Built-In Sustainable CSR Program in a Microfinance Institution: Experience of ASA Philippines Foundation
14 Pages Posted: 3 Oct 2017 Last revised: 19 Nov 2017
Date Written: March 14, 2017
ASA Philippines Foundation is a not-for-profit institution specializing in microfinance. It was conceptualized by Kamrul H. Tarafder and Ambassador Howard Q. Dee. It started operations in August 2004 with financial seed capital from the Assisi Development Foundation and the Ninoy & Cory Aquino Foundation. In 2007, PLDT Smart Foundation joined as a third benefactor. Since then, ASA Philippines has not obtained any other grant and, unlike other foundations, it pledges not to source any more grants.
A Clear Vision to be Sustainable and Incorporate CSR
“In the most cost-effective and sustainable manner”….this was clearly stated in ASA Philippines’ vision statement. The Foundation’s management set out to achieve break-even in the shortest possible time. Businesses tend to set out 5-year management and profitability plans. The Foundation’s management reasoned that since ASA Philippines is a development organization that is not required to pay full taxes to the Philippine government, then why shouldn’t they aim to achieve break-even in a shorter time frame, say 3 years? In fact, ASA Philippines did achieve profitability within 3 years. What’s more, it accomplished this despite setting aside a high provision for possible loan losses. The Philippines tends to experience devastating natural calamities from time to time. When the Foundation’s clients are hit by these calamities, they are often unable to pay their loans on time, if at all. It was important for the Foundation to have the flexibility to respond to clients in their time of need, while at the same time maintaining continuous normal corporate operations, thus the decision to allocate conservative provisioning.
As of December 2016, ASA Philippines has established 850 branches across the country and employed 5,964 fulltime staff. It is serving 1,273,136 active borrowers with a portfolio of US$180 million. Eleven years from inception, the Foundation became the 1st MFI in the country to achieve a milestone of over 1,000,000 active borrowers. ASA Philippines is now the country’s largest MFI in terms of borrowers & assets. It holds the distinction of being the first MFI to establish a presence in all 82 provinces of the country. In 2016, it was named as the Philippines’ most outstanding MFI.
Balancing Financial Sustainability with Achieving the Foundation’s Mission
For NGOs, pursuing their corporate mission while trying to attain financial sustainability is quite the challenge. Many NGOs, particularly those that deal with low-income communities, are unable to generate sufficient income and/or manage their expenses within their limited income. They are thus forced to rely on external sources of funds such as grants.
Corporate Social Responsibility (CSR) Programs
Since the beginning the Foundation started a CSR program albeit at a smaller scale, however, as soon as the company broke even, it increased its CSR programs. The following are some of the current CSR activities:
• Disaster Relief – Typhoons, Fire, Flood, Drought, Rehabilitation Grants, Others
• Health Care – Medical Missions, Cataract/Pterygium Operations, Cleft Lip/Palate Operations, Hospitalization Benefits, Death Benefits, Bloodletting Drive, Water and Sanitation Financing Program, Persons with Disability Program, Child Feeding
• Education – College Scholarship Program, Out of School Youth
• Livelihood – Business Development Training and Marketing Support, Employment of Relatives of Clients, Shari’ah Financing, Star Coke Program
• Housing – Housing Finance
• Environment – Tree Planting, Urban Gardening
As of December 2016 the Foundation spent US$15,000,000 over the last 12.5 years which benefited a million individuals.
Is it possible for an end-user development institution, particularly one that deals with low-income communities, to achieve its corporate mission without relying on grant funding? The conventional wisdom is that it probably is not possible. ASA Philippines Foundation, an institution that deals with financial services for the poor, has however proven otherwise. It was able to design an expanded, sustainable CSR program into its corporate mission while at the same time achieving financial sustainability. Today, approximately 5% of its gross income or 15% of its net income is devoted to CSR Activities.
ASA Philippines Foundation just needed seed capital to start its operations. Though it is unconventional, the Foundation has subsequently politely declined all offers of grant funding. The program it has designed is sustainable. Given the challenges associated with relying on grant funding especially during tough economic times, ASA Philippines has excised grants out of the equation. It is doable.
Keywords: Breakeven, Mission, Planning, Unconventional, Vision
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