Chapter 1

THE PROBLEM ANSD ITS SETTING

Introduction

Nowadays, in the City of Ligao, most of the small businesses we can see

in our community are sari-sari stores. They are retailing products with small

profits. Sari-sari store is the term used in the Philippines for small convenience

stores. It is from the Tagalog word "sari-sari," which means "variety." Such

stores form essential economic and social locations in the Filipino community.

It is present in almost all neighborhoods, sometimes in every street. The store

is often attached to or part of the owner's house, but it may also be a

freestanding store just in front of the owner's house. Many stores have

advertising material alongside the store name on the signboards1.

In this crisis, sari-sari store owners borrow money from microfinance

companies—the loan to have a capital in their business and pay it back with

interest. Microfinance is an emerging phenomenon that opens access to

capital for individuals previously shot out from financial services. In its direct

engagement with the poor, microfinance represents a new way for financial

capital to potentially stimulate economic growth and developing countries.

However, microfinance is poorly understood, and it remains unclear whether

it delivers on its promises2.

Since the early microcredit programs up to the present, microfinance

has grown exponentially, as it has the academic interest on it as a research

subject. Considering that this sector has an impact in terms of sustainability,

any research in the field requires an analysis with comprehensive criteria,

which should include the economic, environmental, social, and governance

dimensions (EESG) and their interrelationships.3

Authorities are considering creating a dedicated loan program for

microfinance non-government organizations to boost lending to small

businesses. In reply to the Philippine News Agency (PNA) questions, the

Bangko Sentral ng Pilipinas (BSP) said another option they and the Philippine

Guarantee Corp. are looking into is subsidizing the surety fees of all loans

endorsed through the Credit Surety Fund. "These measures aim to broaden

support for the microfinance and MSME (micro, small, and medium

enterprises) sectors, which are severely affected by the Covid-19 pandemic,"

it said in an e-mail. Authorities recognize the importance of helping small

businesses, especially during the pandemic, as they account for about 99

percent of businesses in the country. Amid this volume, some small business

owners still find it difficult to get a boost from financial institutions due partly

to such requirements as identification cards of owners and lack of assets that

could be used as collateral. The sector is also considered a risky segment to

lend to because of the lack of information about its credit score 4.