Part of a series of posts from Bachelor of Commerce student blogger, Danny Hertz, written during a Loran Scholarship outreach project in the Philippines.
As many of you know, I’ve accepted an internship working this summer based out of Manila in the Philippines. I am currently in my second week working for a wholesale microfinance institution here, and am planning to send out updates on a bi-weekly basis. Your comments and questions are appreciated, and I will try to respond to them when I have internet access and a computer nearby.
Background Information
Q: Why on earth are you working in the Philippines this summer? Wouldn’t it be much easier to stay at home in Canada?
A: As part of my Loran scholarship, I am required to do three summer experiences: public policy, international personal and community development, and enterprise. Last summer was my public policy summer where I worked for the Canadian Embassy in Washington, this will be my international personal and community development summer, and next year will be my enterprise internship. After looking into a few different possibilities throughout the school year, I decided to pursue a position in the microfinance field this summer and wanted to spend some time in Southeast Asia. I had the good fortune to receive an offer from Seed Finance, and haven’t looked back since.
Q: What is microfinance?
A: Microfinance is the provision of basic financial services (lending, savings, insurance, money transfer) to the lower-income segments of society that the traditional, formal finance sector does not serve. Microfinance is being used as a tool to combat poverty in the developing world, and in my opinion, has the potential to make a greater, longer term impact than other types of development funding. Microcredit, the loans aspect of microfinance, has largely been a private sector initiative that has been proven that it can be self-sustaining and does not necessarily rely on continual external sources of grants or subsidies.
Q: How is microfinance used to help the poor?
A: By providing the financial services that we in the western world tend to take for granted, microfinance allows for individuals and families to increase their financial security and increase both their income and their wealth levels. Loans are provided for entrepreneurs to start or grow their own small businesses to provide for their families, savings products allow for families to put aside funds for sudden demands for cash that everyone faces (sickness, weddings, education expenses, etc.), while microinsurance helps reduce the vulnerability to external shocks that would otherwise devastate the family’s financial security.