Loans help businesses expand. For those with small businesses in small communities, however, getting a loan from banks is almost an impossibility. But with the microfinancing activities of ABS-CBN Bayan Foundation, these entrepreneurs stand a chance.

Microfinancing started out as a project under the ABS-CBN Foundation back in 1993. But the clientele growth of the project which numbered some 3,000 borrowers in 1999 led ABS-CBN Foundation to spin-off Bayan Foundation into a separate institution.

Bayan Foundation helped Nora Carlos sustain the family’s sari-sari store

Unlike most social projects, Bayan Foundation operates like a small bank that charges interest rates to borrowers. But unlike banks, the requirements they ask from clients are entirely different. A borrower should be poor, should not have regular income (or if they do, income is very minimal), and should not have luxuries in their homes. They do require, however, that a borrower be a permanent resident in their area, not a squatter.

Kids are still priority
There is one consideration Bayan Foundation looks at that directly links them to the social orientation of its umbrella foundation, ABS-CBN Foundation - they give priority to couples with kids.

Irma Cosico, Community and External Relations Manager of Bayan Foundation, says, “The focus of other microfinance institutions is business. If an entrepreneur earns so much, it should go back to business for it to expand. But in our case, we would like to see the income going into the preparation of the child’s future.” This is not to say Bayan Foundation does not care about repayment rates. After all, their ability to service more clients can only be done if the foundation’s finances are managed well. Bayan Foundation just makes sure they look at the effect of the loan on the daily activities of the child.

Cosico says during monitoring visits, they would look at indicators that point out the impact on the children of borrowers. “You would hear a child talking about being able to finance school projects, and having regular allowance. One child even said that after the Bayan Foundation assistance, his parents don’t argue about money anymore,” Cosico narrates. She adds, however, that they can’t be 100% sure that these changes occurred because of microfinance, but the impromptu interview with children grateful for Bayan Foundation’s assistance is enough for them to pursue microfinancing.

Business Guarantees
Bayan Foundation does not assisst startups. Cosico says they only lend to poor people who already have existing businesses or those who had businesses in the past but stopped due to lack of capital. They give loans for individuals and groups after doing background investigation.

Cosico says group lending is very effective for their clientele. In this setup, a group of four to six borrowers will get loans as one account so the accountability to pay lies with everyone in the group. That is why it is important to get group members who will be diligent in paying their dues on time. Cosico explains, “If one of the members refuses to pay and the others cannot pressure him, it is the group’s responsibility to pay for the dues of the delinquent group member.”

It is unusual to see foundations espousing microfinance projects, but Cosico believes it is a worthwhile endeavor. She says, “If you want your intervention to be sustainable, you need microfinance because it’s not a dole-out. For as long as it’s managed well, the reward comes back three-fold, four-fold.” What Bayan Foundation provides is assistance that empowers the poor to take control of the future of their family by taking responsibility and earning a living for themselves.