A Student Loan: The First Milestone
I know a photographer back home who, when he and a friend were hanging out a few weeks back, stumbled across an old portrait on a hard drive filled with his first professional pictures:
“Never forget the milestones that shaped you…” He said.
“…and always make sure the new ones are twice as far,” responded the friend.
A few short years ago, this was just another picture by an aspiring photographer – one of thousands he took that were filed away, left to gather whatever kind of dust megabytes collect. But retroactively, knowing what grew from that still shot, it represented a major breaking point for his career.
NWTF's Head Office in Bacolod
On only the third day of my fellowship here in the Philippines, I hopped in a van at 5:30am with four coworkers from my MFI, Negros Women for Tomorrow Foundation (NWTF). From our base in Bacolod City, we drove south for two hours to a town called Kabankalan where NWTF was hosting its first school fair. NWTF staff discussed student loan logistics with a group of 50 students and their mothers, and four universities came to speak about their respective programs. Afterwards, the students and their parents were able to sign up to avail student loans.
Students and their mothers meeting with NWTF staff (from left: Martina, Rhiana, Presy)
Across the auditorium, the mothers’ faces expressed a full understanding of the magnitude of this opportunity. Listening to our overview, heads nodded enthusiastically at the words“dream” and “opportunity” and “goal.” Throughout their conversations with NWTF staff, the students’ faces reflected genuine understanding that the door being opened could revamp their financial trajectories. They understood the weight of this milestone and were already dreaming of plans for a brighter future.
Closing the Capacity Gap
NWTF is a non-government organization (NGO) that has recently expanded to create an actual bank, Dungganon Bank, Inc. NWTF is the source for initial microcredit and, as clients work their way up from the lowest levels of poverty, they will be able to use Dungganon Bank for true banking. The bank is, in many ways, a natural progression from the NGO, helping clients transition from microcredit to formal savings.
As part of what is known as “Project Dugganon,” NWTF has developed four microfinance loan products – the main “negosyo” loan product (a general small business loan), a special loan (for home repair, supplies, improving facilities, etc.), a green loan (advocating environmentally-friendly stoves and solar lamps for the clients’ benefit), and a student loan. Upon taking out a general business loan and establishing good standing (i.e. consistent, timely repayment) with NWTF, a client gains eligibility for the other loans.
After drawing only minimal interest in the student loan product last year (less than 50 students funded), NWTF has relaxed the eligibility criteria to allow funding for students in a greater range of programs. Initially only providing loans for short-term technical courses, NWTF has expanded to include more traditional four-year courses, favored in the Philippines due to the prestige associated with a bachelor’s diploma. Low-interest student loans from NWTF will help close the funding gap and will enable these students access to educational pursuits that they are passionate about.
This capacity gap is very real. NWTF’s local area manager in Kabankalan explained to me how a small percentage of mothers were siphoning their business loans to fund their child’s education (our Research Department manager puts this number a bit higher at nearly 20-30% of the outstanding dollar value). Halfway through the school year, they would be unable to cover both their business costs and their child’s student fees, and the child would be forced to drop out.
With an active effort to promote NWTF’s student loan product, we hope to bridge this gap. For the sake of sustainability, we also hope to help deter clients from the alternative that many borrowers resort to: loans with 20% monthly interest from informal lenders (a practice known as “five sixing” – a 5₱ loan today requires a 6₱ payback in one month). Working with Vittana, NWTF is able to provide loans with a 1% monthly interest – quite an improvement over the alternative.
Education: A Virtuous Cycle
In the Philippines, high basic literacy levels (reportedly over 90%) obscure the true picture of education. In many ways, basic education gives students basic skills: reading, writing, and arithmetic. These skills merely provide students with requisite strength; technical and vocational programs serve to develop in students a capacity to operate heavier machinery. The tools acquired do more than grow a student’s set of basic skills, they cultivate in the student an ability to grow on his or her own. Providing education goes straight to the heart of Muhamad Yunus’ claim that “any program that merely meets the physical needs of a poor person…is not a true development program unless it leads to the unfolding of his or her creative energy.” With education, students are given a sustainable means to climb the ladder out of poverty.
Education will enable “true” development because it contributes to a virtuous cycle in three ways. Firstly, higher income leads to more savings, which will enable more development. If I can save, I can afford to send my child to school. If I can save, I don’t have to rely on income from my child’s work on a day-to-day basis. Secondly, the more education one has, the more capacity he or she will have to advance learning into new terrain and to implement newer technologies (hard or soft). Education, and its subsequent knowledge, builds on itself.
Finally, from a social perspective, a more educated individual will more likely be able to continue development efforts in his or her own community. At the school fair, Dr. Vince Sinining spoke on behalf of our host, Southland College. He grew up in the Philippines to parents who were farmers. With hard work and scholarship opportunities, he was able to go to college in the Philippines and then attend graduate school in the United States. He went on to work with the United Nations before deciding to return to the Philippines to help develop Southland College, in order to further the cycle of education.
Southland College in Kabankalan
Here in Kabankalan, Dr. Sinining’s mindset is hardly an exception. Reviewing the loan applications and notes from the conversations with students, it was readily apparent that the majority were motivated by two hopes in their pursuit of high education: to give their family a better life and to help their community. Many even wanted to become teachers, hoping to pass education on to younger students in their communities.
