Filipino fishers bank on each other

Savers in Lubang, Occidental Mindoro during their share-out activity; Photo: Rare

Savers in Lubang, Occidental Mindoro during their share-out activity; Photo: Rare

Between 2013 and 2017, local leaders and change-makers in 27 locations across the Philippines, Indonesia and Micronesia explored the theory of changing attitudes to and practices of resource use and then launched their own community campaigns. Through participatory processes, community members developed their own conservation goals and implementation mechanisms. In this context, more than 100 savings clubs emerged as self-help mechanisms for vulnerable coastal communities in the Philippines. Community activities in the region have been supported by the ‘Scaling up innovative community-based protection of coastal biodiversity’ project, which is funded by the International Climate Initiative (IKI) of Germany’s Environment Ministry (BMUB). Rare, the leading behavioural change organisation in the field of conservation, took responsibility for implementation.

Analou Lumapguid; Photo: RareBefore the first savings club started on Ayoke Island, where she lives, 36-year-old Analou Lumapguid had two options for saving money: she could either store spare cash in a piggy bank, which she would break open in an emergency, or she could make a rare trip across the water to the bank in mainland Cantilan where she and her husband have a savings account – but that was time-consuming. ‘I haven’t been there in a year,’ says Analou. As with many of the Philippines’ small remote fishing villages, there are no banks on Ayoke Island.

Analou’s options expanded in March 2016, when Rare and local partners began introducing savings clubs to help people in coastal communities of the Philippines take a smarter approach to saving and benefit from productive use of their savings. Each club meets weekly, and members contribute to group savings, take out loans, and pay them off.

Ayoke Island was the first community to set up a savings club, with Analou as chairperson. The club started with 30 members, which has since grown to two-thirds of the total population. Now, more than 100 savings clubs exist in communities in nine of the country’s coastal provinces, including Occidental Mindoro, Camarines Sur, Negros Oriental and Surigao del Sur.

For coastal communities in the Philippines, the journey to better savings begins with an immediate uphill climb: reliable income, formal financial institutions, and access to financial literacy tools have traditionally been noticeably absent in the country.

For many people in small fishing communities like Ayoke Island, the source of extra income and potential savings comes from the sea when there is a good catch. When that catch or other opportunities put extra cash in the hands of coastal villagers, the common response is to celebrate and to spend the money on ephemeral things, such as personal consumer goods providing instant gratification. ‘In the past, saving money was never a priority,’ says Analou of the local tendency to spend.

But members like Analou are now finding that the savings clubs enable them to dream bigger dreams and turn today’s extra income into a bigger return in the future, such as a robust house, a good education for their children, or a profitable small business of their own.

Analou Lumapguid (back row, in the black T-shirt) meeting with savers in Ayoke Island prior to their share-out; Photo: Rare

The same was true of 51-year-old Pervelinda Castelo of Lubang, a community in Occidental Mindoro. She sells dried fish at the Lubang pier and works with her husband as caretaker for a local landowner. ‘We never saved anything in the past, because we spent our money at once,’ says Pervelinda. ‘Our eldest child was not able to go to college because we had no savings. If we had had savings, we could have used them to start a business, like selling ice cream in the summer.’

What is often missing in these communities is awareness of how money can be saved to protect a household against disaster, sickness or other large unexpected financial outlay or to fund costly investments, like a college education. The attitude is understandable under the circumstances but it is also a major part of the cycle of poverty in which many are stuck.

In most of the Philippines’ small and often very remote coastal villages, there are no banks, while existing financial institutions in bigger cities may find island people less ‘bankable’. Living off the bounty of the sea, it’s difficult for fishers to know what their income will be at any given time or when that money will end up in their hands. Catches are unpredictable and unreliable, affected by factors like weather events and how communities manage their own fisheries and marine ecosystems. Even once fishers bring their catch ashore, it is the traders who dictate the prices they earn for their fish.

When money is scarce anyway, and with few options for convenient saving, planning their financial future isn’t easy for this group. Some in small communities have yet to experience the satisfaction of seeing a large sum invested and growing.

Rare is therefore introducing savings clubs to make the concepts more accessible and to empower groups to work together increase their financial literacy and self-reliance. ‘Low-income households need access to financial services to help diversify their income sources through small-scale income-generating activities,’ says Cris Lomboy, Rare’s Director of Markets and Enterprise in the Philippines. ‘This is the value of a savings club – as a bridge for low-income coastal communities in the Philippines to improving their financial literacy and becoming more attractive to formal financial institutions.’

A few basic elements of structure, function and principle keep the savings clubs running smoothly. The clubs have a minimum of 10 members, and some now have over 35 members. They meet on a weekly basis. Members can buy shares during each meeting and can acquire up to five shares, valued at around 20 to 50 Philippine pesos each, though that value depends on each club. In some of the more mature clubs, the price of a share has increased to between 50 and 100 pesos.

There are two kinds of savings funds within the clubs: a savings fund and a social fund. The social fund is a group fund used for health and other emergencies and all members tend to contribute to it. Payments into the savings fund are made on an individual basis, and each member can take out loans from the fund.

The key to saving clubs’ growth is the fact that they are self-managed, with Rare only helping during the first two meetings, checking in on the fourth, and assisting with loan logistics. This enables new clubs to be set up more easily and rapidly, says Cris. ‘We run basic training for the members of the savings clubs and provide assets like calculators, passbooks, and other materials to run the clubs. But more and more, the savings clubs are totally self-run and are also organising other savings clubs. Members invite friends to their savings club, and those people then start their own.’

There’s a discipline to the group setting, too: each member has a unique number in the group and is seated according to that number during the meeting. Each club maintains a savings book to track what members are saving, while illiterate members or those with low literacy skills can track their own savings by using stamps instead of writing down numbers. The stamp is shaped like a fish; a member simply counts the number of fish to know how many shares he or she has in the group. The group also divides up protection of the funds: money is stored in a metal cash box with three padlocks, and each of the three keys is kept by a different member of the group, with a fourth looking after the box.

The group dynamic is a great motivator, says Cris, who describes the ‘peer pressure’ effect of meetings. Members can elect not to buy shares in any given week but they feel more motivated to come up with money to put into their savings when they see how well others have saved. As members are often close neighbours, friends or family, they’re not shy about nudging one another to add to the savings fund: ‘Every day, my neighbour reminds me about my obligation to save money’, says Analou, ‘so it’s a good system.’

‘This is the value of a savings club – as a bridge for low-income coastal communities in the Philippines, to improve their financial literacy and be more attractive to formal financial institutions.’ Cris Lomboy, Director of Markets and Enterprise, Rare Philippines

The clubs operate in cycles, and at the end of each cycle, the interest earned from loans is shared back out among members on the basis of the number of shares they hold. On average, members earn the equivalent of about 2% to 3% interest, which is far better than the 0.5% that most local banks offer, says Cris. ‘During our second share-out, I received 24,000 pesos after 35 weeks, on savings of 500 pesos per week,’ recalls Analou.

She also remembers seeing a man excitedly collecting 9,000 pesos after her club’s first share-out. ‘It was the first time he had ever held that amount of money in his hands, because in the past, all the family’s money would be spent in just a few days,’ she says. ‘His wife was hesitant at first, but he managed to convince her that they should join the savings club.’

The clubs offer women and men an equal chance to be involved in leadership of a community organisation. At first, men wanted to run the clubs in many of the sites, says Cris, but as the clubs grew and progressed, women began to represent the majority of members and took on many of the leadership roles.

Nearly 80% of the clubs’ total members are now women, and women outnumber men in every community where the clubs are in place. Analou says this may be in part because the men are out fishing most of the day and are seldom in the village. Women are more likely to be driven by their closeness to the daily needs of the household and their awareness of the financial pressures of feeding and keeping their children in school, dealing with health issues, and fixing domestic problems. ‘Men give their income to their wives, so the women are the ones responsible for managing the household budget’, says Analou.

Pervelinda Castelo of Lubang with her peddler’s cart; Photo: Rare

With 1,747 members and growing, the savings clubs’ total current holdings from deposits is more than 6 million Philippine pesos. ‘We estimate that the clubs’ total savings may have exceeded 10 million pesos since they started in March 2016,’ says Cris. Members have used the share-outs from the funds for education and healthcare or to start small businesses.

The share-outs have really encouraged members to work hard and become more entrepreneurial, too. Cris says local people have told him that they can see members working harder and coming up with more ways to earn and save money. Some are starting up food businesses, for example, selling hot dogs and pork skewers.

Analou has noticed the same on Ayoke Island, particularly among women. ‘Women are becoming more productive – they are doing things like offering manicure services or cooking food to save money,’ she says; ‘Even the fishermen work harder and save their income instead of spending their money on alcohol. The joke here is that they will only drink if someone else pays, because they want to put their money in savings clubs.’

Pervelinda wants to use the money to pay for feed for her piggery. She has learned over time to put away more and more money for her business. ‘We have had three cycles of share-outs,’ she says. ‘In the first, I got 9,000 pesos because I only saved 250 pesos a week. In both the second and the third share-out, I got more than 18,000 pesos, because I had doubled my savings. The amount I get really encourages me to save more, so I can plan my investments.’

With each cycle, club members like Pervelinda are able to look ahead and plan. And membership is growing quickly. ‘Many people are grateful that the savings clubs are helping us, and we know this will continue in the long term,’ says Pervelinda. ‘Ours was the first one in Lubang, and we now have five savings clubs in town.’

‘We have had three cycles of share-outs. The amount I get really encourages me to save more, so I can plan my investments.’ Pervelinda Castelo, Savings Club Member, Lubang

The clubs are also continuing to evolve. Since May 2017, members have organised business groups that connect their communities and fish catch to companies marketing sustainable seafood in urban areas. The groups they’ve formed are called ‘conservation enterprises’ because they use their savings to fund businesses driven by sustainable fishing practices. They’re currently focusing on directly marketing processed dried fish: partnering with Rare, a company called Fishers and Changemakers, Inc. has started selling dried fish and dried squid produced by the conservation enterprises.

With concepts like the conservation enterprises, Rare aims to get a better sense of how savings clubs and their benefits can further help fishers. In the Philippines, Rare is working with coastal communities to change the social, economic and environmental
conditions in which their people live and work by adopting sustainable, community-based fisheries management. The organisation’s efforts span community engagement, systematic policy and legislative reform, and sustainable finance.

Cris says that the savings clubs should ultimately serve as stepping stones for people to access, and develop the motivation to use, formal financial institutions.

As members’ savings grow to unprecedented levels, the clubs may soon need to use the resources of institutions like Rare: ‘Their savings are really growing, so the risk is increasing.’ says Cris. But a full cash box is a good problem to have. The clubs’ savings and social funds boost income diversification and household resilience, so members are starting to make big plans. ‘I had always wanted to save money in the past, but I couldn’t see any results,’ says Analou; ‘Now, it has become more concrete, and we’re using our savings to build our house.’