Previously, I have talked about how our society’s institutions (Academia, Religion, Government and Big Business) have allowed itself to be corrupted by the elite, to the detriment of the poor and middle classes. One of the biggest problems the poor is facing today is the lack of access to capital, as a result they have no hope of pulling themselves out of their poverty.
My proposed solution to uplift the poor is the establishment of Micro-Lending Institutions that will provide micro credit to the rural poor. According to Grameen Banking, “Microcredit is the extension of small loans to enterpreneurs too poor to qualify for traditional bank loans.”
Micro-Lending institutions should be based on the Grameen Banking Method method, but should be specifically tailored to the Philippine context to ensure the program’s success.
I feel that providing the poor capital is not enough to uplift them from poverty. There needs to be vigorous education and mechanisms in place to make sure that participants in micro lending programs make use of the funds efficiently and re-orient their behavior (culture) to enable wealth creation.
The key ingredients to self-reliance are education on business skills, mechanism to re-enforcement of positive behaviors and mechanism to provide dis-incentive for negative behaviors.
Education on business skills:
Participants (micropreneurs)should be required to go through business skills training prior to receiving their micro-loans so that they will have the skills necessary in running a small business. Business skills training will the concepts of basic accounting such as operating expense (pang-ikot), liability (utang), equity (puhunan), profit (kita), flow back capital (kita na idadagdag sa puhunan), etc. Most business professionals take these skills for granted, however, micropreneurs will find these skills invaluable in their businesses. After learning these concepts, participants will have the skills they need or a least a basic framework to run their business.
Also, there should be vigorous education on planning one’s family that will include artificial contraception. Let them know that the more children they have the harder it is for them to provide for them.
Mechanism to re-enforcement of positive behaviors:
Economic Planning Sec. Romulo Neri said the Philippines's savings rate, or gross domestic savings as a percentage of gross domestic product (GDP), stood at 24.7 percent.
This lags behind neighbors Thailand's 30.5 percent, China's 38.7 percent, Malaysia's 41.8 percent and Singapore's 44.2 percent.
The amount of lent to participants will be based on the percentage of their savings. This way, participants will develop the habit of saving. The more you save, the more you can borrow, thus rewarding positive behavior. I would surmise as participants learn how to save, the less they spend on gambling, drinking, smoking etc. and other unnecessary purchases.
Mechanism to provide dis-incentive for negative behaviors:
In any business transaction, there needs to be an environment of trust. It is essential that participants and the micro-lending institution can trust each other. Participants who are delinquent in paying back loan amounts will be tracked by the micro-lending institution. The delinquent participants will be prevented from using the services of the micro-lending institution in the future. Not only that, a listing of delinquent participants will be circulated to all microprenuers of the lending institution; this will be a warning to the other members have not to have business dealings with the delinquent participants as they are not trustworthy.
Of course a mechanism will be in place to distinguishing between participants who have fallen into hard times and those that are plainly not trustworthy.
I firmly believe that if we help enable the poorest of the poor to lift themselves up, we would have done our nation a big service. A bottom up approach to solving poverty in the Philippines will be the most effective as the poor has the most to gain and should be more motivated for things to change. You see, we need to change how we do things, but we must enable people to work and live smarter.