Cities Development Initiative Newsletter

USAID makes loans and financial literacy more accessible to SMEs in the Philippines

The Magna Carta for small and medium enterprises (SMEs) in 1991 paved the way for government-generated policy improvements in SMEs’ access to finance.

While a variety of regulations and programs were implemented, such interventions have had limited impact due to perverse incentives, poor coordination and consistency in application, low financial literacy and gaps in the financial infrastructure such as the lack of a credit information system.

Thus, even after these interventions from the Philippine Government, financing options for entrepreneurship and small business expansion continued to be constrained and unavailable for the average SME. R. Nangia and L. Vaillancourt, in their 2006 paper for the International Finance Corporation, found that funds obtained from the banking sector accounted for only 11 to 21 percent of capital raised by SMEs. Department of Trade and Industry (DTI) Assistant Secretary Rafaelita M. Aldaba, in a 2011 paper entitled “SMEs Access to Finance: Philippines, ” found similar results in her survey of SMEs. This poses serious problems to SMEs wanting to scale up their business operations.

In 2012, the U.S. Agency for International Development (USAID) introduced the Development Credit Authority-Loan Portfolio Guarantee (DCA-LPG) facility, a 10-year credit guarantee program aimed at encouraging banks to lend to small and medium enterprises (SMEs) and fostering commercial investments in secondary cities. DCA-LPG facility guarantees up to 50 percent potential net principal losses on qualifying loans for qualified SMEs in agribusiness, construction, healthcare, energy, manufacturing, and tourism.

Starting with two partner financial institutions (PFIs) and a portfolio of US$35 million, USAID added four PFIs, increased its portfolio to US$95 million, and expanded the coverage to all areas of the country except Metro Manila, Metro Cebu and Davao City.

USAID's Advancing Philippine Competitiveness (COMPETE) Project helped increase DCA-LPG utilization by working with PFIs, DTI and local business associations in areas covered by USAID’s Cities Development Initiative (CDI) beginning in 2013.

To support the utilization of DCA-LPG facility, COMPETE organized focus group discussions and trained business development services providers, who then can assist SMEs in CDI areas with improving their capacity to prepare business and financial plans, as well as with expanding knowledge of financial options.

Support for the utilization of the DCA-LPG facility is just one of the interventions that COMPETE has undertaken to enhance SMEs’ access to credit. COMPETE has also helped lending institutions build their capacity to assist SMEs in securing titles to their lands under the Residential Free Patent Act. With their land titles secured, potential borrowers can offer higher-quality collateral for their loans and negotiate for a lower interest rate.

COMPETE also supported the national educational campaign of the Credit Information Corporation (CIC) by informing stakeholders—like financial institutions, SMEs, and consumers—about the benefits of a centralized credit registry, while building their capacities to comply with the CIC credit data requirements. It included the production of TV specials on the importance of the credit information system, which was aired on a major cable news channel. Moreover, COMPETE supported the conduct of credit infrastructure fora and roadshows for banks, credit cooperatives, finance companies, credit card companies and SMEs. It also assisted CIC in accrediting special accessing entities or credit bureaus offering value-added services to lending institutions, SMEs, and consumers.

SME access to financing is one of the components of the COMPETE Project, which supports the efforts of the Philippine Government and the development of the private sector as the drivers of national industrial competitiveness and the attainment of inclusive growth.

Bohol ramps up investments with “one voice for one destination”

“We believe in Bohol and Tagbilaran City’s economic growth prospects, and the business sector intends to bring it to greater heights. The province and the city have various investment opportunities to offer and we just need to set the stage for more investments to come in,” said Marietta Gasatan.

Marietta Gasatan is the Vice President for External Affairs of the Bohol Chamber of Commerce and Industry (BCCI). For years, the BCCI has been actively promoting investments, particularly in tourism. Tourism is the competitive advantage of Bohol Province in Central Visayas, given its status as one of the most popular tourist destinations in the Philippines.

“The private sector is an important driver of growth,” said Bohol Governor Edgardo Chatto. “As the province prepares for the influx of tourists and businesses with the opening of the new international airport in Panglao in 2018 and the completion of infrastructure projects in Tagbilaran City, the more we need to synchronize our efforts to reach our potential as an economic growth hub in the region,” he added.

Recognizing the need for a solid “one voice for one destination” vision in promoting investments, the Bohol Provincial Government, the Tagbilaran City Government and the BCCI entered into a tripartite partnership to formalize their commitment in pursuing inclusive growth.

“The government must work with the business sector, civil society, and other stakeholders to achieve sustainable development,” explained Governor Chatto.

More investments, more jobs

The partnership is anchored on a unified and enhanced investment promotions program. It was the result of a series of workshops on investment promotion organized by USAID through its Strengthening Urban Resilience for Growth with Equity (SURGE) Project in Tagbilaran City. The BCCI will take the lead in aggressive investment promotion for the province and the city, drawing in foreign direct investments that can bring in more jobs and revenues. Governor Chatto recently issued an Executive Order for the creation of the Tripartite Technical Working Group.

“The tripartite partnership signifies the public and private sectors’ commitment to building a mutually beneficial economic relationship that will help generate more jobs and wealth and ultimately uplift the lives of citizens,” said Jeffrey Lehrer, Director of the USAID/Philippines Office of Economic Development and Governance.

Tourism development, revitalization of information and communications technology, and a rationalized infrastructure program are the priority areas for development of Tagbilaran City in the next three years.

“Various infrastructure projects are already in the pipeline and we are optimistic these initiatives will bring in significant contributions to what we have today—specifically, attracting investments that will eventually generate more jobs in the city,” said Tagbilaran City Mayor John Geesnell“Baba” Yap.

According to the Department of Tourism, the number of travelers to Bohol nearly doubled from 356,370 in 2012 to 602,257 in 2015.

Strategic directions for investment promotion

The tripartite partnership will revise the enhanced Bohol Investment and Promotion Center’s two-pronged strategic direction to support business registration and micro, small, and medium enterprise development. It will also strengthen the capacity of the center through learning exposures in international investment promotions conferences and destinations. This alliance will work toward establishing an Investment Promotions Center to be led by the private sector, supported by the government, and registered with the Philippines’ Securities and Exchange Commission.

“I commend the involved partners for coming together to plan for Tagbilaran City and Bohol’s future investment direction. USAID is committed to support the province and the city in improving its business environment, which will gradually contribute to deepening the Philippines’ competitive efforts globally and locally,” said Lehrer.

SURGE supported the Tagbilaran City Government in updating its Comprehensive Land Use Plan to integrate climate change adaptation, disaster risk reduction, gender equality, and social inclusion. It also facilitated the expansion of the inter-municipal alliance, the Panglao Island Executive Council, into the Panglao Island and Tagbilaran Executive Committee (PITEC). The PITEC, represented by local government heads from the province and the cities of Tagbilaran, Dauis, and Panglao, is addressing common concerns in urbanization and in managing the impacts of the construction and operation of the new international airport.

Moreover, the SURGE Project and the Tagbilaran City Government are working together to streamline the business registration process to improve the city’s business enabling environment.

Adolescent and Health Development Program gives hope to teen moms

At 17 years old, Paula (not her real name) is five months pregnant with her first child. She dropped out of high school because of poverty and worked as a waitress in a restaurant where she met the father of her unborn child. Not prepared for childbearing, she worries about her child’s future.

Her story is becoming a familiar one with the increasing incidence of teenage pregnancies. A United Nations report noted that teen pregnancy in the country is on the rise, despite the decline in the rest of Asia Pacific. Batangas City in Batangas Province, Southern Luzon, where Paula resides, typifies this trend as teen pregnancies in the city increased from 795 in 2013 to 826 in 2015.

USAID is helping the city reverse this trend and improve the plight of teen mothers and mothers-to-be through its LuzonHealth Project with RTI International.

Batangas City’s Adolescent and Health Development Program educates youth on preventing teenage pregnancy. It also provides care to already pregnant teens and at-risk of prenatal and postpartum complications. With USAID support, the city designed a seamless service delivery network to link up schools, rural health units and the Batangas Medical Center, a tertiary-level hospital which opened a Teen Parents Clinic in June 2016.

One of the Program’s key components is the Teen Health Kiosk, which functions as an information hub and a counseling nook in schools and rural health units. At the Kiosks, students and out-of-school youth who have health-related concerns and problems are referred to the Teen Parents Clinic whose clients include Paula.

During its first four months of operation, the Teen Parents Clinic in Batangas Medical Center has served 349 pregnant teens aged 14 to 19, of whom 167 are residents of Batangas City, while the rest are from neighboring cities and municipalities. The Clinic staff find it inspiring that in just four months 70 percent of their clients has returned for follow-up visits, indicating client satisfaction.

Paula affirms, "the Teen Parents Clinic is dedicated for teens like me. There is less queuing and I can have multiple consultations within the day. The nurses and doctors are accommodating and friendly.”

Locals protect Palawan's green sea turtles

On September 19, 61 green sea turtle (Chelonia mydas) hatchlings have been safely released into the sea along the community of Bagumbayan, Puerto Princesa City, Palawan Province in Western Visayas.

There are seven species of sea turtles in the world and five of them are found in Palawan. They are endangered largely due to overharvesting (for their meat, eggs and shell) and accidental bycatch in fisheries.

The release was organized by Candis 3 Marketing Cooperative with residents and staff of USAID and the Department of Environment and Natural Resources. The cooperative is a grantee of the Philippine-American Fund for the Biodiversity Conservation in Puerto Princesa’s Northwest Area and its Attached Interconnected Ecosystems Project. Through the grant, the cooperative works with local residents on the conservation and protection of sea turtles in the area.

The residents organize patrol groups that locate and protect sea turtle nests and work to educate others on the importance of conservation. Some members of the group were previously poachers. There are still six turtle hatcheries remaining in the barangay where hundreds of turtle eggs are waiting to be hatched.

Candis 3 Marketing Cooperative implements cultural and biological diversity conservation activities in Puerto Princesa City using a landscape approach. It covers the areas of Napsan, Honda Bay, Green Island Bay, and the Bacungan Flora and Fauna Forest Block interconnected systems.

Coastal Resource Management Code takes effect in Philippines' diving capital

Mabini, a municipality in Batangas Province, is now with a Coastal Resource Management (CRM) Code. Known as the diving capital of the Philippines with its rich marine biodiversity and pristine coral reefs, Mabini is a favorite destination of local and international divers.

For years, scuba diving shops, resorts and recreational activities have thrived in the area, benefiting from the coastal resources without paying any fee.

The passage of the CRM Code makes Mabini a pioneer municipality in introducing environmental user fees in local regulation. The revenues that the municipality collects are spent on programs that protect coastal biodiversity and ecosystems.

With the CRM Code, the regulation reduces overcrowding pressure in three dive sites and encourages divers to explore other locations.

There are two diving passes under the CRM Code: a premium dive pass for the inclusive use of the top three dive sites, Cathedral Rock, Twin Rocks, and Arthur’s Rock, during weekends and peak season. The other is a regular dive pass that allows unlimited diving in all the other dive sites. The Code also requires resort owners to prepare and implement a five-year plan to dismantle illegal structures in the “no-build” zone.

USAID's Ecosystems Improved for Sustainable Fisheries (ECOFISH) Project provided technical support to develop the ordinance in 2014, which includes designing the updated environmental user fee system and regulations.

A progressive system of fees increasing by 100 percent annually is imposed on non-compliant resort owners. The Code also imposes new fees for mooring and docking for yachts, cruise ships, tourist boats, and other vessels that stay on for extended periods. Moreover, it provides that dive professionals, such as dive instructors and dive guides, must be accredited by the municipality and must pay a fee in order to practice.

USAID and SMART build resilience of disaster-prone cities to climate risks

Residents of disaster-prone cities can now better prepare for typhoons with the help of advisories received through cellphones. When a typhoon is imminent, free text messages of weather bulletins and emergency advisories will be sent four to six times a day, including recommended actions to prepare for disasters from the Philippine Atmospheric, Geophysical and Astronomical Services Administration (PAGASA), thanks to the SMART Infocast program introduced by USAID's Water Security for Resilient Economic Growth and Stability (Be Secure) Project and Philippines-based wireless services provider Smart Communications Inc. (SMART).

As part of the overall assistance to build resilience of local governments to climate risks, Be Secure partnered with SMART to introduce the SMART Infocast program in the cities of Cagayan de Oro, Cotabato and Zamboanga in Mindanao, and Iloilo and Ormoc in Visayas.

The SMART Infocast program provides local government units (LGUS) access to weather bulletins and emergency advisories that are sent directly to barangays through text messages. LGUs will also receive other information such as reports, media updates, and press releases which they can share to inform the public and raise their awareness.

Be Secure and SMART trained 14 staff in September, representing the Disaster Risk Reduction and Management and Information Offices of each LGU to help them participate effectively in the SMART Infocast program. LGU officers were taught how to access Infocast as well as become familiar with administrator functions such as sending broadcast, responding and managing feedback messages, allocating free SMS credit, and adding/deleting contacts. Access to Infocast weather and climate information also contributes to Be Secure’s work to integrate climate change adaptation and disaster risk reduction into the planning process of local governments and water utilities.

Tagbilaran City takes steps to improve water service delivery and sanitation

The Tagbilaran City Government is taking steps to upgrade its waterworks system and sanitation facilities to provide better public services to its constituents.

Currently, water service providers are unable to meet the increasing average daily demand of water due to the city's growing population. There are two service providers in Tagbilaran, the LGU-led Tagbilaran City Waterworks Office (TCWO) and private company Bohol Water Utilities Inc. (BWUI). The TCWO supplies water to 10 barangays which comprises 60 percent of the city’s population, while BWUI services six barangays. There are certain areas within the city that the BWUI is unable to provide 24-hour access to water.

USAID's SURGE Project is helping the LGU identify gaps and strategies to address the water and sanitation issue. In September, the project conducted a rapid assessment of the water supply and sanitation services and capability of the city. The assessment showed that both the TCWO and BWUI are exploring new surface water sources because of the persistent lack of potable water. For sanitation, the city faces challenges in designing a septage management facility.

City Mayor John Geesnell Yap identified water as one of the City Government's main priorities for the next three years, and has earmarked PhP17 million (US$340,340) to invest in upgrading the existing waterworks system.

SURGE will assist the city in creating an integrated water systems improvement plan. The project is also working with CDI cities of Batangas and Puerto Princesa to expand access to safe and sustainable water supply and sanitation services.

Iloilo City’s Central Philippine University kicks off school-based campaign on water conservation and efficiency

About 600 students from Grades 7-10, teachers and school officials gained awareness on water issues in early September while participating in a campaign on water conservation and efficiency. The campaign was led by the Central Philippine University, an academic partner of USAID's Be Secure Project, during the National Science Week at the Melchor Nava National High School in Iloilo City, Iloilo Province, Central Visayas.

The campaign sets the groundwork for a youth-based initiative on water efficiency and conservation among students. It targets reaching 50 secondary schools in Iloilo Province during the 2016-2017 school year.

It aims to increase awareness and appreciation of students on practical ways to use water more wisely. This awareness will enable the students and teachers to apply water conservation and efficiency practices in their schools and homes, and contribute in both local government and water district efforts to address water shortages in Iloilo City.

The school principal proposed to work with parents to install a rainwater harvesting facility in the school.

The campaign builds on Be Secure’s series of fora on water demand management and is part of the university's broader campaign, “Caravan on Water Demand Management for Iloilo City Colleges and Universities."

Cities Development Initiative

USAID is working to strengthen the economic competitiveness and resilience of secondary cities outside of Metro Manila through its Cities Development Initiative (CDI). The CDI seeks to advance the development of secondary cities as agents of growth that is inclusive, environmentally sustainable and resilient. Depending on the most urgent needs of the city, USAID provides a range of technical assistance, drawing from resources in economic growth, health, energy, environment, governance, and education to assist the cities achieve resilience and inclusive growth.

The CDI is a crucial component of the broader Partnership for Growth, a White House initiated “whole-of-government” partnership between the U.S. Government and the Government of the Philippines. The partnership aims to shift the Philippines to a sustained and more inclusive growth trajectory on par with other high‐performing emerging economies. Currently, USAID has six CDI partner cities: Batangas, Cagayan de Oro, Iloilo, Puerto Princesa, Tagbilaran and Zamboanga.


For more information on USAID's projects in the Philippines, click here.


Contact Us

USAID SURGE Project
9/F Salcedo Towers
169 H.V. Dela Costa Street
Salcedo Village, Makati City
Philippines 1227
Tel. +63 2 8878743

Email: comm@surge.org.ph



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