The other day, I came across a what seemed like a strange clause in the policy for ASKI and Vittana’s pilot Loan for Educational Development Program (LEAP): Only third and fourth year students would qualify for a loan. I found myself wondering, what kind of impact are we making when the person has already made a commitment to go to college and already found a way to pay for it? Why loan them money to do what they already planned on doing?
After travelling to rural areas across Central Luzon and meeting with many potential borrowers, I found the answer. In providing loans to students through ASKI, Vittana is opening two doors simultaneously, one for the student and one for the parents. Let me explain. In contrast to many other countries around the world, higher education is not something that is only available to those fortunate enough to have wealthy parents, to receive a scholarship or to qualify for a loan. Even among the poorest households in the Philippines, higher education is a family effort, where many parents are determined to make sure their child goes to college and are willing to pay for it, regardless of their financial ability. Thus, it’s not a question of: “Will my son/daughter go to college?” Rather, it is a question of: “How much am I going to have to sacrifice to give my child the opportunity for a better life?” By offering loans to students who are already in school, Vittana is bringing their families out of a cycle of debt and poverty, providing opportunity for the student by keeping them in school long enough to graduate and providing opportunity to the parents by freeing up money for them to invest in their small businesses. Let me give you some examples.
Rice farmers hard at work in Central Luzon
Lourdes Andres is a rice farmer from a little province called Bongobon in Central Luzon. Aside from rice, Lourdes earns a living by raising pigs and selling clothing and homemade rice cakes. Anna is Lourdes’ youngest daughter, who Lourdes boasts is a 3rd year marketing student at the Nueva Ecija University of Science and Technology. No one in Anna’s family has ever gone to college, and Lourdes wants nothing more than to see her daughter graduate college. Because rice harvesting only provides seasonal income and Lourdes’ other entrepreneurial activities only make enough money for living expenses, Lourdes is in a perpetual cycle of borrowing from her neighbors in order to afford her daughter’s school: She borrows money, then pays her neighbors back after the rice harvest and gives them cavans (or sacks) of rice as interest payments. The interest payments take away potential profits she could obtain from her rice harvests, resulting in a need to borrow from them yet again. In fact, for every 1,000 pesos (about $20) she borrows, the interest is one cavan of rice worth nearly 1,000 pesos, meaning that her borrowing interest rate is 100%. No wonder she has trouble scraping by!
Lourdes’ biggest worry is that she will not be able to afford to keep her daughter in school. Over homemade rice cakes kindly provided by Lourdes, we presented the new student loan product that is now available to Anna through Vittana and ASKI. We explained to her that we could lend Anna up to 20,000 pesos per semester at a low 4% interest rate (that definitely beats 100%!), and told her that this money comes from generous individual lenders far away in the United States. We then asked her if she and her daughter would be interested in applying. While I did not understand the words of Lourdes’ response (I was speaking through a translator), her moving display of tears and smiles said enough. Yes, she would love to apply for this loan.
Maria, excitedly telling me about her daughter
Many poor families in Central and Northern Luzon are rice farmers, and this business of using sacks of rice as interest payments is quite common. Maria Concepcion Magpali is a single mother with seven children. Twenty-two year old Cheryl is the youngest, and her father died from rabies when she was just 10 months old. Cheryl attended two years of vocational school for computer programming, funded by her mother. To pay for school, Maria, like Lourdes, borrowed from friends and neighbors and paid them back with an interest of one cavan of rice per 1,000 pesos borrowed. Maria struggled a lot during Cheryl’s education, and she knows that she cannot afford to do this again. She laments that Cheryl will not be able to continue her education if she does not receive a loan.
Because ASKI is in the beginning stages of implementing an educational loan program with the help of Vittana, part of my job is assisting in marketing and getting the word out about ASKI’s newest loan product. I spend lots of time in a tricycle crisscrossing fields of rice in the sweltering heat to attend ASKI community meetings held in little huts in rural areas.
ASKI Puangi Community Center
At the community meetings (each comprised of about 20 people), I introduce myself and Vittana and present the educational loan product to interested mothers. They are all very excited to meet me (At most centers I am the first foreigner to ever attend their community meetings) and many are interested in applying their son or daughter for an educational loan. Like Maria and Cheryl, countless families become overburdened by a cycle of debt, resulting in many students dropping out after their first or second year of college. Providing loans to 3rd and 4th year students relieves the financial burden of the students’ families, allowing them not only to invest more in their family businesses, but also allowing their children to continue college, obtain a degree, and substantially increase their income and create a better life for themselves and their families.
*Anna Lourdes was fully funded as of September 2011. Click here to view her profile.
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