I. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

A. Background of the Study . . . . . . . . . . . . . . . . . . . . . . 1

B. Situational Analysis: The Western Mindanao

Community Initiatives Project (WMCIP) . . . . . . . . . . . . . 7

C. Statement of the Problem . . . . . . . . . . . . . . . . . . . . . 17

D. The Research Objectives . . . . . . . . . . . . . . . . . . . . . . 21

E. Significance of the Study . . . . . . . . . . . . . . . . . . . . . . 22

F. Scope and Limitation . . . . . . . . . . . . . . . . . . . . . . . 25

II. REVIEW OF RELATED LITERATURE AND CONCEPTUAL FRAMEWORK . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

A. Review of Related Literature . . . . . . . . . . . . . . . . . . . . 27

A.1. Global Movement for Poverty Reduction through

Microcredit . . . . . . . . . . . . . . . . . . . . . . . . . . 27

A.2. Microcredit as a Mechanism to Reduce Poverty . . . . . . . 31

A.3. Controversies and Current Debates in Microcredit . . . . . . 34

A.4. Microcredit for Poverty Alleviation: A Critique . . . . . . . . 42

A.5. Microcredit as an Instrument of Governance . . . . . . . . . 46

A.6. Successful Microcredit Models . . . . . . . . . . . . . . . 60

A.7. Implementation Strategies of Successful

Microcredit Models . . . . . . . . . . . . . . . . . . . . . . 62

A.7.a. The Grameen Credit-Only Strategy

(minimalist approach) . . . . . . . . . . . . . . . . . 63

A.7.b. Bangladesh Rural Advancement Committee (BRAC):

A Graduated Process for Helping the Poorest . . . . . 66

A.7.c. Bank Rakyat Indonesia’s (BRI) Character

References . . . . . . . . . . . . . . . . . . . . . . . 70

A.7.d. Association for Social Advancement (ASA)

and Compulsory Savings Scheme . . . . . . . . . . . 71

A.8. Microcredit for Poverty Alleviation: The Philippine

Experience . . . . . . . . . . . . . . . . . . . . . . . . . . . 77

A.9. Grameen Replication in the Philippines: Selected

Best Practices . . . . . . . . . . . . . . . . . . . . . . . . . 80

A.9.a. Cooperative Rural Bank of Laguna, Inc. (CRBLI) . . 81

A.9.b. Center for Agriculture and Rural Development

(CARD) . . . . . . . . . . . . . . . . . . . . . . . . 82

A.9.c. Tulay Sa Pag-Unlad Inc. (TSPI) . . . . . . . . . . . . 85

A.9.d. Negros Women for Tomorrow Foundation, Inc.-

Project Dungganon (NWFTFI) . . . . . . . . . . . . 86

A.10. The National Government’s Performance as a Banker

for the Poor . . . . . . . . . . . . . . . . . . . . . . . . . . . 93

A.11. The National Strategy for Microfinance . . . . . . . . . . . . 96

A.12. Microfinance Rhetoric in the General Banking Law . . . . . 100

A.13. The Factors Affecting Microcredit Programs . . . . . . . . . 101

A.13.a. Household Financial Conditions . . . . . . . . . . . 104

A.13.b. Credit Needs of the Poor . . . . . . . . . . . . . . . 107

A.13.c. Credit Experience . . . . . . . . . . . . . . . . . . . 109

A.13.c.1. Access to Loans . . . . . . . . . . . . . . 112

A.13.c.2. Loan Utilization . . . . . . . . . . . . . . 113

A.13.c.3. Loan Repayment . . . . . . . . . . . . . . 115

A.13.d. Credit Providers for the Poor . . . . . . . . . . . . . 117

A.13.e. Microcredit Preferences and Demand . . . . . . . . 120

A.13.f. Good Governance as Microcredit Strategies . . . . 125

A.13.f.1. Participation . . . . . . . . . . . . . . . . 128

A.13.f.2. Transparency . . . . . . . . . . . . . . . . 131

A.13.f.3. Accountability . . . . . . . . . . . . . . . 132

A.13.f.4. Sustainability . . . . . . . . . . . . . . . 136

B. The Conceptual Framework . . . . . . . . . . . . . . . . . . . . . 143

C. Operational Definition of Variables . . . . . . . . . . . . . . . . . 154

III. RESEARCH METHODOLOGY . . . . . . . . . . . . . . . . . . 160

A. Research Technique . . . . . . . . . . . . . . . . . . . . . . . . 160

B. Difficulties Encountered . . . . . . . . . . . . . . . . . . . . . . 166

C. Population and Sampling . . . . . . . . . . . . . . . . . . . . . . 167

D. Data Analysis and Interpretation . . . . . . . . . . . . . . . . . 171

IV. PRESENTATION AND INTERPRETATION OF FINDINGS

AND OBSERVATIONS . . . . . . . . . . . . . . . . . . . . . . . . 176

A. Credit Options for WMCIP Beneficiaries . . . . . . . . . . . . . . 176 a.1. Credit Option #1: LBP Assistance to Cooperatives . . . . . . . 178 a.2. Credit Option #2: Credit Assistance Program for

Program Beneficiaries Development (CAP-PBD) . . . . . . . 188 a.3. Credit Option #3: PCFC’s Credit Program for

Grameen Bank Approach Replication (GBAR) . . . . . . . . 193 a.4 Credit Option #4. QUEDANCOR’s Microcredit

Program (Grameen Replication) . . . . . . . . . . . . . . . . . 197 a.5. Summary of Findings: Credit Program Designs . . . . . . . . . 201

B. Limiting and Enabling Factors in Microcredit Program . . . . . . . . 214 b.1. Demographic Attributes of the Respondents . . . . . . . . . . . 215 b.1.a. Gender . . . . . . . . . . . . . . . . . . . . . . . . . . .216 b.1.b. Age . . . . . . . . . . . . . . . . . . . . . . . . . . . . 216

b.1.c. Ethnicity . . . . . . . . . . . . . . . . . . . . . . . . . 217 b.1.d. Religion . . . . . . . . . . . . . . . . . . . . . . . . . 219 b.1.e. Household Role . . . . . . . . . . . . . . . .. . . . . . . 220 b.1.f. Number of Children . . . . . . . . . . . . . . . . . . . 221 b.1.g. Summary of Findings: Demographic Attributes .. . . . . 222

b.2. Household Financial Conditions . . . . . . . . . . .. . . . . . 226 b.2.a. Type of House . . . . . . . . . . . . . . . . . . . . . . 228 b.2.b. Main Source of Income . . . . . . . .. . . . . . . . . . 229 b.2.c. Other Sources of Income for the Family . . . . . . . . . 231 b.2.d. Estimated Average Monthly Income . . . . . . . . . . . 234 b.2.e. Average Monthly Expenses . . . . . . . . . . . . . . . . 239 b.2.f. Household Cash Flow . . . . . . . . . . . . . . . . . . .. 242 b.2.g. Actions Toward Savings . . . . . . . . . . . . . . . . . 245 b.2.h. Actions Toward Cash Shortages . . . . . . . . . . . . . 247 b.2.i. Summary of Findings: Household Financial Conditions 249 b.2.j. The Appropriateness of Microcredit Program

based on Household Financial Conditions . . . . . . . . 256 b.3. Credit Experience . . . . . . . . . . . . . . . . . . . . . . . . 264 b.3.a. Credit Experience in the Last Two Years . . . . . . . 266

b.3.b. Credit Needs: Overspending Situations . . . . . . . . . 260 b.3.c. Creditor . . . . . . . . . . . . . . . . . . . . . . . . . 262 b.3.d. Access to Loan and Other Credit Services . . . . . . . . 270 b.3.e. Uses of Amount Borrowed . . . . . . . . . . . . . . . 272 b.3.f. Interest Rate . . . . . . . . . . . . . . . . . . . . . . . 273 b.3.g. Mode of Payment . . . . . . . . . . . . . . . . . . . . . 274 b.3.h. Loan Utilization . . . . . . . . . . . . . . . . . . . . . 276 b.3.i. Repayment . . . . . . . . . . . . . . . . . . . . . . . . 277 b.3.j. Summary of Findings: Credit Experience . . . . . . . . 280

b.4. Microcredit Preferences and Demand . . . . . . . . . . . . . .288 b.4.a. Income-Generating Activities for Financing . . . . . . . 291 b.4.b. Loan size . . . . . . . . . . . . . . . . . . . . . . . . . 292 b.4.c. Collateral . . . . . . . . . . . . . . . . . . . . . . . . . 294 b.4.d. Public Support Services . . . . . . . . . . . . . . . . . 296 b.4.e. Summary of Findings: Microcredit Preferences

and Demand . . . . . . . . . . . . . . . . . . . . . . 301 b.4.f. Appropriateness of Credit Program Design to

Credit Needs, Preferences and Demand . . . . . . . . . 303 b.5. Summary of Findings: Enabling and Limiting Factors . . . . . 307

C. Good Governance in Pro-poor Microcredit Strategies . . . . . . . . 314 c.1. Participation . . . . . . . . . . . . . . . . . . . . . . . . . . 317 c.2. Transparency . . . . . . . . . . . . . . . . . . . . . . . . . . 321 c.3. Accountability . . . . . . . . . . . . . . . . . . . . . . . . . . 325

c.4. Sustainability . . . . . . . . . . . . . . . . . . . . . . . . . . 331 c.5. Summary of Findings: Good Governance in Pro-poor

Microcredit Strategies . . . . . . . . . . . . . . . . . . . . . 335

D. Good Governance Strategies in Microcredit Program

for Poverty Reduction . . . . . . . . . . . . . . . . . . . . . . . . . 337 d.1. Beneficiary Perspectives . . . . . . . . . . . . . . . . . . . . 337

d.2. Program Implementors’ Perspectives . . . . . . . . . . . . . 341

E. Summary of Findings and Observations . . . . . . . . . . . . . . 348

V.

SUMMARY AND CONCLUSION . . . . . . . . . . . . . . .

.

. .

359

Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 359

Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 370

VI. LESSONS LEARNED AND RECOMMENDATIONS . . . . . . . 377

A. Lessons Learned . . . . . . . . . . . . . . . . . . . . . . . . . . . . 377

a.1. Productive Potential of Target Beneficiaries . . . . . . . . . . 378

a.2. Resources and Capabilities of Potential Governance

Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 380

a.3. Natural Resource Endowments . . . . . . . . . . . . . . . . . . 383

a.4. Direct Involvement of the National Government and

International Donors . . . . . . . . . . . . . . . . . . . . . . . 384

B. Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . 391

1. Creation of Two Special Microcredit Windows . . . . . . . . . 395

A. CAP-PBD Application . . . . . . . . . . . . . . . . . . . . . 396

B. QUEDANCOR Microcredit Window for

Self-Reliant Teams (SRTs) . . . . . . . . . . . . . . . . . . 397

2. Creation of Special Poverty Alleviation Sub-component (SPAS) 398

3. Administration of Microcredit Program and Special Poverty

Alleviation Sub-component and Microcredit Program . . . . . . 401

A. Socio-Economic Parameters

(Poor and Non-Poor Beneficiaries) . . . . . . . . . . . . . 402

B. Operating Guidelines for Microcredit and SPAS . . . . . . 408

4. The Recommended Microcredit Goverance Model . . . . . . . 413

A. Participation . . . . . . . . . . . . . . . . . . . . . . . . . 414

B. Transparency . . . . . . . . . . . . . . . . . . . . . . . . 414

C. Accountability . . . . . . . . . . . . . . . . . . . . . . . . 415

D. Sustainability . . . . . . . . . . . . . . . . . . . . . . . . 419

5. Impact Assessment . . . . . . . . . . . . . . . . . . . . . . . . 421

Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 424

Appendix A Survey Questionnaire for Availers of Credit Services . . . . . . 433

Appendix B Survey Questionnaire for Non-Availers of Credit Services . . . . 442

Appendix C List of WMCIP-covered Barangays . . . . . . . . . . . . . . . . 449

Appendix D List of Sampled Barangays . . . . . . . . . . . . . . . . . . . . . . 451