governance of cooperatives as regulated financial intermediaries in the philippines

7/30/2019 Governance of Cooperatives as Regulated Financial Intermediaries in the Philippines

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Alan IbaleMicrofinance: Financial Intermediation at the Bottom of the Pyramid

Final PaperProfessor Alex Silva

The Heller School for Social Policy and Management, Brandeis University, Waltham MA. USA

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Governance of Cooperatives in the Philippines

Lieberman defines governance as broader than management. He explained that governance is a means toregulate and fosters a system of check and balance that railroads an organizations direction towards itsmission. This direction-setting goal of governance is carried out via establishment of policies, internal control,organization structure, decision-making processes and procedures necessary to perform specific tasks(Lieberman 2008 p.1-3). In relation to this, my paper will revisit the efficiency of governance of farmerscooperatives in the Philippines vis--vis their internal and external environment and challenges. To give abackground of the establishment of cooperatives in the Philippines, I will give a succinct history of cooperativemovements as an introduction to the main topics. I will limit my discussion on internal environment toorganization structure, outreach, product and services and portfolio composition and quality. For the externalenvironment, I will cover the market share and comparative advantage of farmers cooperatives in the localfinancial market. For the second section of the paper on the challenges of governance, I will limit mydiscussion on prospects of growth, and diversification of cooperatives as financial intermediaries of people at

bottom of the pyramid. To draw out initial lessons on cooperative strengthening program of WOCCU in

southern Philippines, I will present the overview of its performance and compare it with the cooperative sectorin general.

I. Governance of cooperativesa. The history of cooperative movements in the Philippines

The cooperative movement in the Philippines is on its second century. Sibal (2000) divided the history ofcooperative movement into three stages: The first stage, from 1895 to 1941, covered the organizing ofcooperatives by the anti-Spanish elite revolutionist, the founding of agricultural cooperatives by Americanmissionaries and western-schooled Filipinos, and the state-led cooperatives by the American colonial regime.The second stage, from 1941 to 1986, included mobilizing cooperatives to address food shortages during the

Japanese occupation and post World War II reconstruction projects, the resurgence of state-led cooperatives,the rise of non-agricultural cooperatives and politicization of cooperatives during the Martial Law era in thePhilippines. The third stage, from 1986 to present, covered alliance building of cooperatives with trade unionand Non Government Organizations. The cooperatives in this stage became potent stakeholders ofdevelopment and the civil society. During the first stage of cooperative development, bureaucratic andexcessive intervention and creation of non-functional federation were the dominant approach used inorganizing the state-led cooperatives. While, weak management, lack of technology, poor monitoring andevaluation and ineffective networks were experienced by privately initiated cooperatives during the samestage. On the second stage, cooperatives were used by the Japanese colonial regime to address food shortage.After the Japanese occupation (1941-1945), with help from the USAID, the American colonial regimespearheaded the establishments of marketing cooperatives in the Philippines. These marketing coops all failedbecause the US colonial government intentionally formed these cooperative for reasons of avoiding insurgency

and uprising from the peasantry. The US vested the rights to the Bureau of Commerce to spearhead and formmarketing cooperatives for political motives. This political motivation and interventionist approach led to theconsequent closures of the marketing cooperatives. Alongside, the Roman Catholic Church organized creditcooperatives. These privately-led cooperatives were independently operating throughout the country. After theMartial Law (1972), the Philippine government enacted a tied the program of land reform and cooperativedevelopment nationwide. The Presidential Decree 27 and Bureau of Cooperative Development (BACOD)were key policies that pushed the creation of many cooperatives. These state-led cooperatives, calledSamahang Nayon which literally means rural associations, reached 200, 000 that involved 3 million


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people. Moreover, these cooperatives are mostly farmers who are beneficiaries of the land reform program(P.D. 27). However, only 3% of these state-led cooperatives survived. One important outcome of theestablishment of BACOD was the consolidation of state-led and privately-led cooperatives in the country. Thethird stage, from 1986 to present, was characterized by sharp increase in number of cooperatives nationwide.In 1990, the Cooperative Code of the Philippines otherwise known as Republic Act 6838 and establishment ofthe Cooperative Development Authority (CDA) were two of policies that fostered the organizing ofcooperatives. BACOD was dissolved and the CDA carried over BACODs functions. By end of 1993, out of21,125 cooperatives, only 4,495 or 17.8% were confirmed by the CDA as functional, the other 80% of theregistered cooperatives could not be confirmed by CDA as operational. By end of 2003, the numbers ofregistered cooperatives continue to grow, yet, as they continue to rise in number, CDAs incapacity to monitorand regulate remained a problem. The CDAs budgetary and staff shortage problems continue to cripple themto provide technical and regulatory services to cooperatives nationwide. Despite the huge increases incooperative registration, as seen below by Figure 1, only 20% of cooperatives which are actively sending theirannual reports to the CDA are being accounted for.

In a study by the Cooperative Foundation of the Philippines Incorporated (CFPI), it was found that thecooperative sector remains weak. One of the obvious reasons is that majority of the cooperatives aregovernment initiated. The top-down and interventionist approach used by the government in organizingcooperatives seem to fail in creating a sense of ownership and cultivate leadership among the members.Among the problems that were identified by CFPI are as follows: [1] Lack of capital, [2] Inadequatevolume of business, [3] Lack of loyal membership support, [4] Vested interest and graft and corruptionamong coop leaders, [5] Weak leadership and mismanagement and [6] Lack of government support.These organizational problems are mostly internal in nature. The lack of capital, inadequate volume of

business are linked to the lack of loyal membership support. These interlocking problems suggest that

leaders are unable to mobilize resources internally because leaders have vested interests that cultivated graftand corruption and further resulted to weak leadership and mismanagement. Amidst these internalinefficiencies, the government cannot provide ample technical assistance to ensure internal control, buildleadership and ownership among cooperatives nationwide. According to Araullo (2006), most of cooperativesoperate with a few members and small scale operations. Due to financial and human resource constraints, onthe side of the government, the CDA could hardly help these small, commonly government-initiatedcooperatives. Lack of education and training, lack of market access are two of the weaknesses of these smallcooperatives (pp. 10-15). In relation to the management of cooperatives, it is important to revisit the strengthsand weaknesses of the organization structure from which these cooperative are operating from.

Figure 1. Number of Cooperatives in the PhilippinesSource: Sibal 2000, CDA 2003, CDA 2006

5701,530 1,897

2,941 3,350

21,125

31,191

13,583

0

5000

10000

15000

20000

25000

30000

35000

1939 1967 1977 1980 1985 1993 2003 2006

year

numberofcoops

Number


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b. Organization StructureThe organization structure of a cooperative presents the platform of governance. The Cooperative Code of thePhilippines sets the basic organization structure of a cooperative as shown by Figure 2 below (Chap. IV, Sec.33-44):

The highest governing body of the cooperative is the general assembly. The general assembly, as the supremegoverning body, is composed of all the members in good standing. In principle, all policies, systems,procedures and decisions have to be approved by the general assembly. The board of directors acts as thelegislative body. Theoretically, the board performs its function in conjunction with election, credit,education/training and audit committees. A secretary and treasurer reports to the board directly. The

management, under the supervision of the board, runs the day-to-day operations of the cooperative.

The structure of cooperatives needs a blend of participatory and hierarchal governance. The board needs thepermission of the general assembly in every major decision it makes. It is hierarchal because it has at leastthree layers of management: the general assembly, the board and committees, and the management. In everylayer of bureaucracy, more time, resources and competencies are required. According to Araullo (2006), mostof the cooperatives are operating with small membership and small scale of operation. Based from this finding,the cost per transaction in small cooperatives tends to be high. In a practical sense, filling up all committeesthat has at least 3 people per committee, at least 5 board members, at least 3 people at the management requirea lot of human resource and time. Not to mention that leaders and members of the cooperatives are poorfarmers who barely reached secondary education. In a tribal cooperative that I worked with in Auroraprovince, Philippines, the highest school attendance among the 5 board of directors is 6th grade in elementary.

In another, farmer cooperative that I worked with among the 7 board of directors at least 1 has reached highschool. Among the 10 bookkeepers that I worked with in Aurora province, Philippines, only 2 have finishedcollege, the rest are either in the secondary or elementary levels. The gap between actual and requiredcompetencies of leaders and staff to run the cooperative tend to be wide. This training gap was validated byAraullo (2006) on his study. It is not only training that most of the leaders of cooperatives need, they also needformal education to actually perform the tasks under the standard organization set up. According to CMEF(2005), an effective composition of the board requires a good mix of audit skills, legal knowledge,knowledge of the target market, and social mission. Atop of these, personal dedication, political influence,gender, ethnic and cultural diversity are also required to form a competent board (p.9-10). Although these

General Assembly

Audit Committee Board of Directors Election Committee Credit Committee

Education/TrainingCommittee

Management

Secretary

Treasurer


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qualities are for a corporate MFI board and by no means replicable in a small cooperative, at least theacculturation of corporate qualities and values are needed to effectively govern a farmer-led cooperative.According to Professor Alex Silva, during the April 9, 2008 class, the problem of farmer initiated cooperativecan also be attributed to the multiple hats that the board of directors wears as a member, borrower anddirector all at the same time. These interlocking multiple hats will likely color board decisions with vestedinterests and whenever these interests prevails the cooperative operation will be adversely affected. Therelatively weak governance of majority of cooperatives is reflected on their capacity to reach the needy sector.

c. OutreachThe outreach trend of cooperatives is erratic. The increase on outreach did not reflect a linear measure ofstrengths and weaknesses of cooperatives within a particular condition over time. Below, Figure 3 shows thebaseline at 105,000 in 1939, peaked at 555,000 in 1967, fell to 223,700 in 1980, rose again to 337,000 in 1985then finally dropped to 67,444 in 2006:

The major reason for the rise and fall of membership was the nationwide state-initiated organizing ofcooperatives that were not sustained over time and conditions. In 1939, the colonial government of Japan inthe Philippines used the cooperative to address food shortages by linking agricultural cooperative with urban-based cooperatives. Through the partnership of the Japanese government with prominent Filipino businessmen(Laurel, Aquino, Ramos and Recto) resulted into founding of 5000 consumer cooperatives and producerscooperatives (Sibal, 2000). In 1967, the entry of the Catholic parishes in rural areas, founding of the PhilippineRural Reconstruction Movement (PRRM), Federation of Free Farmers boosted the government-led organizing.

The entry of these sectors into the cooperative movement expanded the outreach of membership and pavedway for non-agricultural cooperatives. In 1972, the Philippine government tied up cooperative developmentwith land reform. With the intention of using other government agencies to help cooperatives, the Philippinegovernment mandated the Philippine Coconut Authority, Cooperative Administration Office and AgriculturalCooperative Administration to launch programs related to strengthening cooperatives. However, instead ofhelping out the cooperatives these agencies did not synchronize their programs that resulted into competitionof development programs, politicization of cooperatives and decrease in membership by more than 100,000. In1977, the establishment of national cooperative unions started. In 1979, the Philippine Rural ElectricCooperative Associations was established (PHILRECA). PHILRECA unified 113 electric coops serving 73

Figure 3: Membership in Cooperatives in the PhilippinesSource: Sibal 2000, CDA 2003, CDA 2006

105,000

555,000

460,000

223,700

337,000

67,444

0

100000

200000

300000

400000

500000

600000

1939 1967 1977 1980 1985 2006

Members


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provinces nationwide. Despite these developments, the membership of cooperatives dropped. In 1985, theoutreach rejuvenated. In 1986, the 21 year-dictatorship of Marcos regime was ousted by the revolutionarygovernment of Corazon Aquino. During that time, the actual number of cooperatives continued to increase yetthe actual membership was undetermined. The Cooperative Development Authority (CDA) cannot determinethe actual number of members. In 2006, the CDA can only account for 67,444 members of those cooperativesthat religiously submit their annual reports. In summary, the competing approaches between privately-initiatedand government-initiated approaches, seeming lack of sense of ownership among cooperative members,political and economic instability are some of the key factors on the erratic outreach of the coop sector overtime.

In another study by CGAP (2005) a sample of 1285 coop members were interviewed on where they deposit orkeep their savings. 63.5% says they keep it at home; 9.7% says they save it in rural banks; 9.4% says they saveit in cooperatives; 6.7% says they save it in self-help groups; 2.2% says they save it in commercial banks; andthe remaining 2.3% says they save it in other places (p.5). The bulk of savings is still at home. The cooperativewere only able to reach 9.4% or about 120 savers. This suggests that the cooperatives are unable to open awindow on savings that fits the needs of customers/members.

To illustrate further, the CGAP (2005) study cited the CUES finding on the distribution of savings in thecooperative sector, it revealed that 80% of the savings deposits are below US$90 and only 3% maintains morethan US$4,444. This may imply that the influx of small savings that constitute 80% of the deposits into thecooperative come from poor people (p.4). However, it is also possible that the savers in cooperatives maintainsmall deposits because they do not want to save large amount of money in the cooperatives. Whichever is thecase, the point remains that the pool of savings are from a large number of savers.

Table 1 Deposits in the Philippine financial system, December 2003

Total volume Number of accountsAverageaccount

balance $

Billion $ percent million PercentUniversal & Commercial banks 43.99 90.13% 17.92 58.56% 2,451

Thrift banks 3.53 7.23% 2.69 8.76% 1,315

Rural & Cooperative banks 1.13 2.32% 5.14 16.77% 219

Cooperatives 0.14 0.29% 4.31 14.07% 354

Microfinance NGOs 0.02 0.03% 0.56 1.83% 27

Total 48.81 100.00% 30.65 100.00% 1,826

Source: Central bank of the Philippines, Microfinance Council, Cooperative Development Authority

Table 1 suggests that the cooperative was able to capture 29% of the savings in the financial market that isfurther broken down into 4.31 savings accounts. Assuming that each saver maintains two savings accounts, it

may imply that the cooperative are servicing 2 million savers in the Philippines (CGAP 2005, p.9).


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d. Portfolio qualityAnother important variable in governance is portfolio quality. According to CDA (2006) a total of 262 million-dollar worth of transaction related to farming were disbursed by the Philippine cooperative sector in 2006. Thismay mean that if the agricultural cooperatives are well governed and operated they can contribute todevelopment substantially. The macro picture of transaction does not really present a viable cooperative sector.The cooperatives are indeed catering to agricultural production but not all of them. The bulk of transactions aremostly from well established, professional governed and managed cooperatives. For instance, in Auroraprovince where I work as a community organizer, the CDA accounted 205 registered cooperatives by 2000.Out of 205 registered cooperatives, only 7 cooperatives have access to lending windows of the Land Bank ofthe PhilippinesBaler Branch. The Land Bank of the Philippines only extend loans to cooperatives who haveat least 3 years of operations, maintain cooperative offices, have good credit records, maintain books ofaccounts, manage by regular staff and governed by an active board. The 7/205 cooperative participation in theLand bank of Philippines lending program is an indication the basic criteria of loan eligibility as stated abovewere not met by the cooperatives. However, the stringent requirements of the bank can also affect the

enrollment or application of cooperatives in Aurora which are mostly operating with voluntary and unpaidstaff and board.

A case in point is the Simbahan-Mapalad Agrarian Reform Beneficiaries Cooperative (SIMARBECO).SIMARBECO is a registered farmers cooperative founded in June 25, 1995 with license number LGA-4057and managed by voluntary staff and board and is operating in a very small scale and not eligible for a banklending window. SIMARBECO operate in the coastal towns of Dinalungan, Aurora, Philippines. Themembers of SIMARBECO are awardees of farm land title given by the Department of Agrarian Reform(DAR). As a DAR extension worker, I worked with SIMARBECO as community organizer and trainer. Ihelped SIMARBECO in installing their financial system, policies, systems and procedures. I also help inpackaging project proposals and in their implementation. With authorization or request from them, I alsoobserve board and management meetings. Prior to the technical assistance to SIMARBECO, the cooperative

has only 37 members with a paid-subscription of only 42, 340 Philippine Peso ($1,085). It has no office. Everyloan transaction is approved during a meeting of credit committee in a public place. Oftentimes, thedisbursement of loan and other money transaction are done in the house of the Treasurer. The cooperative hasno written vision, mission and goals. Among the board and staff, only 1 staff has college education, the resteither has secondary or elementary education. Bangus fry gathering and production lending are the twoprojects SIMARBECO operate.

In June 2002, SIMARBECO became recipient of a two-year Agrarian Reform Infrastructure Support Project(ARISP). ARISP has infrastructure and institutional strengthening programs and funded by the Japan Bank forInternational Cooperation (JBIC). ARISP was implemented in partnership with ARCOW - a local non-government organization, the Department of Agrarian Reform and Development Academy of the Philippines.Improvement of irrigation systems, establishment of potable water system, warehouse and drying facility and

farm-to-market road are the subprojects under the infrastructure components. A training package for staff,board, and members on cooperative development and management are essentially the description of theinstitutional program.

Institutional development was implemented alongside with the infrastructure development within the projectlife. From a small, voluntarily governed and managed cooperative, SIMARBECOs performance improved intwo years. According to the terminal report on institutional strengthening prepared by ARCOW in 2004,membership grew from 37 to 113; paid-up share subscription increased from P 42,340 to 138,000 ($1,085 to


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$3,450); businesses diversified from fry gathering and production lending, additional projects included ricetrading, catering service, consumer goods retailing, and warehousing. SIMARBECO was able to have anoffice as part of the warehouse facility. Strategic direction was set via creation of mission, vision and goals.Policies on credit, warehousing, membership, auditing, project, record keeping were prepared, documentedand packaged in user-friendly manuals. These operating and financial manual were translated in locallanguage.

Within the project life of ARISP II, SIMARBECOs performance was enhanced. Governance ofSIMARBECO during the two-year project implementation of ARISP was not exclusively performed by theboard. ARCOW assigned a village-based community organizer who was always at the reach of the board andmanagement. In other words, the cooperative was co-governed and co-managed by the board, staff and thecommunity organizer. The community organizer was an experienced bookkeeper and organizer at the sametime. The combined financial and operational competency of the community organizer helped a lot inencouraging SIMARBECO to perform well. Immediately after the assignment of the village-based communityorganizer, strategic assessment and planning was conducted in December 7-8, 2002. I was one of the trainersof that training. The outputs of the training included the setting of vision, mission and goals that set the short-

term and long-term direction of the cooperative. This training was followed by cooperative value socialization,policy formulation, accounting for non-accountants, basic course on governance among others. The output ofthese institutional training included the manualization of systems, policies and procedures. In a way, the wholetraining packages professionalize the farmer-leaders, who barely had formal education, in conducting board

meetings, writing board resolutions, making memorandum, writing policies and making guided day-to-daydecisions in operating and financing.

Based on my observations, as a community organizer and trainer, within the two year implementation ofinfrastructure and institutional components of ARISP II, the cooperative had benefited from the presence ofvillage-based, NGO staff that immersed throughout the project life and served as the cooperatives technicalsupport on day-to-day decision making. The expansion of membership and influx of share subscriptionsimproved the portfolio of the cooperative. The production loan was tied up to the hybrid rice and hybrid corn

production. As a result, loan recovery and roll over was high. The trust of members to the cooperative can besaid to have improved as share subscription tripled in two years. Clear administrative and financial policiesthat were posted on the bulletin boards of the cooperative were also instrumental in keeping members fromparticipating and patronizing the loan products of the cooperatives.

In sum, to make the portfolio of a cooperative lucrative, as in the case of SIMARBECO, it required agriculturaland institutional infrastructure. Putting other factors constant, it may take all these costly infrastructures tomake the 200 cooperatives in Aurora operationally and financially viable and bankable.

II. Challengesa. Growth

Sibal (2005) found that a large number of cooperative in the Philippines still operate in small, unviable scale.Only 17% of 25,125 cooperatives in 1993 were actively engaged in gainful businesses. Agriculture-basedcooperatives, particularly those which are under the land reform program, are unproductive. The protectionistmentality, parochialism, and close-doorism remains as socio-cultural and structural barriers that impedethe growth of cooperatives. State protectionism comes in the way whenever the Philippine government enactspolicies that affect the market and subsidies for cooperative operations. Parochialism and close-doorism


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are notions about cooperative services and products that are solely for the members only; thus ignoring theassociate members or non-members that can also contribute to internal and external resource mobilization.

CGAP (2005) found that the poor are capable of saving as demonstrated on the distribution of savings in thebanking systems in the Philippines. CGAP (2005) found that savings deposits amounting between US$ 1 266 comprise more than 70% of savings in the banking systems. This suggests that the poor are depositingtheir money in banks. Likewise, the same trend are seen in cooperatives in the Philippines that take savingsdeposits, wherein 80% of savings deposits ranged from US$ 089 (p.4). Indeed, the cooperative sector mayneed to revisit savings mobilization as a means to mobilize funds and engage members in gainful enterprisesand collective actions.

The other issue on growth is what professor Silva has lectured on in one of the Microfinance Policy classes.Professor Silva said that growth is not linear and very relative. He explained that an informal self-help groupmay be more effective in staying informal and small but can be an excellent source of financial andinstitutional services. There are MFIs that really need economies of scale to better deliver financialintermediation. Growth is more focused on finding a niche or a market position that best fits the nature and

development mission of a particular self-help group or MFI. Growth is more on finding a fit in the financialmarket, social and political environment at the same time. In other words, growth is independently determinedby a group and not merely based on financial viability and thus gives more weight on the non-economicfactors such as spirit of cooperation, fraternity, solidarity and mission. I find this idea of growth as equallychallenging and practical. It is challenging because to be able to understand it I must be fully aware of why dothe less privileged or people at the bottom of the pyramid wants to build a group. The other more challenging

part is the idea of questioning my own framework of development. I think I am used to looking at growth inlinearity. Professor Silva pauses a new discourse about growth that I need to contend with in relation to myframework of development. Professor Silvas discourse on growth is quite practical yet too practical toaccept easily. I have been a Jesuit volunteer, NGO worker and a government employee. All throughout mywork experiences, I was accustomed to see growth as linear. In the office, I need to deliver outputs if I failed,I will get sanctions. So I often explore all means of bringing in growth, yet all these time, I have been missing a

very important pointthat growth is not always linear, rather it is contextual based on what a group envisionsto achieve not what the financial market or any socio-economic yardstick dictates in particular environmentover time. This means that cooperatives in Aurora province which are operating in a very small scale shouldnot be seen as not growing; as long as they fulfill their development mission, the niche that they are positioned

at might be their fit in the economy and society.

b. DiversificationIn relation to these growth challenges, revisiting some basic notions on savings-led diversification may proveto be helpful in addressing the limited products and services of agricultural cooperatives in the Philippines. Toshow the potentials of cooperatives to improve their operations and viability, the case of WOCCUs CreditUnion Empowerment and Strengthening (CUES) program that was implemented in southern Philippines

starting on October 2005 was a good example. The WOCCU CUES project in southern Philippines is asavings-led microfinance initiative aimed at improving the operations of cooperatives. The project involved 16credit unions which are composed of cooperatives. WOCCU CUES partnered with the Mindanao Alliance forSelf Help Societies-Southern Philippines Educational Cooperative Center (MASS-SPECC) and the PhilippineFederation of Credit Cooperatives-Mindanao League (PFCCO-ML). As one of the outcomes of CUES, 69%of the total assets were sourced from savings deposits and share capital and only 11% of revolving fund wasexternally accessed by participating cooperatives.


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Below are the outreach, financial performance, savings mobilization and loan purpose of WOCCU CUESparticipating credit unions:

Table 2 Outreach for 19 WOCCU CUES Philippines Credit Union

Outreach Indicator 12/31/2006 12/31/2007 %Change

Number of Member-Clients 361,241 479,121 32.6%

% of Women Member-Clients 29% 62.3% 114.8%

No. Loans Outstanding 0 115,008 NA

Avg. Loan Size Outstanding $14,214 $356 -97.5%

Total Loans Outstanding $1,711,733,724 $55,732,658 -96.7%

Avg. Deposit Size $3,540 $84 -97.6%

Total Deposits $1,279,127,813 $40,701,924 -96.8%

Average Share Size $1,363 $31 -97.7%

Total Shares $492,426,995 $14,870,244 -97.0%

Total Assets $2,373,565,591 $76,016,576 -96.8%Source: www.woccu.org

The 32.6% percentage change in number of member-clients, 114% participation of women, and utilization offunds suggests that the CUES project are initially upgrading the performance of cooperatives in southernPhilippines. The initial total deposit of 1.2 billion dollars alone in December 31, 2006 is way too high ascompared with the 6.6 million dollars amount of paid up subscription in cooperative sector as of December 31,2006

Table 3 Financial Performance 19 WOCCU CUES Philippines Credit Union

Outreach Indicator 12/31/2006 12/31/2007 %Change

Provision/Loans delinquent>12 months 98.8 % 99.56 % 0.8 %

Net loans/Total Assets 73.4 % 69.22 % -5.7 %

Liquid AssetsST Payables/Total Deposits 24.6 % 29.17 % 18.6 %

Source: www.woccu.org

The selected financial performance shows that the provisioning of loan is almost 100% while the liquidity ofthe project increased by 18.6%. Based on these performances it may be said that the project is well governedand managed.

Table 4 Loan Purpose 19 WOCCU CUES Philippines Credit Union

Outreach Indicator %No. of loansVolume of

loan

Agriculture 7.61 % 5,115,281Commerce 18.84 % 16,712,811

Housing 0.95 % 316,852

Personal/ consumption 27.67 % 9,961,701

Small Micro Enterprise 17.27 % 8,054,703

27.66 % 11,453,082

TOTAL 100.00 %US$

51,614,430

Source: www.woccu.org
http://www.woccu.org/http://www.woccu.org/http://www.woccu.org/http://www.woccu.org/http://www.woccu.org/http://www.woccu.org/


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Table 4 shows a diversity of loan products that is less focused on agriculture and more focused on small micro-enterprises and providential services (personal/consumption). This diversity in product keeps the cooperativefrom doing single business. It also decreases massive loss of funds that are concentrated on farming. Hence,the transformational process which the WOCCU CUES 19 cooperatives are undergoing may be a replicablepractice and technology for strengthening agricultural cooperatives in the Philippines. The savings-ledapproach that WOCCU adopted to improve the operational and financial viability of the 19 cooperative unionsgained initial positive results. It has the potential to help the cooperatives enhance their internal capacities aswell as collection actions towards shared goals of bridging the gap in the financial mainstream.

III. Conclusion

Based of the foregoing evidences, it can be deduced that the governance of cooperatives was weak generallybut the erratic performance trend of cooperative cannot be the only measure of their growth over time. On one

hand, the inconsistency in linear increase in number and erratic rise and fall of membership of cooperativessuggests that the general assembly and officials were either not really in control or not competent enough tomanage a social enterprise. The organization structure of a cooperative is quite formal. This formality andhierarchy in structure, that requires minimum competency in running a business, often limit the board,committees and management to innovate, diversify and get out-of-the-box. As Sibal imply theorganizational culture of parochialism and close-doorism often create a mentality that the cooperativeexists in a vacuum. Since most cooperatives were government-initiated, interventionist approach did harm thangood. Cooperatives were formed not in the spirit of cooperation, unity and entrepreneurship but as a means tofunnel top-down projects. The entry of the religious organization and civil society in the formation ofprivately-initiated cooperatives started to introduce the idea of sense of ownership among the cooperativemembers. However, the Non Government Organizations and the sectarian organizations fall short of capacitiesto develop entrepreneurial skill, knowledge and values needed to cultivate the culture of social enterprise.

Finally, the WOCCU CUES savings-led project that aims to strengthen the cooperative is gaining initialpositive results. The savings-led technology can be a replicable means to socialize the values of cooperationand personal commitment towards a shared goal of providing choices for the people at the bottom of thepyramid and enable them to participate in the financial mainstream. On the other hand, I think there is a needto ask the cooperative members of what they envision to reach as they develop social enterprises. Concludinglevels of growth of cooperative, based on a yardstick of governance, may not necessarily be an accuraterepresentation of how the less privileged conceive growth as seen in a particular development lens (like what Ihave).


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Work cited:

From Reading Pocket, Class Presentation & Recommended sites:

CGAP (2005) Philippines: Country-Level Savings Assessment CGAP Savings Initiative Retrieved on 26April 2008 from http://cgap.org/savings/philippines_assessment.html

CDA (2000) List of Registered Cooperatives in the Philippines Baler, Aurora, Philippines: CooperativeDevelopment Authority.

CMEF (2005) The Practice of Corporate Governance in ShareholderOwned Microfinance Institutions

Lieberman, Ira (2008) Corporate Governance and the Role of Board of Directors, A PowerPointpresentation for the Microfinance: Financial Intermediation at the Bottom of the Pyramid class, 9

April 2008, Brandeis University

WOCCU (2008) Credit Union Empowerment and Strengthening Program [CUES] in the Philippines,Retrieved on 26 April 2008 fromhttp://www.woccu.org/dev/programs/program?sp=43#_OOFS_Overview

The Economist (2005) The Hidden Wealth of the Poor in November 5, 2005 Issue.

From other sources:

Araullo, Dennis B. (2006) Agricultural Cooperatives in the Philippines a paper delivered in FFTC-NACFInternational Seminar on Agricultural Cooperatives in Asia: Innovations and Opportunities in the 21st

Century, Seoul, Korea, 11-15 September 2006 Retrieved on 26 April 2008 fromhttp://www.agnet.org/activities/sw/2006/520024423/

ARCOW (2004) Completion Report, Institutional Development Component, ARISP II Baler, Philippines:ARCOW

Sibal, Jorge V. (2000) A Century of the Philippine Cooperative Movement, Madison: University ofWisconsin Center of Cooperatives Retrieved on 26 April 2008 fromhttp://www.uwcc.wisc.edu/info/abroad/sibal.html
http://www.agnet.org/activities/sw/2006/520024423/http://www.agnet.org/activities/sw/2006/520024423/

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