8 Lending to Micro Enterprises Through NGOs in the Philippines

This chapter deals with NGO programs of lending to micro enterprises in the Philippines. It contains four sections: a brief background on the programs themselves, the premises underlying them, questions of sustain-ability, and some research priorities. The programs discussed represent a major attempt underway in the Philippines to reconstruct the nature of the financial landscapes by using NGOs and “peoples organizations ” as intermediaries to make a major dent on poverty by lending to micro enterprises. The term micro-enterprise program refers to the promotion of small self-employment activities through the provision of credit, training and other inputs. Two types of approaches will be briefly described in this chapter: the first approach is to concentrate on qualitative change of a limited number of enterprises, offering them a rather comprehensive range of services. The second approach, that refers to so-called “minimalist programs”, is directed at expansion of a large number of enterprises through the provision of a minimum of services. NGOs and peoples organizations such as cooperatives and credit unions are usually regarded as semi-formal. Although regulated in certain aspects they retain the essential informality of the informal sector. Thus the programs discussed in this paper can be viewed as an attempt to develop and use the semi-formal sector to fill a void left not only by the formal, but also by the informal sector, which practices its own form of credit rationing. To the extent the informal sector does lend to micro enterprises, these programs can also be viewe