On our way to the MRT we stumbled across a Chinese Zen temple and decided to take a look:

After we fully explored all the hidden corners of the zen temple, we ambled back out to Manila’s busy streets and came across – of all things – a MASONIC TEMPLE.

A more pleasant surprise was these adorably crafted bread-pigs that I noticed in a bakery window

Since Mary and I were able to meet up in Manila because of Bonifacio Day – a public holiday in the Philippines – it seemed appropriate to snap a quick pic of Bonifacio himself at “Liwasang Bonifacio” plaza.

At Intramuros, we spent quite a bit of time in the Manila Cathedral. I was surprised to see a copy of Michelangelo’s “La Pieta” there – we later learned that this was one of the few authorized copies made from the original, and it was gifted to the Cathedral after the hurricane floods in Luzon last fall?

After our visit to the cathedral, we took a short but enjoyable kalesa ride in Intramuros…

And after we finished our wanderings for the day, we headed back to the Paco Park Oasis Hotel. The courtyard pool (with wifi access) was one of the best things about this mo- I mean hotel!

But definitely what I enjoyed most about Manila was being able to learn more about the history of the city and the country through the sights, especially with the help of Mary’s friend Voltaire – and of course, hanging out with Mary and getting to know her better. I didn’t do a particularly good job of capturing this through my photos, but I’ll always cherish the memories from this Manila trip as it turned out to be a real learning experience! To better understand the essence of the Philippines, I believe a visit to Manila is really a must

Sari-sari (variety) stores are really common amongst HSPFI borrowers in the Philippines; they come in all sorts of different shapes and sizes, from a small window display in the back of a home to neat standalone buildings on the side of a street.

One of the things that I was really surprised to learn as a Kiva Fellow is that sari-sari store owners need to obtain a permit in order to operate. One of the last Kiva borrowers who I interviewed in Valencia City happened to be a sari-sari store owner herself, so I asked her to go into more detail about the process of obtaining a sari-sari store permit.

In order for her to get a permit, this Kiva borrower explained, she had to start at the barangay hall in the village to apply for barangay clearance. Currently her business is still under probation, as she’s only had her business for a year – so the barangay will continue observing her business for a while longer. She also attended a two-day seminar on food handling in February, and expected to receive her seminar certification about fifteen days after completion of the seminar. With the seminar certification in hand, she’ll be done with the second step of the permit application process. She’ll then return to the barangay hall for her community tax certificate, and pay P600 for her permit. She’ll need to pay P600 every year to renew her permit, since barangay officials would close her store after one month if she’s caught operating without a permit.

The process of applying for a permit wasn’t too difficult, she explained, but having to wait for processing to go through for the permit is a bit cumbersome.

Given that sari-sari stores are so common and informal looking, I hadn’t expected that there would be such strict regulations around these businesses. But once I found out, it not only explained my relative luck with regards to (mostly) avoiding stomach problems while traveling around in the field, but also gave me something else to marvel at – how all of these small sari-sari store owners are part of an active business sector, supporting a whole other network of inspectors, educators, and government employees through the fees and taxes that they’re paying. These microfinance borrowers are actively contributing to their own communities in ways that aren’t always apparent on the surface – ways that we don’t often think of.

Support a sari-sari store owner by lending through Kiva today!

The dive shop we went to was small, but bustling – a group of Korean scuba divers had just returned from their dive. We held our breath and asked about availability and rates. The staff informed us that none of the boats were available for the day (generally do people book in advance, oops), but they could commission a boat from another resort to take us out to the marine sanctuary at Olango Island, and we could have the boat for the entire day. Ed and I ended up forking over around P3,500+ for the boat, or about $75 USD for the two of us – not too bad, considering that we walked in last minute. I also summoned enough enough courage to attempt haggling – we ended up getting our snorkeling gear, water and towels thrown in for free. Plus, the boat turned out to be a massive beast that could easily (and probably usually) fit 10, 15 people. Ed and I got on the boat, lounged, read, snorkeled, and felt like a million bucks.

After jumping in the gorgeous clear water and admiring the swarms of fish that had gathered, I climbed back into the boat and was greeted by a mysterious man holding coconuts and shell jewelry, who had apparently boarded our boat while Ed and I were snorkeling. He offered me fresh coconut juice and I made the big mistake of accepting without first asking for the price and assuming that it’d be pretty cheap. So he hacked off the top of the coconut and while I sipped the fresh, sweet juice, he said “And that will be 700 pesos.” And I was like WHAT!? NO. That coconut is not worth $15 USD, even in the States! And I had spent enough time in the Philippines to know that the local going rate for fresh coconuts is under 100 pesos. He insisted that he had muttered the price at me before he opened the coconut for me, but I angrily countered that I hadn’t heard a thing. I was mad enough to really bargain him down hard without feeling my usual pangs of embarrassment, and in the end I think I forked over around P200 for the coconut. He left, shaking his head, and the boat crew that were sailing us around looked at me with… respect? It wasn’t a particularly happy experience, but it did reinforce an important lesson – always, always settle on a price first and never make any assumptions until you know what the agreed upon price is.

Slightly rattled by the experience, I asked the boat crew if they could take us someplace where we can get lunch (as the staff at the dive shop had suggested). They nodded, and we were taken to this row of five or six restaurant-shacks on stilts standing in the ocean, just off shore. So we literally climbed out of the boat, up a ladder and into the restaurant. I wish I had gotten some pictures of Restaurant Row, as it was really quite picturesque.

Unfortunately Ed and I quickly realized that we had fallen from one tourist trap into another. After looking at an impressive array of live seafood in various plastic crates, we picked out some fish, some clams, some scallops. This time we were smart enough to ask for the price first, and got quoted a ridiculously high price – 3,000+ pesos. Ed and I looked at each other and grimaced. I told Ed that apart from not wanting to pay that much money for a meal, especially when we’d been spending around P300 to P400 on fairly posh meals in Cebu, I didn’t have enough cash on me anyways. Ed agreed that the price was ridiculous, and we started to head out. One of the restaurant waiters rushed over to us, lowering the original price quite a bit but still not enough to tempt my slim wallet. So we walked just outside of the restaurant where our boat crew was happily digging into fresh plates of rice and seafood (Ed speculated later that they were probably related to the restaurant owners), and told them we’d decided to not eat at the restaurant – but they should still finish their lunches, since there’s no point in everyone going hungry. To our slight embarrassment they followed us back into the boat fairly quickly, and we motored back to the marine sanctuary again.

After a bit more swimming and lounging, Ed and I decided that we’ve gotten our money’s worth and asked to be taken back to shore. We paid the dive shop, and decided to walk to Magellan’s Shrine, which we had passed on our way over in the taxi. We grabbed a quick bite at a cheap burger stand to satiate our hunger…

…and after an hour of leisurely walking and spontaneous detours, we arrived at Magellan’s Shrine.

Most people know of Magellan’s exploits as a famous explorer, but the fact that he died at the hands of a Philippine native right in Mactan is far less popularized (outside of the Philippines). Both Magellan’s Shrine and Lapu Lapu Monument offered interesting insight into Philippine history and nationalism.

Not only is the park surrounding Magellan’s Shrine filled with aboriginal sculptures and busts -

But Magellan’s death is recorded in detail (and dare I venture, celebrated even) on this marker. The front celebrates Lapu-Lapu’s defeat of Magellan: “Here on 27 April 1521 Lapu-Lapu and his men repulsed the Spanish invaders, killing their leader Ferdinand Magellan. Thus Lapu-Lapu became the first Filipino to have repelled European aggression.”

The back of the marker acknowledged Magellan as a great explorer while (not so subtly) pointing out that Magellan was hindered from completing the circumnavigation of the globe because of Lapu-Lapu and his soldiers.

On this spot Ferdinand Magellan died on April 27, 1521 wounded in an encounter with the soldiers of Lapu-Lapu, Chief of Mactan Island. One of Magellan’s ships, the Victoria, under the command of Juan Sebastian Elcano, sailed from Cebu on May 1, 1521 and anchored at San Lucar de Barrameda on September 6, 1522, thus completing the first circumnavigation of the Earth.

Overall, I really enjoyed my time in Cebu – the landmarks, the history, the modern amenities. But at the same time, Cebu was the one place in the Philippines where I felt horribly conspicuous as a foreigner – someone who’s very rich and could be easily taken advantage of by almost any local, from taxi drivers to restaurant owners. Maybe this is because Cebu is a big tourist hub for wealthy foreigners, but I had gotten used to blending into the crowd in Cagayan de Oro – generally not too difficult for me as a Taiwanese person. So while I’m glad to have experienced Cebu and would definitely recommend a visit to anyone who hasn’t been there yet, there’s no denying that Cebu dealt me both ups and downs on this trip.

Ms. Leilita Esparagoza is the owner of Esparagoza Store, a sari-sari (variety) store in Valencia, Bukidnon. Sari-sari stores abound in the Philippines – it’s one of the most popular businesses for HSPFI clients – but it quickly became clear that Leilita is no ordinary sari-sari store owner. As we sat down in front of her store for the interview, I found myself almost mesmerized by her clear, patient voice. She not only had a compelling story, but she also knew how to tell her story well. Leilita was one of the most self-aware and reflective HSPFI borrowers that I had the good fortune to interview in the Philippines – so much so that I wanted to do a more extensive “press profile” interview with her. Unfortunately when we returned to her store later she had left for the afternoon to take care of errands. So I’m sharing her story here instead

Leilita shared that when she started her business with a small sari-sari store nine years ago. She became a wholesaler for Coke in 2002, and started peddling soft drinks around the local village with just a bicycle. As her business grew, she graduated to peddling with a motorela and started selling soft drinks in other nearby villages. By 2009 she was an exclusive wholesaler of Pepsi products, selling over 1,000 cases of soft drinks a month. Pepsi observed her business success and gave her a blue multicab (or small pick-up truck) as a reward, which helped further her business. The multicab parked in front of her store was an impressive sight indeed, as it was stocked high with piles of Pepsi cases waiting to be distributed.

Impressed, I asked her what the secret to her success was. Leilita smiled and replied that she understands the mood of her customers – so she can put herself in their shoes and handle any situations that may arise. She also discovered the need to be humble and patient, because it takes time to build up a business. Leilita added that she always makes sure that the individual customers could afford to pay the amount for items, as she offers her products for credit that’s good for two days only.

Going forward, Leilita wants her children to finish their studies. This year, Leilita said, she hopes to diversity her inventory to include other Cola products like RC Cola, so she can increase her income. She plans to expand her business until it offers all the products that her customers could need – so that her business can be a one-stop store for her customers.

Having seen how far Leilita has come, her business saavy, and her personal drive, I have no doubt that she will succeed.

Complete with many landmarks commemorating the landing (and death) of the great European explorer Ferdinand Magellan, the weighty layers of history made themselves felt as I walked through the streets of Cebu. In a way Cebu is like a mash-up of Boston, for the history, and Miami, for the beautiful beaches nearby and modern amenities – including the biggest SM City mall in the Philippines, as my HSPFI co-workers informed me. You really can’t ask for any better than that.

Unfortunately the weekend started off on a slightly traumatic note, as our taxi arrived at Magellan’s Cross and was immediately surrounded by a crowd of child beggars. The taxi driver did his best to shoo them away, but we ultimately had to brave wading out and through the crowd as the kids followed us and begged for money. I wished there was a prescribed action that one could take when facing child beggars – we didn’t give them any money, but I felt horrible about myself anyways. Elizabeth Gilbert wrote a particularly compelling passage in her latest book Committed about her encounter with child beggars in Cambodia:

I picked up my pace and walked faster toward the hotel. The crowd of kids tagged behind me, around me, in front of me. Some of them were laughing and blocking my way, but one very little girl kept pulling at my sleeve and crying out, “Food! Food! Food!” By the time I neared the hotel, I was running. It was shameful.

So much of my experience as a Kiva Fellow in the Philippines was about poverty – but somehow nothing I’d experienced before made me feel quite as shocked and ashamed as being surrounded by all those child beggars in Cebu.

By the time we made it to Magellan’s Cross, the child beggars had scattered – probably because there were security guards posted by most of Cebu’s tourist attractions. So Ed and I admired the cross, as a sign underneath proclaimed that “the original cross planted by Ferdinand Magellan on this very site April 21, 1521″ was encased in the visible cross of tindalo wood.

We then wandered over to the Basilica of Santo Niño, which was just a short five-minute walk away from Magellan’s Cross.

There were lots of visitors in the Basilica, but the church still exuded an atmosphere of peace. The courtyards I found to be especially beautiful and serene.

Ed and I ambled out of the Basilica…

…and I asked if he’d be interested in walking back towards a big, interesting-looking sculpture we had passed in the taxi earlier on the way to the Basilica. I had seen it in some sort of promotional image for Cebu, and thought it must be another famous landmark. It was a hot morning, but Ed gamely said yes and we proceeded down the streets of Cebu, walking past another beautiful stone church on the way.

Turned out that the sculpture I had saw was the Heritage Monument in Parian Park.

The pride, unity, and cultural wealth of a race emanate from a people’s sense of self and history; from the early Filipinos, to the dawn of European colonization, the revolution of 1896, the birth of the Philippine Republic. The heroic contribution of the Cebuano people and the saga of events, which transpired on the islands of Cebu, are vital elements in the formulation of the nation we know today

The adventure continues on Day Two in Cebu…

Corroi kept trying to get a good picture of the Kalatungan Mountain Range, because she explained that the mountains were shaped in the form of a “sleeping lady.” Unfortunately the focus was kind of hard to get right from the bus, but she still managed to get some pretty good pictures of the mountains.

Quote wiki: “Bukidnon is considered by Filipinos to be the food basket of Mindanao. It is the major producer of rice and corn in the region. Plantations in the province also produce pineapples, bananas and sugarcane.”

I loved seeing all this lush green. Traveling in the field was my favorite part of the Kiva Fellowship, partially because there’s so much beautiful scenery to take in.

Corroi lamented the fact that I would miss Bukidnon’s famous Kaamulan Festival by about a week. She explained that the festival celebrates the seven tribes of Bukidnon. People would gather in Malaybalay, and there would be lots of street dancing and good food. Foreigners like to visit Bukidnon during Kaamulan to observe the festivities, Corroi added. Since I’d be missing out on all the good times, she took care to snap a picture of this arch that was going up in preparation for the festival.

The bus stopped by a bus/jeepney depot to drop off and pick up more passengers…

Corroi was particularly taken by the orderly display of this stand at the terminal.

Then we were back on the road again…

And Corroi managed to sneak a few more pictures in before the sky went completely dark and my camera’s battery died. She was particularly keen to get some pictures of the Kitanglad Mountain Range. Mt. Kitanglad is the second highest mountain in the Philippines and home to the endangered Philippine Eagles. Corroi had fixed the Philippine Eagles in my mind by telling me about how a local Filipino was arrested and tried for hunting and eating an eagle, not knowing that it was a precious national bird. But I guess that’s another story for another day

Imagine you’re a loan officer who’s working for one of Kiva’s partner MFIs. You’ve been traveling around the field, collecting repayments from quite a few clients over the course of the day. It’s getting late, and you’ve amassed a huge amount of cash – the equivalent of a few months’ worth of income for locals. As the sun begins to set, you realize you’re still at least an hour away from the office – an hour’s worth of travel on your motorcycle, over rough roads that are poorly (if at all) lit. What do you think could happen next?

When I ask HSPFI‘s loan or project officers what they find most challenging about their jobs, they always say repayments. Not just because all the hours spent traveling to get to clients is rough and arduous, but because project officers make tempting targets for robbers and thieves as they carry huge sums of cash repayments back to their MFIs. One of the HSPFI project officers who I met was actually robbed at gunpoint in broad daylight. At around 10AM in the morning, the project officer found himself confronted by a robber with a gun and was forced to hand over all the repayments he had collected. Shocked and confused, the project officer went home before heading to the police station to report the crime.

HSPFI project officers are generally fairly philosophical and accepting of the dangers that comes with this line of work (“It is a part of our job and duty… it is an experience.”) But still, it took me some time to digest the fact that many of the project officers who I’ve met and come to respect are quite literally putting themselves in danger every day. Not only are project officers potential targets while they’re on the road, but they can also come under fire from clients or clients’ families. One such encounter involved a project officer and a client’s drunken knife-wielding husband. Luckily no one was hurt, but I don’t think that project officer managed to collect the client’s repayment that day. (This also made me realize that there was another practical reason as to why MFIs tend to target women borrowers – most women are probably less prone to threatening MFI loan officers with weapons or other dangerous household objects.)

What do you do? I pressed. What do you do under these circumstances? After all, as one HSPFI project officer told me, it’s not like we can carry guns with us. Another project officer who’s worked for over thirteen years with HSPFI shared that she tries not to react in difficult situations where she is being provoked by angry clients. You do not react, just do your part. And smile. Smile on the outside even though it’s hard on the inside. She added that most people will usually cool down with time; some clients have felt so ashamed of their outbursts that they’d visit the office and apologize to her.

There are also other strategies that project officers can employ to help reduce their personal risk. Project officers at one of HSPFI’s branches would travel in a group to a particularly remote village, setting out early in the morning on their motorcycles to visiting several villages on the way, and returning to the office after night has fallen – trusting that there is safety in numbers. HSPFI has also taken steps to help ensure the employees’ safety – project officers do not carry cash and give out disbursed loans to clients at their centers or their homes. Instead, clients visit HSPFI branch offices to receive their loan checks. I had guessed the reason behind this policy (as I’m sure you have as well), but I asked why anyways. It was because the risk for project officers carrying all that money one-way was already so high, HSPFI couldn’t risk doubling the danger to project officers by asking them to carry funds to AND from the MFI.

Most of all, project officers tell me that they pray. HSPFI staff pray that God will protect the project officers and ensure their safety while they’re working in the field. Next time you receive your repayments from Kiva, I hope that you can send a thought (or a prayer) to the hardworking MFI loan officers, who are working in difficult and dangerous environments to make sure that your money gets repaid!

Eva Wu has already finished her placement in the Philippines, but she crammed so much field traveling in her last few weeks that she went home with a bunch of stories left to share. She plans to linger on for a bit longer until she’s caught up with her Kiva Fellow duties here and on her personal blog. In the meantime, support HSPFI by joining the HSPFI lending team!

Having read Meg’s excellent blog post “Bad Roads, Interest Rates, and MFI Sustainability” and the ensuing comments from Kiva lenders, I admit that I was rather baffled. Particularly by comments that varied upon the theme of: “In the U.S. you can get loans for ~8%! You can get credit for 18% interest, which we find high and oppressive! So how can MFIs charge 36% interest rates on loans to their poor clients, it is usurious, it can’t be justified…” so on and so forth.

I believe that if you were to plunk a U.S. bank into a developing country with limited infrastructure, where most clients don’t have ready access to the internet that lets them transfer money from one bank account to another with the click of a mouse, where you have to ask employees to constantly risk their personal safety by carrying huge amounts of cash over uncertain roads and territories, those banks would not be charging 8% interest or even 18% interest, but a much, much higher rate.

Still not convinced? Let’s try a quick breakdown of some actual numbers -

HSPFI, my host MFI and Kiva field partner, charges 3% interest a month on loans. So for a first-time borrower with a loan of P5,000 to be repaid over 5 months, in one month the HSPFI borrower would be paying back P1,000 on the capital, and P150 in interest. (The current exchange rate is 46 Philippine pesos to 1 U.S. dollar, so the USD equivalent is $21.74 in capital, and $3.26 in interest.)

The P150 interest collected on that loan covers salaries and benefits of not just the project or loan officers who collect the client repayments on a weekly basis, but also the salaries of admin staff members like the branch cashier, accountant and assistant accountant, as well as the branch manager. Let’s say our first time borrower lives in Camiguin. For HSPFI’s Camiguin Branch (which is HSPFI’s smallest but one of its most efficient branches), total salaries and benefits for their five staff members (three project officers, one admin staff, and one officer-in-charge/branch manager) in January 2010 came to roughly P27,500 (or $598 USD).

Apart from the salaries and wages of the branch staff, the P150 interest will also go towards salaries and benefits of the Head Office staff – HSPFI’s Executive Director, Director of Operations, HR staff, tech staff, community development staff, internal auditors, Kiva Coordinator(!), etc. – as well as Head Office’s administrative costs (for printing, office supplies, utilities, trainings and conferences…). Unlike the branches, HSPFI’s Head Office does not give out loans or collect interest from clients, so the branch offices make monthly contributions to help cover Head Office’s costs. HSPFI Camiguin Branch contributed P53,400 (or $1,161 USD) in management fees to Head Office this past month.

Still with me? Remember that our first time borrower is paying P150, or $3.26 USD in monthly interest on his or her loan of P5,000. But salaries and wages are hardly the only things that a functioning MFI has to pay for. Camiguin project officers spent about P4,500 (or $98 USD) on travel this past month. And to round out the estimated operational costs, total administrative expenses for necessities like utilities, phone, office supplies, rent, taxes/licenses, etc. for the branch came to about P26,150 (or $568 USD).

Note that this is PARTIAL operating costs for HSPFI Camiguin. Kiva is not HSPFI’s only (or biggest) funder by any means, and other funders (e.g. Oikocredit, SEAD, PCFC, SBGFC) actually do charge interest on loans to HSPFI. I left that line item out of the above calculations for the sake of argument that Kiva’s funds are interest-free, but if I were to add that line item in Camiguin’s operational costs would increase by about P49,800 (or $1,082 USD).

By now you’re probably tired of me repeating that our first-time HSPFI borrower is paying P150, or $3.26 USD in interest this month on his or her loan of P5,000 – 0.13% of operational costs. Surely you have to account for repeat borrowers who have taken out higher loans and are correspondingly paying higher interest fees. So if we increase the loan amount to P30,000, our now long-time, repeat HSPFI borrower would be paying P3,000 on the loan capital and P900 (or $19.57) on interest this month – 0.8% of operational costs. This P900 definitely goes farther towards contributing towards operational costs, but note that borrowers with P30,000+ loans only make up about 10% of HSPFI’s total portfolio.

The above is very condensed and much abridged, to keep this post from being three times as long. But by listing out all these figures, I wanted to show that running an MFI is not cheap. It’s easy for us to condemn 3% monthly interest rates are high, but it’s just as easy for us to forget that staff, utilities, rent and a whole range of other operational expenses need to be paid in order for an organization – any organization – to run.

Also, working conditions for MFIs in developing countries are very different from banks in developed countries. This may seem like huge duh point, but it bears pointing out that MFIs’ operational costs are high in part because you need enough project officers to visit hundreds of clients every week and collect cash repayments, and you need enough admin/other staff to support the project officers. U.S. banks don’t need employees to visit every one of their clients on a weekly basis to collect repayments. Furthermore, banks in the U.S. have access the excellent technology/infrastructure in place that allows for automated payments (and greater automation in general) – which helps keep interest rates low. To say that MFIs in developing countries have “high” interest rates in comparison to banks in developed countries with “low” interest rates ignores the fact that banks in developed countries have certain operational advantages that MFIs in developing countries don’t have, and need to compensate for.

At this point maybe some of you are thinking, “I don’t really care about MFIs needing to cover operational costs, I only care about how this 3% monthly interest affects Kiva borrowers!” Leaving aside the fact that there would be no Kiva borrowers without field partner MFIs, I had previously met a Kiva borrower who decided to stop borrowing from HSPFI, and I know she’s not the only person to have ever done so. The interest rate might have been a factor behind her decision to stop borrowing, although there might’ve been other personal factors as well.

But on the other side of the spectrum there are Kiva borrowers like Ms. Mellianita Moron. Since this topic of “high” interest rates had been weighing on my mind, I brought it up during her interview. I explained that businesses in the U.S. can get loans at much lower interest rates, so there are Kiva lenders who are worried that MFIs like HSPFI are charging overly high interest rates to borrowers in the Philippines. I asked what she thought about HSPFI’s interest rate – was it indeed too high?

HSPFI’s 3% monthly interest rate is ok! Mellianita exclaimed. Especially in comparison to other MFIs who she had borrowed from that charged 10% interest a month! And to top it all off the other MFI collects repayments on a DAILY basis, in comparison to HSPFI which collects repayments on a weekly basis. When I then asked if there are any additional services that she would like to see from HSPFI, Mellianita laughed and said that she wished HSPFI could increase loan amounts and release more loans at a faster rate, so she won’t have to borrow from MFIs that charge truly exorbitant interest rates and can just borrow from HSPFI. I looked around at the various center members and extended family who had gathered outside Mellianita’s sari-sari store to watch (and occasionally interject), as they all nodded their heads in agreement.

Eva Wu would like to thank HSPFI for generously allowing her to use figures from their latest financial statement in this blog post. She has lots of thoughts on the (unsexy) topic of MFI interest rates, but hopes for now that people can understand that asking why MFIs in developing countries can’t offer interest rates as low as banks in developed countries is a bit like asking why apples can’t be oranges. Or to use a more Filipino analogy, why lanzones can’t be rambotan.

I was just two days off the plane and back in the Philippines when I heard that HSPFI’s 2009 Q4 Project Officers Meeting would be taking place the next day. I really wanted to make something for the POs as a small token of thanks, so I threw a video together and showed it the next day to whoops and cheers. I actually think this is the best Kiva/HSPFI video that I’ve edited to-date, so I was really glad to see it well-received.

A bit of context – the first part of the video is mostly made up of footage from the HSPFI 2009 Staff Christmas Party. The day kicked off with gift exchanges and team-building/general bonding activities at a nearby resort; the night activities took place in the HSPFI office and consisted of a big delicious dinner and the HSPFI staff dance competition (and videoke/impromptu dancing). Having seen how hard HSPFI staff works on a regular basis, it was really cool to see the organization give back to dedicated staff members on the ground with a kickass Christmas celebration.

(Video Background Music: Allison Crowe – “Immersed” and “Midnight”, available on Jamendo.com)

Other footage used in the video were taken from the 2009 Q3 HSPFI POs Meeting & After-Party; Iligan Branch’s 15th Anniversary and 2009 Client Christmas Party; and Gingoog Branch’s 2009 Client Christmas Party. I also threw in some of my favorite photos from various branch visits/field travels with awesome HSPFI POs.

Enjoy

As a Kiva Fellow, I’ve seen the successes. I’ve visited businesses and interviewed clients who have succeeded because of microfinance. These borrowers were able to grow their businesses that not only provide the owners with a comfortable living, but also provide additional livelihoods for hired employees. Abhijit Vinayak Banerjee and Esther Duflo of M.I.T, and Dean Karlan of Yale wrote in their New York Times op-ed “The Role of Microfinance,” microcredit is generally viewed as either “transformative” successes, or “ruinous” failures. Having seen the former, I believe that much of the latter is caused by over-high expectations – that poor people all over the world would be lifted out of poverty through lending. When recent research failed to support this concept of global poverty alleviation, people started to lose faith in microfinance.

Again, from “The Role of Microfinance” (which I highly recommend reading if you haven’t already):

…as we see it, microcredit seems to have delivered exactly what a successful new financial product is supposed deliver—allowing people to make large purchases that they would not have been able to otherwise. The fact that some people expected much more from it (and perhaps they are right, may be it will just take longer), is perhaps inevitable given how eager the world is to find that one magic bullet that would finally “solve” poverty. But to actually blame microcredit for not promoting the immunization of children is no different from blaming immunization campaigns for not generating new businesses.

Microfinance is a tool, like a hammer. Some people have natural creative skill with a hammer, whereas others have to invest some time in learning how to put the hammer to best use. Still others might decide that they don’t like using the hammer at all and opt for another tool. Overall though, has the hammer made people’s lives easier? Yes, it has – so it is a successful tool. Can a tool like microfinance be transformative? Yes, for some people. Should the tool be completely discarded (or discredited) because it does NOT transform the lives of everyone? No, definitely not.

In a previous blog post “The Savings Behind the Interest” I had written that the microfinance arena in the Philippines is crowded with players, and that there are a lot of microfinance institutions jousting for clients by offering a variety of attractive programs apart from loans. My host MFI HSPFI for example offers savings, insurance, business training, a small competitive scholarship program for clients’ children, as well as community development initiatives. Other Kiva partner MFIs in the Philippines also have a similar array of programs, as several Kiva Fellows have shared. In other words, if you take product diversification and competitive commercialization as indicators of maturity, the Philippine microfinance industry has clearly “come of age” – largely to the benefit of microfinance borrowers.

To be honest, I believe that most microfinance critiques focus mostly on the effects of lending to the poor. Many other programs like savings or insurance offered by microfinance institutions are ignored, so the critics are out of step with the maturing of the microfinance industry. Case in point – much of the recent public fallout over microfinance was fueled by randomized control trials (RCT) that measured the short-term impact of microcredit on clients, and most of those studies found no evidence of microcredit bring about a transformative improvement in household income or consumption. However, in “Does Microcredit Really Help Poor People?” Richard Rosenburg of CGAP noted that “Interestingly, the only RCT study of microfinance so far that found short-term welfare improvements looked at microsavings, not microcredit (Dupas and Robinson 2009).”

It’s important to remember that “microcredit” or lending is part of a suite of services that makes up “microfinance.” Especially in areas of the world with a mature microfinance industry (like the Philippines), microsavings is a part of microfinance. When you’re making a loan through Kiva to a Filipino borrower, it’s safe to assume that many of those borrowers are utilizing additional programs from partner MFIs in the Philippines, and are receiving other benefits that branch out beyond the loan itself.

Returning to my original question – does microfinance really work? The pragmatist in me says yes – but not in a magical transformative way for every poor person, while the idealist in me adds that the successes would mount if all the other microfinance programs offered by MFIs were taken into account. Rosenburg wrote in “Does Microcredit Really Help Poor People?” that, “For now, it seems an honest summary of the evidence to say that we simply do not know yet whether microcredit or other forms of microfinance are helping to lift millions out of poverty… [but] poor people think this ‘palliative’ is enormously important in helping them deal with their circumstances.” Even as we in the developed world throw up our hands and bemoan the ruinous effects of high interest rates, etc. the poor believes that microfinance has helped improve their lives and are “voting with their feet.” And that, really, is the most important thing.