N. Perlas, 2 April 2005
The Year 2005 is the International Year for Microcredit.
From its small beginnings in Bangladesh in the 1970s, microcredit has become a
global phenomenon. When Mohammed Yunus facilitated the first microcredit for
economically poor women, he did not realize that he would trigger a global
movement which, among others, would make microcredit one of the key strategies
of the UN Millennium Development Goals.
But microcredit is not enough. Microcredit alone would not
solve the problem of the poverty-complex. In addition to livelihood problems,
persons struggling with poverty also have to face other challenges. Economic
livelihood alone will not enable the poor to develop their full human potential
and their communities.
Poverty has many dimensions, hence the concept,
poverty-complex. The most obvious is the economic dimension: the lack of
jobs, an asset base, low incomes and earnings, deficient market infrastructures
and so on. These economic challenges are aggravated by a policy environment that
is geared to empower the rich, instead of helping the poor. A country’s culture
is often also loaded against the poor, including in the areas of education and
patriarchal norms and behavior. Then there is also the human development
challenge of malnutrition, disease, inadequate housing, and lack of security in
one’s future. And often the poor, especially those in the cities, live in urban
squalor and subject to the toxic effects of pollution aggravated by a lack of
access to clean water and adequate energy. Often the combination of these
challenges lead to a culture of silence and the defeat of the spirit of the
So clearly, while microcredit is a good and important
beginning, it is not enough. Microcredit alone does not address the ecological,
political, cultural, social, human and spiritual challenges that harass the
It is therefore a welcome development when, recently, on
March 31, 2005, the Mindanao Microfinance Council (MMC) passed a resolution
committing its members to pursue “social development”. This resolution
encouraged the 65 institutional members of the Council to expand their service
beyond microcredit to include delivery of health, education, shelter,
infrastructure, insurance, and other forms of services for the poor.
In short, the Council has embraced the idea of strategic
microfinance instead of simple microcredit. Strategic microfinance is a
powerful creative response to the challenge of the poverty-complex oppressing
The MMC resolution is significant. Already the Council has
mobilized several billion pesos in resources to serve over 300,000
entrepreneurial poor in more than 85% of all the towns of Mindanao, with
millions of Filipinos living in this second largest island of the Philippines.
One can already envision the profound impact this new resolution will have when,
together with the poor, the new services become widespread and effective in the
poorest areas of the Philippines.
There needs to be a word of caution, however. In pursuing
strategic microfinance, banks and other financial institutions should learn to
differentiate between an economic project and a cultural initiative. Serving the
educational needs of the poor, for example, is a cultural activity. If a bank
decides to set up schools, then it will lose its microcredit focus and enter
into an area where it has no expertise. In addition, it will risk commodifying
the educational process and subjecting it to purely financial ratios and
profitability calculations. The ultimate result will be the reduction of the
quality of education and, consequently, full human development. (See the related
articles on social threefolding in TruthForce!
To address this challenge, microfinance institutions (MFIs),
including banks, need to develop strategic partnerships with civil society
organizations which are the key institutions of culture. They can partner, for
example, with existing schools and find ways to enter into joint initiatives
that would be beneficial to both and that would ultimately redound to the
benefit of the economically poor. MFIs can also establish similar arrangements
in connection with malnutrition, health, and ecological regeneration, among
This encouraging resolution of the Mindanao Microfinance
Council (MMC) will not be unique. Already, the People’s Credit and Finance
Corporation (PCFC), the largest funder of MFIs in the Philippines, is
encouraging its other partner councils in the four other microfinance
mega-regions of the Philippines to pursue microcredit plus strategies including
social development and ultimately, the even broader framework of integral
sustainable development (ISD). The top leadership of PCFC and MMC requested the
Editor-In-Chief of TruthForce! to introduce ISD as a framework for strategic
microfinance in its recent meeting of partners in Davao City, Mindanao.
This development also shows the operational power of
social threefolding. Those concerned can only solve the poverty-complex if
they can mobilize the strategic involvement of the three key societal actors and
powers in any society: business, government, and civil society. For the
poverty-complex requires the mobilization of society as a whole. As decades of
failed anti-poverty work has emphasized, piecemeal approaches will not succeed.
Business can mobilize financial resources, markets and
talents. Government can harness political capital and assets and create an
enabling policy environment that would stimulate the pursuit of strategic
microfinance. Civil society can activate cultural power, social and ecological
capital including its proven ability to mobilize communities to create a better
future. When they come together in a strategic microfinance initiative, they can
transform the poverty-complex into a wide-ranging opportunity to enable the poor
to be the key agents of their own development.
PCFC is a government-owned corporation, subject to the
goals and objectives of government policy. But PCFC has insulated itself from
political maneuverings and has given over, on a professional basis, P2.8 billion
of loans to its business partners, the 199 partner MFIs. Through these loans,
PCFC has leveraged more than P5 billion worth of financial resources from its
partner MFIs, not to mention the more than 5,000 dedicated staff found in its
network. Together, the five regional microfinance council partners of PCFC make
up the bulk of microfinance services in the Philippines, serving over 1.4
million enterprising poor and their families. And increasingly, a significant
number of these MFIs are developing strategic partnerships with civil society to
address the other aspects of the poverty-complex. This is power of social
threefolding in action.
The resolution of the Mindanao Microfinance Council is a
microcosm of global developments. MFIs in Asia, Africa, and Latin America are
increasingly entering the area of strategic microfinance. From there it will be
only a short time before MFIs ultimately pursue integral sustainable development
and social threefolding. When this happens, then the poverty-complex will slowly
but surely disappear. Then the billions of human beings who are trapped by the
poverty-complex will be liberated, free to contribute constructively towards
their own development and that of the planet.
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