Lending to someone who may not pay you back

03 December 2006

By Ephraim Aguilar
Legazpi City

HOW CAN YOU LEND MONEY TO a poor man if you know there is no guarantee he can pay you back?

The Simbag sa Pag-asenso (Res-ponse to Progress) Inc., a lending institution benefiting 20,756 households in over 500 villages in Albay and Camarines Sur, has an answer to this question.

It started as one of the poverty alleviation programs of the Social Action Center (SAC) of the Diocese of Legazpi here, called the Socio Economic Development Program (SEDP), until it became a separate institution under the name “Simbag sa Pag-asenso” in January 2003.

The institution does not only help villagers finance their small businesses and expand them but also offers other services such as training in advanced business entrepreneurial skills, leadership and project management.

Its members also undergo spiritual and values formation training.

Carmen Orlin, 33, of Barangay Mauyod in this city used to live with her family in a nipa hut with a sari-sari store, she put up with a P1,000 capital.

Orlin then heard of Simbag sa Pag-asenso and became member in March 2003. She borrowed P5,000 for additional capital.

Now, she can loan up to P25,000 through Simbag’s “asenso loan,” given to members who have faithfully undergone the training of the institution and have performed well as a member.

“Before I joined SEDP, I had a smaller capital and there were only very few items I could sell in my store,” Orlin says. “The SEDP was like an answer to my prayers.”

She says the training being conducted by SEDP Inc. played a great part in the growth of her business.

“All I knew before was simple arithmetic,” Orlin said. “I have been trained to be more organized and more careful in managing my business. That is why I always give priority to all our meetings and training.”

Orlin says, the success of a thriving business does not solely depend on the capital. It still greatly depends on the hard work of its owner.

Orlin was brought up in a business-minded family and was trained, in the public market, where their family ran a stall during her high school and college years.

“I had not just seen but also experienced how hard it was to run a business when I was still young,” Orlin says. “My parents have also set me a good example.”

Banking strategy

The SEDP Inc. is a pioneering institution modeled after Grameen Bank of Bangladesh.

Grameen Bank is a microfinance organization that makes small loans, known as micro-credit, to the impoverished without requiring collateral.

The system is based on the idea that the poor have skills that are under-utilized.

The bank also accepts deposits, other services, and runs other several development-oriented businesses.

The organization and its founder, Muhammad Yunus, were jointly awarded the Nobel Peace Prize this year.

Fr. Jovic Lobrigo, chair of the board of SAC-Legazpi, says the foremost challenge they face in poverty alleviation through the SEDP Inc. is dealing with the mindset of many Filipinos, that they have no opportunity to improve their lives.

He adds that others have asked him why the institution lends money to those who do not have the means to pay back the loan.

He says SEDP Inc. is more than just a lending institution—while it provides financial assistance to the poor, it also teaches them to be good stewards of money.

Emerson Moral, executive director of SEDP Inc., says they saw microfinance only as one strategy for social transformation, and that they were after quality over quantity.

Bigger visions

Lobrigo says 15,000 household beneficiaries of the institution already have Philhealth access. SEDP also supports 75 student scholar in Bicol. The institution now has 152 staff members assigned in 13 branches.

These SEDP personnel are well-equipped and -trained.

Moral said SEDP, which now has a portfolio worth more than P100 million, is trying to introduce additional services to its beneficiaries. It has also started to expand in areas outside Albay and Camarines Sur.

By 2007, the SEDP envisions to be of help to 25,000 poor Bicolano households, and up to 40,000 households by 2010.

Orlin now has a bigger dream—to expand her sari-sari store, put up a computer and Internet station, and run a copy center right in her two-story concrete house.