Exemplary Practices: MicroCredit - Pres Roxas, Cotabato Prov.

President Roxas, Cotabato Province

Kaunlaran sa Kabuhayan: Microcredit for Livelihood Program

Kaunlaran sa Kabuhayan: Microcredit for Livelihood Program Copyright Š 2005 Philippines-Canada Local Government Support Program (LGSP) The Philippines-Canada Local Government Support Program encourages the use, translation, adaptation and copying of this material for non-commercial use, with appropriate credit given to LGSP. Although reasonable care has been taken in the preparation of this book, neither the publisher and/or contributor and/or editor can accept any liability for any consequence arising from the use thereof or from any information contained herein.

Printed and bound in Manila, Philippines Published by: Philippines-Canada Local Government Support Program Unit 1507 Jollibee Plaza Emerald Ave., Pasig City 1600 Philippines Tel. Nos. (632) 637-3511 to 13 www.lgsp.org.ph This project was undertaken with the financial support of the Government of Canada provided through the Canadian International Development Agency (CIDA).

Kaunlaran sa Kabuhayan: Microcredit for Livelihood Program PRESIDENT ROXAS, COTABATO PROVINCE

Philippines-Canada Local Government Support Program (LGSP) Documentation of LGU Exemplary Practices

Replicable Practice

KAUNLARAN SA KABUHAYAN: MICROCREDIT FOR LIVELIHOOD PROGRAM IN PRESIDENT ROXAS, COTABATO PROVINCE (2ND Class Municipality)

CONTENTS Summary

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Project Description: Helping government workers in need

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History: How the project was initiated

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Results: Improving incomes of local government and its workers

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Key Implementation Steps

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Analysis and Lessons Learned: Investing in people is good business

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Annexes: Annex A – Executive Order creating the Expanded Local Finance Committee Annex B – KKP Policies and Implementing Guidelines Annex C – KKP Flow Chart Annex D – KKP Livelihood Project Form

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Kaunlaran sa Kabuhayan: Microcredit for Livelihood Program PRESIDENT ROXAS, COTABATO PROVINCE

SUMMARY The Kaunlaran sa Kabuhayan (KKP) is a successful microcredit and revenue generation program implemented by the municipal government of Pres. Roxas in North Cotabato. Launched in 2002, KKP provides easy-to-access, low-interest loans to low-income local and national government employees and barangay officials, as well as other poor individuals. These loans help beneficiaries pursue incomegenerating schemes in agriculture, livestock raising, aquaculture and transportation.

After two years of implementation, the project has significantly improved the incomes and general wellbeing of beneficiaries, as well as the municipal government of Pres. Roxas. From an initial Php 2 million seed fund, the KKP has released some Php 24.6 million to 700 individual beneficiaries attracted by the low, one-time 10% interest fee with no monthly or annual interest payments.

These loans have made possible the growing number of micro-enterprises in Pres. Roxas, including livestock and poultry raising, inland fish farming, diversified farming, fruit tree growing, and small transport businesses. The LGU has also gained additional income from the following: 1) the 10% onetime interest it charges on the livelihood assistance loans, 2) market fees charged for every live meat sold (from the livestock raised from individual livestock-raising projects), and 3) increase in tax revenues as more residents are able to pay their taxes as a result of the improved incomes.

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Kaunlaran sa Kabuhayan: Microcredit for Livelihood Program PRESIDENT ROXAS, COTABATO PROVINCE

Project Description: Helping Government Workers in Need Most local government units (LGUs) seek to address poverty and unemployment from a broad perspective. Pres. Roxas and its mayor, however, took a more personal view. Mayor Jaime Mahimpit saw poverty through the eyes of the people who worked with him – the municipal and barangay government employees and officials. Mayor Mahimpit believed that an LGU functioned better if its workers were happy and well; therefore, an LGU should be concerned with the economic wellbeing of its workers.

From this perspective, Mayor Mahimpit Basic Profile: Pres. Roxas, North Cotabato discovered that many municipal employees Location: North Cotabato sometimes missed work for economic reasons. Land Area: 61,825 hectares 42,812 Some traveled to Cotabato City to apply for or Population: Population growth: follow up salary loans with the Government Ave. HH size class: 2nd class Service Insurance System (GSIS) or the Land Income No. of barangays: 26 Bank of the Philippines (LBP); others absented Land use/Terrain: inland; generaly flat and rolling hills themselves to avoid usurers and money low, Major industries/economic activities: lenders they owed money to. Employees and agriculture officials were also forced to skip official functions at times, because they lacked funds for transportation and other expenses; LGU stipends for such activities were often deemed inadequate.

The mayor also noticed that among the growing number of out-of-school youth playing in the public basketball court, many were children of municipal employees. Mayor Mahimpit thus realized that many LGU employees could not afford to send their children to college or vocational school on their government salaries.

With these insights, Mayor Mahimpit, together with his team of local officials, came up with an innovative scheme to implement and manage a livelihood assistance project for low-income LGU employees and municipal and barangay officials, and other residents of Pres. Roxas. In 2002, the Kaunlaran sa Kabuhayan Program (KKP) was born, with the following basic objectives: Provide livelihood assistance Capacitate project beneficiaries Increase financial security for low-income earners in and outside the LGU Enhance food security Reduce poverty Contribute to the economic growth of the municipality Ensure sustainable development Generate additional income for the LGU

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Kaunlaran sa Kabuhayan: Microcredit for Livelihood Program PRESIDENT ROXAS, COTABATO PROVINCE

Project History: How the project was initiated To implement the project, Mayor Mahimpit first convened the Local Finance Committee (LFC), which undertook the task of designing a project that would address the problem of financial insecurity among local government workers and other sectors.

As a first step, the committee decided to expand its membership so that more innovative ideas on revenue generation and resource mobilization could be surfaced. From an initial membership of 5 -- the Treasurer, Budget Officer, Planning Officer, and the SB Chair on Finance and Appropriations and the mayor -the LFC grew to have 20 members. (See Annex A for Executive Order creating the Expanded Local Finance Committee) As a result, LFC brainstorming sessions on possible revenue sources -- previously limited to the Internal Revenue Allotment (IRA), local taxes and permits -- soon benefited from new ideas. One such idea was a livelihood assistance project that would respond to the additional financial needs of municipal and barangay officials and employees, and later, teachers, farm workers and other low-income earners.

Results: Improving incomes for the LGU and its workers After three years, the project has made a real impact on the economic conditions of its beneficiaries and become a viable source of additional income for the LGU. Concrete gains from the project include the following: More livelihood and income opportunities. In three years, the LGU, through the KKP, released some Php 24.6 million in loans to 700 beneficiaries.

These include national, municipal, and barangay workers as well as private individuals that have started livelihood projects. Projects funded by the loans include hog, swine, goat and cattle raising, rice/corn/sugarcane production, diversified/ high value crop farming, tilapia culture, multicab/van operation, and fish vending.

Greater financial security for beneficiaries. Loan beneficiaries have also been able to reduce their dependence on high interest loans from private moneylenders to augment their limited income.

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Kaunlaran sa Kabuhayan: Microcredit for Livelihood Program PRESIDENT ROXAS, COTABATO PROVINCE

Enhanced food security. With their combined outputs, the range of agricultural and fishery projects started by beneficiaries have also contributed to increasing productivity as well as food security in the municipality.

Enhanced LGU capacity for microfinance management and revenue generation.

The LGU has created an organizational structure within the bureaucracy skilled in managing the microcredit program, releasing loans in record time as well as adequately monitoring and evaluation livelihood projects.

Additional income for the LGU. Since June 2002, the project has earned the LGU a total Php 2.3 million pesos in additional income.

Key Implementation Steps Pres. Roxas was able to make its KKP project a success by undertaking the following key implementation steps.

1. Building consensus on the project The LGU first firmed up consensus to pursue the program through the discussions of the expanded LFC. With its broader membership, LFC was able to undertake a consultation process in designing the program, and the KKP was enriched by inputs from many departments and offices within and outside the LGU. 2. Designing the program After deciding on a livelihood enhancement and assistance through microfinance program, the LGU formulated the necessary policies to institutionalize and implement the program, including a manual of operations that outlines the loan requirements and the processes involved in accessing livelihood assistance. Safety measures that would protect the LGU and its borrowers in cases of loan payment defaults, disputes and other contingencies were also developed. The LFC took the lead in formulating these policies, with technical assistance from external microfinance experts who gave inputs on how to ensure the viability of such policies. (See Annex B for KKP policies and implementing guidelines.)

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Kaunlaran sa Kabuhayan: Microcredit for Livelihood Program PRESIDENT ROXAS, COTABATO PROVINCE

3. Obtaining legislative support With policies and guidelines in place, the executive branch then obtained Sangguniang Bayan (SB) approval for program implementation and appropriation of seed capital fund. This proved relatively quick and easy because the Vice-Mayor and 5 SB members were named members of the LFC. Within one week, the project was reviewed and approved by the SB. The SB then passed a resolution adopting the KKP and authorizing the Mayor to open a special bank account for its operations. The SB also allocated an initial capital investment of Php 2 million for the project, which was sourced from the LGU’s General Fund.

4. Opening a special bank account for the project Following SB approval and budget allocation, a special bank account was opened by the LGU exclusively for KKP funds and transactions. The Php 2 million allocated for the program was deposited in the account and subsequent withdrawals for program operations and for loans were made from the deposit.

5. Creating committees With the project approved and a budget allocated for operations, the necessary structures were created to manage and implement the project. Six committees were created within the LGU to undertake the process of screening and approving loans: A Technical Committee was responsible for the evaluation of project proposals submitted by proponents/applicants. (See Annex D for KKP Livelihood Project Form) A Screening Committee received submitted project proposals for loan funding. It then conducted screening, which included an ocular survey of the proposed site/business location and personal interviews with the proponents/beneficiaries to validate the information required for the approval of the loans. The committee ensured that screening did not take more than 2 days.

An Inspection and Verification Committee received the endorsements of the Screening Committee for proposals that passed the screening process. It then conducted on-site inspections and evaluated the feasibility of the projects being proposed in relation to the proposed site or business location. Again, inspection and verification took no more than 2 days.

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Kaunlaran sa Kabuhayan: Microcredit for Livelihood Program PRESIDENT ROXAS, COTABATO PROVINCE

A Processing Committee received the proposals that have been verified and endorsed by the Inspection and Verification Committee, and again reviewed the applications for the completeness, authenticity, and propriety of the documents. Upon completion of the committee’s work, a cheque was prepared corresponding to the amount of the approved loan.

An Approving committee then made a final review of the documents to ensure that these bore the signatures of the Screening, Inspection and Verification, and Processing Committees. The prepared cheques were then released to the loan beneficiaries.

A Monitoring/Evaluation/Assessment Committee conducted monitoring activities to ensure productivity and profitability of the project See Annex C for KKP Flowchart.

Fees and charges comprised 10% of the loan amount; this is a one-time-only, standard interest rate applied to all types and amounts of loans. The 10% rate is broken down as follows: 5.0% Technical Fee 1.5% Processing Fee 1.5% Inspection/Verification Fee 2.0% Monitoring and Evaluation Fee 6. Conducting monitoring and evaluation The municipal agriculturist was tasked with monitoring most of the projects, as a majority of them were agricultural in nature, and reported the findings to the LFC. An LFC member, in turn, submitted monthly financial reports to the mayor and LFC chair, one week before the monthly meeting of the LFC, to give members time to read the report and prepare their comments.

7. Ensuring program sustainability Sustainability measures being pursued by the LGU include: Creating an office for business operations in the LGU – the Office of the Municipal Economic Enterprise Development Officer (MEEDO). MEEDO aims to institutionalize economic enterprise development as a specific thrust of the LGU for the long-term November 2005

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Kaunlaran sa Kabuhayan: Microcredit for Livelihood Program PRESIDENT ROXAS, COTABATO PROVINCE

Ensuring annual budget allocations for the program Ensuring transparency in all transactions Matrix of Key Implementation Steps Key Implementation Steps 1. Building consensus for the project 2. Designing the program 3. Obtaining legislative approval 4.Opening a special bank account 5. Creating working committees 6. Conducting monitoring and evaluation 7. Ensuring sustainability

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Expected Outputs Consensus on the project

An operations manual and other policies Ordinance/resolutio n approving the project A special bank account for the project Working committees A monitoring and evaluation scheme

Person/ Agency Responsible Mayor, LFC

LFC SB, Mayor Mayor LFC, working committees

Budget/ Resources Required Time and budget for meetings Political will on the part of the LGU Willing and competent LFC members Time and budget for LFC meetings to formulate the policies SB support Time and budget for SB hearings SB resolution authorizing the opening of an account Initial deposit Time, budget and personnel for the work of the committees Time, budget and personnel to conduct monitoring and evaluation

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Kaunlaran sa Kabuhayan: Microcredit for Livelihood Program PRESIDENT ROXAS, COTABATO PROVINCE

Analysis and Lessons Learned: Investing in people makes good business With most LGUs interested in pursuing livelihood programs, Pres. Roxas’ KKP may be may serve as one replicable model in livelihood generation.

LGUs that may not have the capacity to replicate Pres. Roxas’s initial capitalization of Php 2 million pesos may opt for a smaller capital outlay at the beginning of the program. Other elements that may be required to replicate or adapt the practice include: Technical expertise in microfinance, which may be obtained from local or external experts. Such experts may help the LGU design a microfinance scheme that would consider existing capacities, resources and limitations of the LGU and provide options for a viable and profitable scheme.

Capacity development activities for personnel and officials who will manage the project. Experts may also be called in to provide inputs on what capacity development activities may be necessary. Funds for such activities may also be needed.

Openness to participatory, multi-stakeholder processes in undertaking the project as well as a consultative local chief executive with the political will to pursue a similar program and ensure that the project remains free from political pressure and patronage.

Team spirit and oneness of purpose in improving the economic wellbeing of families in the municipality Competence and commitment of program staff/officials as well as transparency and accountability among the members of the LFC and the working committees. This can be ensured by clearly defining roles, tasks, and functions of LFC and committee members.

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Kaunlaran sa Kabuhayan: Microcredit for Livelihood Program PRESIDENT ROXAS, COTABATO PROVINCE

Institutionalization of program policies, systems and mechanisms, including a Manual of Operations, regular committees, a monitoring and evaluation system, and a regular budget allocation Entrepreneurial attitude, knowledge and skills on the part of beneficiaries

Who to contact if interested in replication: Pres. Roxas Mayor Jaime H. Mahimpit Tel. (064) 278-4736

Annexes: A. B. C. D.

Executive Order creating the Expanded Local Finance Committee KKP Policies and Implementing Guidelines KKP Flow Chart KKP Livelihood Project Form

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Kaunlaran sa Kabuhayan: Microcredit for Livelihood Program PRESIDENT ROXAS, COTABATO PROVINCE

Annex A: Executive Order creating the Expanded Local Finance Committee

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Kaunlaran sa Kabuhayan: Microcredit for Livelihood Program PRESIDENT ROXAS, COTABATO PROVINCE

Annex B: KKP Policies and Implementing Guidelines

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Kaunlaran sa Kabuhayan: Microcredit for Livelihood Program PRESIDENT ROXAS, COTABATO PROVINCE

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Kaunlaran sa Kabuhayan: Microcredit for Livelihood Program PRESIDENT ROXAS, COTABATO PROVINCE

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Kaunlaran sa Kabuhayan: Microcredit for Livelihood Program PRESIDENT ROXAS, COTABATO PROVINCE

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Kaunlaran sa Kabuhayan: Microcredit for Livelihood Program PRESIDENT ROXAS, COTABATO PROVINCE

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Kaunlaran sa Kabuhayan: Microcredit for Livelihood Program PRESIDENT ROXAS, COTABATO PROVINCE

Annex C: KKP Flow Chart

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Kaunlaran sa Kabuhayan: Microcredit for Livelihood Program PRESIDENT ROXAS, COTABATO PROVINCE

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Kaunlaran sa Kabuhayan: Microcredit for Livelihood Program PRESIDENT ROXAS, COTABATO PROVINCE

Annex D: KKP Livelihood Project Form

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Kaunlaran sa Kabuhayan: Microcredit for Livelihood Program PRESIDENT ROXAS, COTABATO PROVINCE

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Kaunlaran sa Kabuhayan: Microcredit for Livelihood Program PRESIDENT ROXAS, COTABATO PROVINCE

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