MF 111: Microfinance and Development

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MF 122: Microfinance and Development

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Course This course covers definitions and terminology, rationale and objectives
Description
of microfinance, financial viability and access to capital markets,
characteristics of different microfinance. The students will learn how
microfinance becomes a tool and development especially with integrated
social services that empowers individuals who consequently influences
their respective families and communities. Social services that
accompany microfinance are information and education, health and
sanitation and insurance. The story of CARD MRI in relation to
integrated microfinance and social services will be discussed and will
serve as the main case study.
Course At the end of the course, the student should be able to:
Learning ● Explore the role of microfinance in economic development.
Outcomes ● Trace the evolution of microfinance.
● Discuss how poor countries use financial services.
● Discuss about the contribution to development, and how the stories
shape perception of microfinance.

Evidence of Teaching teacher will facilitate the following assessment:

Learning/ ● Group activity
Assessment ● Assignment
Tools ● Short Quiz
● Oral Recitation/reflection
● Conference Discussion
● Case Study
● Essay

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Topics Topics:
(Coverage) prelim
Session 1: Mandala of Life
Session 2:Evolution and history of microfinance
Session 3: The poverty situation
Session 4: Microfinance Institution (MFIs)
Session 5: Savings Micro-Insurance as a social service and added
value to Microfinance.
Midterm
Session 6 and 7: Who are the global microfinance players?
Session 8-9: Micro-Insurance
Pre final
Session 10: Different basic features of Microfinance as Social Business
and Social Enterprise.
Session 11: Important factors to be considered when starting an MFI to
eradicate poverty.
Session 12 and 13 Measuring impacts on poverty success stories
and impact studies on microfinance
Final
Session 14:Center Meeting
Session 15: Development as freedom Evaluate the empowerment
potential of loans among women in rural areas
Session 16 – 18:Growth and Development of MFI “The Case of CARD
MRI”
Target This course is offered to the fourth-year students taking up Bachelor of
Participants
Science in Entrepreneurship with Specialization in Microfinance.
Learning Time:

Means for The students may contact teacher for assistance and guidance to the
Learner following:
Support Instructor
Email:[email protected]

Summative For overall assessment of the module, the student Rubrics/

Assessment will internalize and discuss their own understanding
Standards
about the role of microfinance and will take a long
quiz to validate their learning. (See Module
Instruction)

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Icon Used in this module

To guide you through your offline module, we include icons. Here’s what they mean:

Activation of your prior knowledge icon.

These include introduction of the topic and preliminary activities
and/or exercises (not graded)
Acquisition of new knowledge icon.

This is the learning part of the module where content about the topic/lesson is being
discussed.

Acquisition of new knowledge icon (for online references transcription)

This is the learning part of the module where other learning tools such as video or e-
books about the topic/lesson is being discussed.

Application of acquired knowledge and/or competency icon.

This learning part of the module where the acquired competency and knowledge will be
practiced (not graded)

Application of acquired knowledge and/or competency icon.

This learning part of the module where the acquired competency and knowledge will be
practice (graded)

Assessment of acquired knowledge and/or competency icon.

This learning part of the module where the acquired competency and knowledge will be
evaluated through different assessment activities (graded)

Resources icon.

This part of the module provided other additional reading materials and/or references
for the student to use in their self-paced learning.
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This part of the module indicates the activity timeline as guide for the students
(instructions, submissions dates and other announcements).
 MF 111: Microfinance and Development
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PERIOD/TERM: Prelim-term

Welcome to Microfinance and Development course!

This course covers:
● Definitions and terminology, rationale and objectives of microfinance;
● Financial viability and access to capital markets
● Characteristics of successful microfinance offerings, and impact of microfinance.
● Definitions and terminology, rationale and objectives of microfinance;
● Financial viability and access to capital markets;
● Characteristics of successful microfinance offerings, and impact of microfinance.
● The story of CARD MRI along with its core values and principles in relation to integrated
microfinance and social services will be discussed and will serve as the main case study.
References:
● End of Poverty by Jeffrey Sachs
● The Triangle of Microfinance by Manfred Seller and Richard Meyer
● Reengineering Selected CARD Business Process by Dr. Jaime Aristotle Alip
● Microfinance Selected Readings Volumes 1 and 2 compiled by MykaReinsch

METHODOLOGIES
● Lecture/Discussion
● Small Group Discussion
● Library Research; Google Research
● Individual/Group Reporting
● Case Analysis

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● Role Playing
● Conduct of Oral Interviews
COURSE REQUIREMENTS
● Active Participation
● Advanced Readings in Assigned Topics
● Alternative/Authentic Assessment
● Attendance
● Case study/Critical Thinking
● Graded Recitation
● Individual/Group Reports
● Pass Major Exams and Quizzes
● On-time Submission of Requirements
Microfinance and Development

Course Content
● Self-awareness using Mandala of Life
● What is Microfinance?
● Evolution and history of microfinance
● Progress and challenges in microfinance in Asia
● Goals/triangle of microfinance
● Trends
● The poverty situation
● Development and the Millennium Development Goals
● The CARD MRI Story and Business Model

Let’s activate your prior knowledge!

Module 1
Good Morning Everyone!

Welcome everyone to module 1 of your course

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Now, let’s acquire new knowledge!

Session 1- Mandala of Life

Let us start the discussion by a short video of Who am I? A philosophical inquiry - Amy Adkins (using
the OTG)
https://www.youtube.com/watch?v=UHwVyplU3Pg
Done watching? If you are, that is good! Now, who can share any insight about the video?

Please write your insight below:

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MANDALA OF LIFE

Who am
I?

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STRENGTH HAPPINESS

DISLIKE
TRIUMPH

FAILURE LIKE

SADNESS WEAKNESS

Application

Synthesis:
Self and Group awareness is an important activity that all participants must experience. It will help
determine ones capabilities, weaknesses, likes, and dislikes, successes and failures in life and
unforgettable experiences which make what they are now.
In knowing our strengths, we can capitalize on them, in acknowledging our weaknesses; we can
bring to improve them.
Knowing oneself and others is a facilitating factor in group building and value formation.

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Assessment
Sharing (Who Am I?)
Everyone should participate and share their life experiences.
Mechanics:
● Giving you unlimited time to share your true to life experiences ( write your life story below).
● Can use English or Tagalog dialect.
● The experiences shared should reflect the Mandala of Life pictograph as shown above.

Who Am I?

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TOPIC TITLE: Evolution and History of Microfinance

Activate Prior Knowledge

Week 2

Hello everyone welcome to session 2!!!!

Course Content
● What is Microfinance?
● Evolution and History of Microfinance
● Progress, trends, and challenges in microfinance in Asia
● Goals - Triangle of Microfinance
“If you want 1 year of prosperity, grow grain. If you want 10 years of prosperity, grow
trees. If you want 100 years of prosperity, grow people.”Chinese proverbs
Overview:
• Microfinance is the provision of a broad range of financial services such as deposit, loans,
payment services, money transfers/remittances, and insurances to poor and low income
households and their micro-enterprises.
• By definition, it is important to note that Microfinance is NOT subsidized credit, NOT a dole-
out, NOT salary or consumption loans, and NOT a cure-all for poverty.

Acquire New Knowledge

Session 2: WHAT IS MICROFINANCE?

WHAT IS MICROFINANCE?

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Microfinance is the provision of a broad range of financial services such as deposit, loans, payment
services, money transfers/remittances, and insurances to poor and low income households and their
micro-enterprises. By definition, it is important to note that Microfinance is NOT subsidized credit,
NOT a dole-out, NOT salary or consumption loans, and NOT a cure-all for poverty.
The clients of microfinance are the economically-active, entrepreneurial poor (e-poor). Some
examples of these are shopkeepers, ambulant vendors and household based entrepreneurs. These
are the clients who have a stable economic activity and will be able to sustain and enhance these if
they are provided with even a small amount of readily available funds.
Who are the clients of CARD MRI?
Poor women who are willing to borrow to start a small business and attend meetings, save, pay insurance
premium, and repay loans without default weekly.
Husbands who also believe that they can do all of the above.
Poor women and men who have no time to attend weeklymeeting but would like to saveto save weekly.
Children who are at least 18 years and are willing to do at least saving, weekly meeting and insurance.
Children of who are below 18 years but would like to start saving weekly.

How can microfinance assist the poor?

If provided on a sustainable basis, microfinance can help increase income, build viable businesses, reduce vulnerability to
external shocks, empower the client, and improve the quality of their lives.
Principles of Microfinance
● That the poor needs sustained access to financial services and products and this sustained
access is a primary issue over interest rates.
● That the poor have the capacity to repay their loans and to save.
● That microfinance institution can be operationally and financially self-sufficient.
Evolution and History of Microfinance
● Ancient Egypt – Pyramids
● 15th Century - Franciscan Monks (Community Pawnshops).
More than 500 years before the birth of modern microfinance, Franciscan monks in Perugia, Italy,
developed their own method of social finance. They would lend money to the poor in times of crisis;
as collateral, they would hold some precious item and charge a fee for its safekeeping to cover their
operating costs. The idea was endorsed by the Pope and widely emulated. The monks called the fund
a “Monte di Pietà”, a Fund of Mercy. Today, we would call it a pawnshop.
. 1700s – Irish Loan Fund System by Jonathan Swift (no Collateral)
In those days the poor also lacked access to finance and it was Jonathan Swift, an Irish nationalist
and author of Gulliver's travels, who in the early 1800s founded a £500 fund to lend to “poor
industrious tradesmen” (Sheridan, 1787). Small sums of 5 to 10 pounds were loaned out and repaid
in weekly installments of 2 to 4 shillings, without interest. To overcome the problem of possible non-
repayment, borrowers were required to have two neighbours guarantee the loan, both of whom
would be notified in case of late-payments. On top of that Swift took all three of them to court in case
repayment was not made. Apparently this strategy worked very well since Swift is said not to have
suffered any losses from this enterprise (Hollis &Sweetman, 2001).
● 1800s - People’s Bank, Credit Unions in Europe by Friedrich Raiffeisen
Raiffeisen sought to understand the credit needs of farmers and craftsmen. With the support of the
wealthy class, he created a new association that helped small farmers acquire cattle so they wouldn't
have to mortgage their assets and go into debt. This association quickly evolved into a credit society
where farmers could borrow money at a low rate to buy their cattle directly.
● 1900s – Latin America, Agriculture/Reducing Oppressive Feudal Relations
In the early 1900s, various adaptations of these models began to appear in parts of rural Latin
America. While the goal of such rural finance interventions was usually defined in terms of

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modernizing the agricultural sector, they usually had two specific objectives: increased
commercialization of the rural sector and reducing oppressive feudal relations (it was a way of
structuring society around relationships derived from the holding of land in exchange for service or
labor) that were enforced through indebtedness. In most cases, these new banks for the poor were
not owned by the poor themselves, but by government agencies or private banks.
Early beginnings
● Informal credit and savings groups.
● Informal village level moneylenders.
1960’s to 70s
● Proliferation of government directed credit programs.
● State as the main provider of financial services.
● Development banks and agricultural credit projects.
Mid-80’s
Grameen Bank in Bangladesh
● Dr. Muhammad Yunus, economics professor at Chittagong University started an action
research program.
● Experimental credit program to solve banking problems faced by the poor.
● Started with 42 clients with US$27 of portfolio.
80’s – Onwards
● Many MFIs/Banks/NGOs were established and involved in microfinance including CARD MRI.
Prodem(Promocion y Desarollo de la Microempresa) in Bolivia – started by Pancho Otero.
● Prodem later gave rise to Banco Sol
Bank Rakyat Indonesia (BRI) – a government bank that created successful village banking
networks (Unit Desas).
● Largest commercial bank
● Gov’t revitalized unit desas.
● UDs measured by profitability, not portfolio
Bank Perkreditan Rakyat (BPRs) or People’s Credit Bank in Indonesia.
The Beginnings of microfinance during the 80s led to many MFIs collapsing due to:
● Trial and error, untrained staff.
● No proven direction growth.
● Unsustainable operations.
● Undiversified portfolio.
● Whims (a sudden desire or change of mind) of donors.
Depth and breadth of outreach still limited
1990s - The Financial Systems Approach
● Microfinance became the buzzword.
● Microfinance attracted attention from donors, academicians and development practitioners.
● Microfinance widely diversified and funded by donors, networks, apex organizations, lobby
groups and CGAP.
● Massive literature on microfinance that includes toolkits, handbooks and best practices guide.
● Most microfinance institutions are at an infancy stage operating at less than 10 years
● Rise of micro-credit summit campaign (1997) with a nine-year goal of providing financial
services to 100 Million poor families with 1,700 member institutions (800 of which are
practitioners.
Consultative Group to Assist the Poor (CGAP)
The CGAP is a global partnership of more than 30 leading organizations that seek to advance
financial inclusion. CGAP develops innovative solutions through practical research and active
engagement with financial service providers, policy makers, and funders to enable approaches at
scale. Housed at the World Bank, CGAP combines a pragmatic approach to responsible market
development with an evidence-based advocacy platform to increase access to the financial services
the poor need to improve their lives.
Microcredit Summit Campaign

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Building on the achievements of the 1997 Summit, a series of Global and Regional meetings have
since been successfully held. They have attracted more than 15,000 delegates from over 140
countries. From 1997 to the present, the Microcredit Summit Campaign has relentlessly pursued its
goals, maintaining a steadfast commitment to the Summit's four core themes. The Microcredit
Summit Campaign is a global effort to restore control to people over their own lives and destinies.
In November of 2006 the Campaign was re-launched with two new goals:
1. Reaching 175 million poorest families with credit for self-employment and other financial and
business services.
2. Helping 100 million families lift themselves out of extreme poverty.
FOUR CORE THEMES
● Reaching the Poorest
While we recognize the importance of financial inclusion for all overlooked by the traditional banking
sector, the Campaign specifically focuses on reaching the poorest families. In developing countries
these are families living below 50 percent of the poverty line. In industrialized countries the Campaign
is focused on all of those living below their nation’s poverty line.
● Empowering Women
Experience shows that women are a good credit risk, and that woman-run businesses tend to
benefit family members more
directly than those run by men. At the same time, through earning an income women achieve a
higher status in their homes, their communities, and their nations.
● Financial Self-Sustainability
Experience has shown that microcredit programs in developing countries can improve their efficiency
by structuring their interest rates and fees to eventually cover their operating and financial costs.
Though the economic context in industrialized countries is radically different, the Summit encourages
programs in these countries to explore ways of becoming self-sufficient so that, to the greatest extent
possible, their operating costs will be covered through direct revenue from program services.
● A Positive, Measureable Impact.
While financial measures such as program repayment rates give an indication of the strength of a
microcredit institution, the Campaign is committed to programs having a positive, measurable impact
on the lives of the very poor. The Campaign’s 100 Million Project is directly linked to this effort by
promoting the use of and collecting data from, poverty measurement tools to enable MFIs to
generate products and services that best help their clients move out of poverty.
Effects of Asian Financial crisis (1997-1998)on Microfinance (Study of MFIs in Philippines,
Indonesia, Malaysia and Thailand)
● Number of poor increased dramatically – more potentialcustomers, more competition, less
demand.
● Great reduction in economic activity.
● Arrears on MFI portfolio gone up while total value of assets gone down.
● Crisis had greater effect on institutions serving small business customers.
2000s Commercialization and Globalization of Microfinance
● Maturing financial institutions.
● Expansion of microfinance services both in depth and breadth of outreach.
● Rise of apex funding institutions
● Diversified funding sources (local and international creditors, tie-up with commercial sector,
savings).
● Use of information technology (eg. Softwares, MIX market, internet banking).
● Rise of innovations (loans and savings products, target customers, micro-insurance, strategic
alliances, evaluations) and intensified competition.
● Major shifts in institutional strategies.
● Push for commercialization and regulation and supervision of microfinance among regulators.
● Mergers, acquisitions, diversification of ownership.

Economic situation in Asia-Pacific that gave rise to microfinance“The Microfinance

BOOM!!!”

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● Population density – denser population generally morefavourable to sustainability.
● Annual income per capita.
● Human Development Index – includes measures of health, literacy & education as well as per
capita income.
● Many countries in poverty trap – poverty itself as a cause of economic stagnation
● Physical geography
● Countries in debt trap
● Governance failures
References:
🕮 The Alchemy of Microfinance – Dirk Steinwand, 2001
🕮 Pathways Out of Poverty – 2002
🕮 The End of Poverty – Jeffrey Sachs, 2005
🕮 UN Development Report
Progress and Trends of Microfinance in Asia
● Rapid expansion of microfinance in some countries (Philippines, Cambodia, Indonesia,
Bangladesh, India, Nepal)
● Emerging microfinance markets (eg. Mongolia, Laos, Myanmar, China, Pacific Islands)
● Regulation and supervision of microfinance (Cambodia, Philippines, Vietnam)
● Increasing sophistication in microfinance operations
● Microfinance operators reaching the double bottom lines of sustainability and impact
● Better depth and breath of outreach, product and service delivery innovations
● Stronger and more sophisticated networks and support groups
● Emergence of tie-ups with commercial institutions
Innovations in Asia
● Going to Scale
⮚ NABARD India – tie-up with 750 NGOs to reach 462,000 SHGs reaching 7.8 million clients
⮚ PKSF microcredit fund - partners with 200 MFIs in Bangladesh with 2 M borrowers .
⮚ Going to Scale
⮚ WEP Nepal – savings-led approach training 240 local NGOs reaching 130,000 clients
⮚ LPWF China –Grameen replication established in 1989
⮚ Reaching the Poorest
⮚ CFTS (CASHPOR) India – poultry program for full-time farm laborers.
Progress and Trends of Microfinance in Asia
● Product and Service Innovations
⮚ ASA Bangladesh– going beyond group guarantee
⮚ CARE/Bangladesh– family savings pilot project
⮚ CARD micro-insurance
⮚ Grameen Bank Bangladesh– housing and cell phone loans
⮚ PMUK Bangladesh– financial services for street children
⮚ WOCCU/FFH Philippines– credit with education and integrating VB methodology into credit
unions
● Innovations in Program Financing
⮚ MIX Market –virtual market place for donors, lenders, support groups and microfinance
practitioners.
⮚ Emergence of rating institutions for microfinance
● Innovations in program evaluation
⮚ AIMS/SEEP evaluation tool (learning from clients)
⮚ CGAPs poverty assessment tool
⮚ Social Performance Management (SPM)
⮚ Client Assessment Techniques Tools (CATT)
● Innovations in IT
⮚ Manual systems now being replaced by computerized loan tracking systems and accounting
softwares.
Innovations in Asia

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● Use of Technology
● Diversification of target clients
⮚ Farmers
⮚ Hardcore poor, Beggars, Male and Youth
● Development of new products and services
⮚ Insurance
⮚ Loans (Agricultural, merchandizing, health and others)
⮚ Savings Products (extended to other family members and community)
Goals – The triangle of Microfinance

Output

Sustainability Impact

Seedling Sapling Tree

Goals – The triangle of Microfinance
● Outreach –ability of the organization to reach out to poor families and provide them with
the products and services of the microfinance institutions
● Sustainability– ability of the organization to continue and sustain the provision of the
products and services to target clients today and tomorrow (future).
● Impact– the changes in the lives of the members, to their families and communities.
Issues and Challenges
● Morality
● Over-indebtedness of the poor caused by multiple loans and wrong assessments by
MFI.
● Over-saturation of accessible areas and absence of services in remote areas.
● Unfair competition.
● Negative publicity of other MFIs.
● Violation of code of ethics particularly client and staff pirating.
● Is microfinance “delaying” government response to poverty such as discriminatory laws,
corruption, and inadequate services
● Unclear/ no laws governing or related to microfinance in many countries
● Weak regulatory systems
● Further sophistication of microfinance operations.
● Massive scale, intense competition.
● Savings orientation/customer orientation of microfinance operators.
● Beyond group lending.
● More governments adopting regulation.
● Consolidation/mergers of smaller MFIs
● More depth of outreach
● Credit and social performance ratings
● Diversified products and services (to include savings, cash transfers, consumption loans,
micro-insurance, etc)
● Links of microfinance with business development services

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Application
Congratulations for finishing the session 2. Now, let’s have an activity. Please refer to
the instruction below.

Assessment

Self Activity (Next week)

● The student will present their own understanding on poverty and development situation of
the Philippines.
● Presentation can be in the forms of creative dance, sing and etc.
● The student will be given 3 minutes to present.
● Use your video recorder for your presentation.
● The assignment should be sending in my email account
[email protected]
Rubrics:

Criteria Percentage
Content 25%
Creativity 25%
Originality 50%
Total 100%

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Topic: The Poverty and Development

Activate Prior Knowledge

Week 3

Synthesis of Weeks 1 and 2

(Mandala, Microfinance Definition, History, Trends and Challenges)

Acquire New Knowledge

Session: 3 The Poverty and Development

The global population and poverty situation

https://en.wikipedia.org/wiki/World_population

In terms of Literacy

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In demographics, the world population is the total number of humans currently living, and was
estimated to have reached 7.8 billion people as of March 2020. It took over 200,000 years of human
history for the world's population to reach 1 billion, and only 200 years more to reach 7 billion.
The world population has experienced continuous growth following the Great Famine of 1315–
1317 and the end of the Black Death in 1350, when it was near 370 million. The highest
global population growth rates, with increases of over 1.8% per year, occurred between 1955 and
1975—peaking to 2.1% between 1965 and 1970. The growth rate declined to 1.2% between 2010
and 2015 and is projected to decline further in the course of the 21st century. However, the global
population is still increasing and is projected to reach about 10 billion in 2050 and more than 11
billion in 2100.
Total annual births were highest in the late 1980s at about 139 million and as of 2011 were expected
to remain essentially constant at a level of 135 million,[ while deaths numbered 56 million per year
and were expected to increase to 80 million per year by 2040. The median age of the world's
population was estimated to be 30.4 years in 2018. In mid-2019, the United Nations estimated that
the world population had reached 7,713,468,000.

Poorest countries in Asia based on GDP per capita

Country Population Per capita

North Korea 25,783,680 $651

Nepal 29,157,144 $718

Tajikistan 9,546,925 $729

Yemen 29,855,084 $851

Kyrgyzstan 6,528,867 $1,004

https://worldpopulationreview.com/country-rankings/poorest-asian-countries
Asia Countries

Asia is the largest continent on Earth, spanning over 17.2 million square miles (44.58 square
kilometers) and home to over 4.5 billion people as of June 2019. Asia comprises about 30% of Earth’s
total land areas of 8.7% of Earth’s total surface area. Asia is comprised of 48 countries, three of
which are transcontinental, having some land in Europe.

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Asia is home to very powerful countries, including China, India, Japan, and South Korea. China and
India have the largest populations in the world, with 1.44 billion and 1.38 billion people, respectively.
China and India have the largest and second-largest economies in Asia and the second-largest and
fifth-largest economies in the world.

The Philippine Poverty Indicators

Poverty Incidence for Basic Sectors: 2006, 2009, 2012 and 2015

Poverty Incidence for Employed and Unemployed Population: 2006, 2009, 2012 and
2015

Fen.wikipedia.org

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WHAT IS POVERTY?
These alternative perspectives have refocused the concept of poverty as a human condition
that reflects failures in many dimensions of human life:
1. Hunger
2. Unemployment
3. Homelessness
4. Illness and health care,
5. Powerlessness and victimization, and
6. Social injustice
In an attempt to define poverty operationally, the World Bank in 1990 adopted a rule-of-
thumb measure of US$ 370 per year per person at 1985 prices (the “dollar a day” poverty line) for
poor countries.

FRAMEWORK ON POVERTY ANALYSIS

There are four questions to ask in poverty analysis:
- Who are the poor?
- Where are they?
- Why are they poor?
- What are their coping mechanisms?
Top 15 Poorest Provinces in the Philippines

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https://www.google.com/urlcheck-robredo-flubs-poverty-and-political
Development in the Context of Microfinance
WHAT IS DEVELOPMENT?
Development is the process of economic and social transformation that is based on complex cultural
and environmental factors and their interactions (Business Dictionary).
Microfinance is a very powerful tool in development of the poor to improve their economic conditions.
MILLENIUM DEVELOPMENT GOALS
● To eradicate extreme poverty and hunger.
● To achieve universal primary education.
● Promote gender equality and empower women.
● To reduce child mortality
● To improve maternal health.
● To combat HIV/AIDS, malaria, and other diseases.
● To ensure environmental sustainability
● To develop a global partnership for development.

Application:

The end of our session. Congratulations to surpass this session. Let’s have a quick easy activity.
I’d like to know how much learning’s you gain. Please refer to the instruction below.

Assessment

Essay
Poverty is number one problem in every country that many people suffered. As student, how could
you help our country to eradicate poverty? Write your answer below.

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Rubrics:

Criteria Points
Grammar 5 pts.
Content 15 pts.
Neatness 5 pts.
Total 25 points.

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TOPIC TITLE:Microfinance Institutions (MFIs)

Activate Prior Knowledge

Week 4

Good day everyone welcome to session 4!!!!!!!!

Let’s review our lessons and insights from Week 2
*Play a GAME*
(Write if Yes, Positive, No, Negative)
Questions:
● Are you Happy this morning?
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● Do you take your breakfast this day?
____________________________
● Do you have crush/es here in school?
_____________________________
● Are your body and soul stays together now?
_____________________________
● Are you ready to combat POVERTY?
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Question:
Can pawnshops, lending investors, finance companies be considered as MFIs?
YES or NO
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Acquire New Knowledge

Session : 4 Microfinance Institutions (MFIs)

What is an MFI?
An institution or entity that provides financial and non-financial services to the poor. Main mission is
to improve the quality of life of the poor. In CARD, our main mission is total eradication of poverty in
the country.
What are the different categories of MFIs:
1. NGOs
2. Mass Based Organizations/Grassroot Organizations.
3. Cooperatives/Credit Unions.
4. Microfinance-Oriented Banks.
Others: Civic Organizations, Clubs and other socio-economic organizations.

MFIs and Microfinance-oriented Banks as compared with Commercial Banks, in general:

Indicators MFIs & MF- Commercial Banks
oriented Banks
Target Market Low-income, poor Highly bankable and mostly
and non-bankable belong to well-to-do families
clients

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Focus Scale and depth of Profitability, sustainability,
outreach especially market share
women sector

Customer MF services are Clients walk-in in bank

Acquisition brought to where branches
the clients live.
Thus, clients are
recruited from
house-to-house;
through meetings;
referrals by existing
clients at the area

Location Rural and urban Mostly in urban and city areas

locations that are
accessible to most of
the clients

Governance Allowing clients Controlled by few owners and

participation shareholders only

Products Simple, affordable, Sophisticated products designed

accessible that are to entice their high profile and
designed to serve the choosy customers.
needs of MFI clients

Procedures Very simple and Complex and complicated

understandable procedures that suit their high-
systems and end customers
procedures
Requirements Non-collateral with Collateralized with Long lists of
few and relevant paper requirement and
documents only documentation

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Application:
Wow! We made it for this session! Now, let’s have an oral recitation at this moment. Please refer to the instruction below.

Assessment
Quick essay
Instructions:
The student will be requested to answer any of the questions at random and write your answer below.
● What is your understanding of the definition of microfinance? Please elaborate.
● How can microfinance assist the poor? Who are the target clients of microfinance? Please explain.
● What are the three main principles in microfinance? Please explain.
● Give three important events in the history of microfinance? Please elaborate.
● Explain the three triangle (Goals) of microfinance. What is the latest additional goal of microfinance? Please
explain.
● What is your understanding on the definition of poverty and development? Please elaborate.
● What is your understanding on the difference of a Commercial Bank and an MFI? Please explain.
● Give three issues and challenges in microfinance. Elaborate your answer.
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TOPIC TITLE: Savings

Activate Prior Knowledge

Week 5

Welcome to our Week 5!!!

Let’s review our lessons and insights from session 4!!!

Acquire New Knowledge

Session 5: Savings
What is Savings???
Conventional Definition:
Income - Expense = Savings
CARD Definition of Savings:
Income - Savings = Expense
Why People Save?
1. Children’s education

2. Capital for business (Existing or new business)

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1. Retirement/better life (Wealth accumulation)

2. Emergency needs (Illness, disability, Death)

3. Everyday needs (School fees, food, utilities)

4. Acquire fixed assets (House renovation, appliances)

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Where to Save - Bank or Piggy Bank?

Keeping savings in a piggy bank is tempting as it is very accessible and easy to withdraw.
Opening a bank account will distant you from spending your savings and gives security.
Friendly advise.
Put your money intended for emergency fund (equivalent to 3-6 months of yoursalary) to a bank

Disadvantages of Saving through a Piggy Bank

1. Potential for theft, overspending, demands from family.
2. Value cannot cope with inflation rate.
3. No returns/income from savings
Importance of Saving in Banks
1. Withdrawability– easy access.
2. Security – deposits are insured, no problems of theft.
3. Access to other services - loans.
Returns
Interest income; investment
Compounding Interest - is interest calculated on the initial principal and also on the accumulated
interest of previous periods of a deposit or loan.
Compounding Interest Sample

With compounding interest, savings will surely be growing.

Address Inflation
Inflation is a sustained increase in price level of goods and services in an economy over a period of
time.
-Saving money through banks can help cope with inflation because of the interest it will earn
compared to keeping money in a piggy bank.
-But do not just be a saver, be an investor as well.
Put your oney intended for emergency fund (equivalent to 3-6 months of yoursalary) to a bank
Importance of Saving in Banks

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Good formula:
Income – Savings = Expenses
But this is better:
Income – Investments = Expenses
Savings and Investment
1. It takes money to make money.
2. It is important to save not just for emergency purposes but also for business and other
opportunities.
Savings + Opportunities = Investment
Note:
The most hardworking employee is MONEYwhen you let it work.
Forms of Investment
1. Time Deposit
2. Government Securities
3. Variable Universal Life (VUL)
4. Mutual Funds

Other Forms of Savings

Non-Monetary Form such as:
1. Jewelry
2. Livestock
3. Inventory
4. Land
5. House
6. Durable items
Problems with non-bank savings
1. Cash. Potential for theft, overspending, demands from family.
2. Jewelry. Theft, loss, difficulty of selling in an emergency.

3. Livestock. Theft, death of animal, difficult to sell in an emergency.

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4. Inventory. Spoilage, theft, storage

5. Land and house. Not easy to sell and dispose or liquefy.

6. Durable items. Depreciation, Theft

Retirement Savings
The What? Why? and How?of Retirement Savings
What is retirement savings? The total amount you accumulated in your savings
account/investment at the age of 60.
Why save for retirement?Peace of mind; Security; safety; health; enjoyment with family; future of
children and grandchildren.
How to build-up and achieve retirement savings?
1. compute for the no. of years before the age of 60;
2. commit how much you would like to save daily, weekly or monthly until you reach 60;
3. Multiply the amount with the no of years.
4. You will get the total amount.
5.

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Example/illustration of computation of retirement savings?
a. Hero is a student and now 18 so he will have 42 years more to reach 60;
b. Hero commits not to smoke anymore so this makes him capable and committed to save 15
pesos daily in his account with CARD Bank which he will do monthly to a total of 450 pesos;
c. 42 years x 12 =504 months x 450 =Php226,800
There is a great potential that Hero will be able to save more since he can adjust the amount base on
his changing stature in life for example when he gets employed or established a business, he can
definitely save more.

Application:
Good Job! We finished our session. In order to test your learning for this session, I will
give an assignment. Please refer to the instruction below.

Assessment

ASSIGNMENT
Students will make a written “Retirement Savings Plan” stating their objectives or dreams why they want to achieve the
plan. To be submitted the following week.
Note:
1. The assignment must be of compose of 3 paragraphs and compose of 150 words.
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2.
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