HomeFeaturesTeaching self-sufficiency: How Philippine diocese’s microfinance program empowers poor

Teaching self-sufficiency: How Philippine diocese’s microfinance program empowers poor

When it comes to the issue of financing, most people immediately think of decisions and policies that would result in either a booming economy or high net income for corporations or individuals.

Yet, the concept of sustainable finance is not solely determined by higher or lower numbers, especially within the Catholic context.

Microfinancing is not commonly seen in the programs of many dioceses in the Philippines, except for a few. 



One of the country’s Catholic pioneers in this field is the Diocese of Legazpi, specifically through its affiliated non-government organization (NGO), SEDP-Simbag sa Pag-Asenso, Inc.

Amid the common negative perceptions about the ethics of microfinancing, it is clear to Simbag what its mandate is.

“We are not in the business of lending. We are on the mission of finding solutions to poverty,” said Fr. Rex Arjona, President of Simbag and a member of the diocese’s finance council.

Socially responsible

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The Diocese of Legazpi has long established hard lines against investments in ecologically harmful industries such as coal and mining. 

It was a leading voice in opposing mining in Rapu-Rapu Island in Albay a decade ago, citing pollution of the nearby natural environment and the lack of economic benefits for locals.

Soon, the diocese will roll out its finance manual that adheres to the Church’s teachings, which will also be reflected in the operations of Simbag and other affiliated entities. 

One basis is Mensuram Bonam, a Vatican publication that provides guidance for ethical and responsible Catholic investing.

Another guiding document is Caritas in Veritate, the encyclical of Pope Benedict XVI that reflects on economic and social issues. 

According to Arjona, they abide by one of the document’s key messages – that the economy needs people-centered ethics to function correctly.

“Our microfinance works on two fronts: to protect the most vulnerable from financial exclusion and exploitation,” he said.

Simbag focuses on providing loans and other products to aid in addressing issues such as education, family welfare, and disaster response. 

For the latter, its niche is aiding small enterprises to ensure business continuity in the aftermath of typhoons by offering calamity loans with discounted interest rates or moratoriums where customers do not have to pay immediately.

As part of innovative solutions, he also noted, “Our board approved us to set aside PHP100 million (US$1.7 million) to cover expenses for zero-interest loans,” which were used to assist those hit by storms Kristine (international name: Trami)  and Pepito (international name: Man-yi) last year.

Standard-setting

Simbag initially started as a program of the Diocesan Social Action Center in 1994 before becoming its own entity a decade later. 

The journey for the NGO has not been easy, especially with the challenges in the Philippine microfinancing industry.

Arjona recalled that they faced several risks in the first few years, such as a lack of expertise in the field of financing, potential monetary losses, and dependency on donor organizations. 

However, they made another form of investment that ultimately helped their sustainability: forming partnerships.

He mentioned the support of local organizations such as Catholic Relief Services (CRS) and Caritas Philippines, as well as European groups, as instrumental in ensuring the early stability of Simbag. These partnerships have remained strong to this day.

“CRS partnered with us for anticipatory action and cash-based quick response, making use of our systems and network. We served as a conduit for areas with no cash remittance,” he added, referring to the recent barrage of storms that hit the Bicol region.

Another challenge is dispelling misconceptions and going against typical trends associated with microfinancing, which Simbag addresses through concrete actions.

“We also face certain skepticism on how lending and spirituality should be mixed,” he said. “Part of our commitment is to maintain the lowest interest rates among fellow industries.”

While their income is not as high as it could be if they imposed higher interest rates, the NGO remains financially stable. Compared to four years ago, it has increased its starting loan to PHP10,000 (US$171.00).

It also ensures that at least 10% of its net surplus is given back to aid the Social Action Centers in their operations. 

Some of the excess is also given to partner communities for college scholarships, disaster response, and enterprise development.

Simbag also currently sits as a board member of the Microfinance Council of the Philippines, where it is a leader in advocating for stronger policies on green financing and adopting the ESG framework, often outpacing for-profit groups within the body.

Through it all, the NGO maintains its mission to aid micro-enterprises and the entrepreneurial poor as part of its social justice agenda, treating it “as part of our DNA.”

‘Low-hanging fruit’

Given its relatively sustainable investments and microfinancing, the Diocese of Legazpi has not been as directly involved in the national divest-invest movement. 

However, Arjona regards it as a “low-hanging fruit,” acknowledging the role of the finance industry in taking care of the Earth.

He believes that the Catholic Bishops’ Conference of the Philippines (CBCP) is capable of living up to its promise to withdraw all of its finances from banks supporting fossil fuels by 2025. 

But to do so, it needs to promote wider awareness of divest-invest, coupled with financial literacy among bishops and financial personnel.

“Mensuram Bonam is an unfamiliar document for many finance officers and bishops,” he said.

Another key step is to “group all the faith-based institutions making strong stances to send a strong signal to the finance powerhouses.” 

Presenting examples of sustainable models that can be scaled up and replicated, such as the practices of Simbag and the Diocese of Legazpi on microfinancing, would aid in this action.

Ultimately, adopting the “teach a man to fish” approach not only applies to the recipients of microfinancing but also to the CBCP itself.

“They have to make dioceses understand that this can be done. Part of the challenge is dioceses do not really look at their finances, especially the smaller ones. They underestimate their power and value,” Arjona stated.

This is the third part of a four-part series featuring the best practices on Catholic-led fossil fuel divestment in the Philippines.

John Leo is the National Coordinator of Aksyon Klima Pilipinas and the Deputy Executive Director for Programs and Campaigns of Living Laudato Si’ Philippines. He has been a climate and environmental journalist since 2016.

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