Development Economics

Life on the Farm: Micro-Crop Loans

This post appeared on the Kiva Fellows blog.  Read the original here. Last week I went to a town called La Castellana about an hour south of Bacolod to visit the NWTF branch there.  I was there to meet a handful of Kiva borrowers and interview them about the progress of their loan.  Over the course of two days, I met six women that currently have a loan with Kiva, and another four that I am going to post to the site this week.  La Castellana is a town in the mountains that is largely supported by agriculture.   It is also one of the major areas impacted by agrarian reform and home to some of NWTF's poorest clients. The Philippines is a country of ~90 million people, half of whom live in rural areas.  Eighty percent (80%) of Filipinos living below the poverty line are in rural communities, supported primarily by agriculture.  Over the past three decades, agricultural land ownership in the Philippines underwent a transformation via a series of legislation known as Comprehensive Agrarian Reform Program (CARP) passed in 1988.  Designed to provide landless farm workers a piece of land, the program has redistributed farmland in 1.1-hectare units.   It is a controversial topic, and its effectiveness at combating poverty is debatable.  Regardless of whether or not CARP has worked, the ARBs (Agrarian Reform Beneficiaries) – the recipients of the farmland – are the poorest of the poor.  In Negros alone, there are 112,000 ARBs working 170,00 hectares.  There are no economies of scale on a one-hectare farm.  Fertilizer, farming equipment and labor are expensive, and they don’t have the capital.  The average land tract size for ARBs in Negros is 1.25 hectares, with input costs of 35,000 pesos (~$800 USD) per hectare.  The government gave them land but failed to provide adequate funding, agricultural training, or meaningful support.  In many ways, the cards are stacked against them.  So, unable to make ends meet, many just rent or sell their land back to the owner.  It is a vicious cycle, but microfinance can offer a solution. (more…)

Microfinance

Community Loans: Part II

The following was written for the Kiva Fellows blog.  See the original here. I spent all last week touring a province in the Philippines with a 7-person team in an effort to gather market intelligence about the region.  The purpose is to determine whether or not NWTF should open a branch here.  Much of our day is spent driving around a town (one in the morning and one in the afternoon) looking for the poorest neighborhoods.  The Dilapidated Housing Index is a means of making a snap judgment about whether a community is sufficiently poor for microfinance to be beneficial.  If most of the houses on the street are made of bamboo, corrugated aluminum, and bamboo leaves, we know we are looking in the right place. [caption id="attachment_361" align="alignright" width="300" caption="A fishing village in the Philippines"][/caption] On Thursday morning, we were driving through a coastal town when the paved road turned to dirt.  According to the driver and director of the research department at NWTF, when the road turns to dirt, you know you are headed in the right direction.  Sure enough, within a few minutes we reached a squatter community bustling with people.  (In the Philippines, the government protects squatters, and large communities spring up on other peoples’ lands.)  The road was just wide enough to fit the van and lined with nipa huts and sari sari stores.  We passed by two makeshift basketball courts before coming to the end of the road.  We parked the van and split up to walk around and talk to the people.  Unfortunately, the interviews are all in Illonggo, so I chose to follow the director down to the shore.  He began talking to a group of women on the beach holding their infant children.  If they could have a loan to spend on anything in their community, what would it be?  Their response: diesel fuel or an icemaker.  I’ll explain why this is important, but first some background. (more…)

Microfinance

Community Loans: Part I

Microfinance is a term to describe the broad umbrella of financial services to people without access to a traditional banking system.  Microfinance institutions (MFIs) provide these types of services, which include microcredit, insurance (health, life, crop), savings accounts, remittances, and others.  Most MFIs rely on social collateral for repayment, which, in turn, is dependent on the strength of the community.  The community is at the center of the mission of microfinance, and some of the most interesting services offered by MFIs are aimed at making the community better as a whole. Villages served by NWTF frequently support a single industry.  A community on the water might derive its livelihood from fishing or oyster farming.  Similarly, a community in the middle of a rice field s likely to revolve around rice farming.  The NWTF members in the community either have businesses in the industry (i.e. operating a fishing boat or renting crab nets) or supporting the industry (sari-sari store, buy-and-sell, used clothing).  In these cases, the health of the community is directly tied to the strength of the industry.  This is where community-based loans are useful. (more…)