Press Release
October 17, 2006

Drilon says DSWD can't get into microfinancing,
junks lending program

The powerful Senate Finance Committee has rejected the proposed P160 million appropriation for the so-called "Tindahan Natin (Our Store)" livelihood project of the Department of Social Welfare and Development (DSWD), noting that engaging in microfinance lending programs was beyond the competence and mandate of the department.

During the Senate public hearing on the proposed P4.38 billion budget of the DSWD for year 2007, Finance Committee Chairman Franklin Drilon informed DSWD Secretary Esperanza Cabral that the Senate would "either realign or totally remove" the P160 million allocation for the lending project in the proposed 2007 budget of DSWD.

"We will have very serious problems about the allocation for the Tindahan Natin outlets, not because the program is not valid, but because your agency's mandate does not include lending, collection and handling that kind of a project," Drilon told Cabral.

"The DSWD has no business engaging in microfinancing," Drilon said. "That is beyond the mandate of that department."

During the budget hearing, Cabral explained that the "Tindahan Natin" is one of the projects under the Kapit-Bisig Laban sa Kahirapan-Comprehensive and Integrated Delivery of Social Services (Kalahi-Cidss), the flagship poverty-alleviation program of the government.

Under the program, the DSWD would extend soft loans to over 2,600 small-time entrepreneurs who will operate sari-sari stores nationwide. The retail outlets will be identified and endorsed jointly by the DSWD and local government units (LGUs), and accredited by the National Food Authority (NFA). The "Tindahan Natin" outlets offer basic commodities such as rice, noodles, sugar and canned goods at prices lower than market prices.

Scrutinizing the project, Drilon noted that the DSWD does not have the personnel to competently and professionally conduct credit investigation, project evaluation and credit collection tasks of the micofinancing program. Moreover, noting that the functions of the DSWD have been devolved to local governments units, the DSWD does not have the manpower at the grassroots level to conduct a viable and credible lending program.

Drilon expressed fear that should the DSWD fail to achieve satisfactory credit collection results from its 2,600 clients, the Tindahan Natin project may end up like the failed lending programs of past administrations such as the Masagana 99 and KKK livelihood programs of the Marcos administration.

Citing newspaper reports, Drilon also noted that Malacañang itself was about to amend a controversial executive order, No. 558, which critics have said would open the floodgates to a new round of costly government dole-outs.

Reports said President Arroyo was slated to issue the amended order that will effectively kill the government's plan to have state-owned or -controlled corporations (GOCCs) and government non-financial agencies (GNFAs) lend out money at low interest rates to private borrowers, similar to the Tindahan Natin program of the DSWD.

Finance Secretary Margarito Teves confirmed a plan to issue an amended order, No. EO 558-A, to prevent a repeat of previous state-funded dole-out programs that had cost the government an estimated P40 billion in losses since the 1970s. Reports said the amended order would restrict the lending program proposed to be implemented by the DSWD.

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