Chiz Escudero

The government should stay away from the money-lending business, as it lacks the experience and skill to run such a program.

This is a reaction to announcements that local governments are now lending money to their constituents supposedly to finance food stalls, sari-sari stores, and other livelihood programs.

I am all for extending credit to the poor, but experience tells us that allowing politicians to determine who will and will not get a loan is a prescription to disaster. The money simply finds its way into the pocket of politicians or their supporters. The names of the poor are only used in the scheme.

The problem arose with the issuance by President Gloria Macapagal-Arroyo of Executive Order 558 which repealed E.O. 138. It allows the Department of Social Welfare and Development (DSWD) and other government agencies to engage in micro-lending, a program that gives the poor access to credit without collateral and at a very low interest rate.

But that is already being handled by rural banks and, through their microfinance window, by commercial banks.

During his short-lived presidency, Joseph Estrada issued E.O. 138 precisely to get micro-lending out of the hands of government agencies. The executive order provided that funds intended for lending to the poor should be coursed through the rural banks and people’s cooperatives.

The government, on the strength of E.O. 558, has taken over micro-lending activities.

Now instead of cooperatives extending credit, DSWD and other government agencies, through the intercession of politicians, are dispensing what could only be described as dole-outs. I fear the dissipation of the P20 Billion Small Guarantee Fund. It is the fund, made available by international financial institutions, that the government is tapping for lending.

Even if DSWD does dispense the money to the really poor, it is ill-prepared to evaluate the credit worthiness of borrowers and the viability of the projects being applied for financing.

E.O. 558 was issued, curiously enough, in time for the 2007 mid-term election.

Finance Secretary Gary Tevez has not been consulted. He does not understand the sudden change. Neither do I, unless the fund purportedly intended to help the poor is diverted to favor politicians belonging to the party in power.

Under E.O. 138, micro-lending has been a successful program. The numbers speak for themselves. The repayment rate of loans coursed through rural banks and cooperatives is 91 percent. It is a measly 62 percent when the money is lent directly to borrowers by the government.

The borrowers simply regard the loan as dole-out.

This entry was posted on Saturday, February 17th, 2007 at 11:17 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.