship.

This strategy is very similar to Islamic finance and we’re trying to adapt more inclusive financing strategies to our members. We will no longer be charging interest rate but a fixed service fee to capital contribution through joint ventures with our members.

We would also like for government and development organizations to use microfinance inatitutions as conduits for unconditional cash transfers to avoid red tape, patronage politics and corruption. Microfinance institutions are rooted well in communities and have vast network to penetrate areas suitable for distribution of government assistance as well as for information dissemination.

IRR on Bayanihan Act Section 4 (aa)

Ateneo-SEDPI released a position paper appealing to government to revise the Section 3.01 IRR of Bayanihan Act Section 4 (aa). The republic act clearly stated that during the quarantine period, grace period shall be extended to all loans without incurring interests, penalties, fees, or other charges.

However, in the IRR, this was revised to the grace period shall be extended to loans without incurring interest on interest, penalties, fees, or other charges. This means that interest will still accrue during the quarantine period.

If the IRR prevails, microenterprises and the informal sector with loans from MFIs, will still have to pay interest during the quarantine period even though they could barely survive the effect of the pandemic. Most MFIs source their funds from commercial banks and will also have to pay interest when they already declared collection moratorium and no interest accrual.

The IRR unduely puts additional burden to low income groups. That’s why the position paper appeals to the government to revert to the intent and spirit of the republic act.

Mass testing

The intention of the quarantine is to prevent the spread of the virus. However, if mass testing is done, this could be lifted and mobility restored to jumpstart the economy.

Microenterprises and the informal sector should be provided with free testing services to make sure that transmission in low income segments are prevented and managed properly. Local government units should have isolation areas for PUIs and PUMs to prevent spread of the disease in poor communities that do not have proper isolation areas.

What happens after the community quarantine?

April 5 community assessment

Most of SEDPI members or 78% 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. A few or 5% need work as source of income.

The request for cash assistance to restart livelihoods should be coursed through MFIs to eliminate dole out mentality. The cash assistance should be given, at the minimum, as 0% loans.

The government should infuse capital in the form of equity to MFIs to fund the cash assistance. MFIs will eventually pay this back to the government as cash assistance once microenterprises repay back. SEDPI strongly suggests moving away from debt-based development assistance since interest will ultimately be passed on as additional burden to microenterprise and informal sector clients.

This strategy is similar to the bail out 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 microfinance institutions that directly help those at the bottom of the pyramid.

Government and development organizations should provide pay for work programs to spur local economic development. It would also be good for SSS and Pag-IBIG to make their calamity loans zero percent since these are drawn from the personal contribution of members anyway.

Improving greater access to government welfare and services

It is also important to focus more on financial inclusion to make sure that bank accounts are opened for all low income fanilies so that they can easily access cash transfers and cash relief in times of disaster. This will and ensure that funds truly land in the pockets of low income groups and could potentially reduce corruption and patronage politics.

In relation to this, even more basic is to streamline processes for low income groups to get government identification documents such as birth certificates, marriage certificates and licenses. This pandemic highlights that access to basic services starts with identity.

It is also high time to have universal disaster insurance since the Philippines ranks high in the World risk index. This will make us better prepared for disasters and pandemics in the future.

Channeling resources to help microenterprises and the informal sector will make our nation better poised to recover faster from the negative effects of COVID-19.


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