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The Philippines has made some progress in alleviating poverty. From a 49.2 percent poverty rate in 1985, it decreased to 18.1 percent in 2021. This is attributed to structural transformation and the robust growth of the country’s GDP in recent years leading to the pandemic. However, the decrease in the country’s poverty rate is not at par with its contemporaries in the Asean region, with Thailand from 67.0 percent (1986) to 6.8 percent (2020), and Vietnam from 58.1 percent (1992) to 4.8 percent (2020).

As the World Bank pointed out in 2022, this is mainly due to the persistence of economic inequality in which not everyone, especially the ultra-poor, have the same level of opportunity to access proper nutrition, health care, quality education, jobs, and skills, which are essential in ending poverty and creating inclusivity. In other words, the Philippine economy, despite its rapid growth, does not have much inclusivity for it to move out of poverty at a faster pace.

So, how do we reduce poverty? One of the most common poverty interventions is the cash transfer program. A cash transfer is a direct transfer of payment of money to an eligible individual for humanitarian assistance, which provides a lifeline for poor families facing threats to their health and well-being.

The Philippines had its own cash transfer program called “Pantawid Pamilyang Pilipino Program” (4Ps). The goal of the program is to alleviate the immediate needs of the poor and break the intergenerational poverty cycle. The Department of Social Welfare and Development (DSWD) executes the program that is designed to meet health, nutrition, and educational needs of vulnerable households.

A study by the Philippine Institute of Development Studies (PIDS) in 2014 revealed that the 4Ps has no significant negative impact on work effort of household heads, it has increased school participation of children, and resulted in increased consumption of education-related goods. On the succeeding wave of the study in 2021, PIDS found out that it has a long term positive impact on health and well-being. However, these impacts can be extended further if recipients can be equipped and trained on how they can maximize the cash transfers given to them.

Many organizations around the world, aside from governments, have found ways on equipping the poor aside from the cash transfer program. One of the most effective is the “graduation approach” or the graduation from poverty program, which was pioneered by BRAC, a nonprofit organization based in Bangladesh. The graduation approach is an innovative, holistic, and proven approach to addressing remaining poverty and reducing inequality. The program combines social assistance or cash transfers with technical, life skills and health training, financial inclusion, coaching and mentoring, which targets people living in ultra-poverty.

In a study by the Asian Development Bank (ADB) in 2021, they found out that despite the severe impact of the Covid-19 pandemic especially on the poor and vulnerable households in the Philippines, the group of poor people who trained under the graduation approach by BRAC were made resilient across a range of dimensions including financial security, food security, and mental health. They also found out that households that received the graduation program on top of the government cash transfers (4Ps) fared significantly better than those who received only the government cash transfers. This proved to be an effective way of raising human capital among the ultra-poor.

Equipping the poor also had its impact on the natural environment. Taking care of the natural environment is one of the key elements in poverty reduction. Climate change and poverty are deeply intertwined because climate change disproportionately affects poor people in low-income communities and exposes existing inequalities. BRAC with its graduation approach provides training for climate resilient livelihoods and support for the ultra-poor. Meanwhile, The Village Enterprise (VE), a nonprofit organization, trains the ultra-poor in Uganda not only for their livelihood but also in protecting their environment. By doing so, they are able to develop human capital and well-being without harming the environment. VE also trains their program participants in doing environmentally friendly livelihood.

To sum it up, the key to reducing poverty is not only limited to giving cash transfers to the poor but also equipping them with the right knowledge, training, proper coaching and mentoring. The poor may be given capital be it in cash or tangible assets. But if not given the proper guidance, they may not be able to use it properly or worse they may use it in unproductive ways. Poverty may be addressed specifically in the Philippines given the right policies having in mind that the poor should be equipped instead of just being given cash transfers by a “reactionary” government.

To date, the Philippines has made remarkable progress in alleviating poverty. From 49.2 percent in 1985, the country’s poverty rate decreased to 18.1 percent in 2021 owing to structural transformation and high GDP growth rates. However, the rate decline has been slower compared to other Asean contemporaries such as Thailand from 67.0 percent (1986) to 6.8 percent (2020), and Vietnam from 58.1 percent (1992) to 4.8 percent (2020).

Thailand was successful in reducing poverty by significantly investing in its people through human capital development and health care initiatives such as their Universal Health Care Scheme (UHCS), which they were able to achieve in 2002. Vietnam significantly improved its education enrolment, healthcare insurance coverage, and access to amenities (electricity, clean water, and sanitation).

We may have gone a long way, but why does our poverty reduction seem to be slower? If the Philippines has one of the fastest growing economies in Asia, then why is its poverty alleviation not at pace? According to a publication of the World Bank in 2022, persistent economic inequality hinders the Philippines’ potential to move rapidly out of poverty. Economic inequality pertains to the unequal distribution of income and opportunity of different groups in a society. As was the case in the Philippines, the ultra-poor do not have the same level of opportunity to have access to proper nutrition, health care, quality education, jobs, and skills which are essential in ending extreme poverty and creating more inclusive societies.

Improved nutrition empowers people and transcends to empowering communities. It helps education, gender equality, and improves life opportunities. Health care systems improve the health status of the whole population, especially the ultra-poor among whom poor health and access to health care tends to be concentrated. In the Philippines, most of the national burden of health care is taken up by private health providers. This creates inequities in access to health services. Since funding for local government units (LGUs) oftentimes vary, some communities face difficulties accessing public health services.

Additionally, most health services are made out of pocket, especially services from private health entities. This makes health care even more inaccessible for the ultra-poor. Due to these facts, the World Health Organization has defined health care in the Philippines as “fragmented.” This means there is a large gap between the quantity and quality of health services for the poor and the rich. Though efforts are being performed to bridge the gap by the signing of the Universal Health Care Bill of 2019, significant results are still yet to be achieved.

Increased access to education can contribute to poverty alleviation. Education plays an important role in the lives of the ultra-poor. Education determines other factors of livelihood, like occupation, which determines income, and then determines health outcomes. It also helps the impoverished develop usable skills, abilities, and resources that help people reach goals.

The roots of unemployment are often speculated with discrimination at an early age. Children from impoverished households tend to be deprived of access to quality education, so they remain in poverty trap from generation to generation. The Philippines’ educational system struggles with policy implementation, and many public schools need more classrooms, books, and other learning equipment (libraries, computers, and laboratories). While schooling is widely accessible, its quality and attainment oftentimes vary by income group.

Children from ultra-poor families are less likely to be enrolled or to reach age-appropriate grade levels. This means that the poor are less likely to reach college education, which hampers their ability to potentially increase income. Although efforts had been made to improve its quality such as the expansion of secondary education (K to 12), we still need to improve its accessibility for all.

Lack of access to basic services such as water, sanitation, energy, transportation, and solid waste management has its effect at the most basic level of living. 52 percent of the population of the Philippines lack access to a reliable and safely managed source of water and 39 percent lack access to safely managed household sanitation.

At the same time, while the electricity access rate in the country is as high as 98 percent in the capital region, the remote regions are still lagging behind. In terms of transportation, traffic congestion has been an issue, especially in Metro Manila. While the rich can afford to buy cars, public transport is still the most economical choice for the poor, but the country still needs to improve its mass transport system.

Overall, the Philippines has a huge potential to eradicate poverty at a faster rate by addressing inequality. However, right policies and proper implementation are what we need in order for us to reach further heights.

Mr. Thomas L. Lazaro III is a graduate student at the Department of Economics of Ateneo de Manila University.

In our previous articles, we discussed about how the Philippines has remarkably progressed in alleviating poverty for the past 30 years due to its robust economic growth, and how it is faring with its Asean contemporaries.

We found out that despite the fast GDP growth, our poverty reduction was not at the same pace and slower than Thailand and Vietnam. And as the World Bank had pointed out, this is mainly due to the persistence of economic inequality in which not everyone, especially the ultra-poor, have an equal level of opportunity to have access to proper nutrition, health care, quality education, jobs, and skills that are essential in eradicating poverty and creating inclusivity.

In alleviating poverty, giving cash and tangible productive assets is not the only solution. We must also equip the poor with the right training, knowledge, coaching and mentoring with encouragement. In today’s article, we are to discuss the impact of equipping the poor on financial health and livelihood.

In the previous survey of the Bangko Sentral ng Pilipinas (BSP), the share of Filipino adults with bank accounts grew to 56 percent in the first quarter of 2022, from 29 percent in 2019. This was relatively higher than Cambodia’s 33 percent, Laos’ 37 percent, Myanmar’s 48 percent, and Indonesia’s 52 percent. However, this is lower than Malaysia’s 88 percent, Thailand’s 96 percent, and Singapore’s 98 percent (World Bank Global Findex 2021). Despite this development, challenges remain for the financial inclusion agenda of the BSP. The main barrier is lack of income, and bank transactions persist that expose inequality in the financial aspect. Effective financial organization and instruments are required, be it at the national (formal) level or at the household (informal) level. Training and equipping the poor can be utilized to improve the financial well-being of ultra-poor families.

International Care Ministries, a nonprofit organization that serves the ultra-poor communities in Visayas and Mindanao, trains and equips families in ultra-poverty through its Transform program. The program is delivered through weekly group sessions. One of its key component is the livelihood training wherein a trained staff teach business skills, saving and how to manage their finances. Program participants are grouped into “savings groups” (SGs). These groups are typically five to 20 people who belong to the same community. These groups have their regular meetings at least once a week, and members are required to contribute a small sum each meting, which is collected by the group’s treasurer and serves as the group’s savings. These groups are also being mentored and coached by an ICM staff regularly so they may use their savings, should it be enough, in a lucrative and sustainable business. As their business progresses and accumulates profit, members of the group may now potentially open a savings account in a bank, joining the formal financial sector.

Presbyterian Agricultural Services (PAS), a nonprofit organization, also trains the ultra-poor in Ghana, which includes financial education plus productive assets, aside from technical training, and life skills. Their poverty intervention proved to be successful in increasing the participants’ income and monthly consumption (Banerjee et. al. 2015).

Livelihood training is also essential for poverty reduction. Communities, especially rural ones, may have resources such as land, crops, and other assets. However, these communities often do not have the skills on managing these assets and turning them into productive use. The Village Enterprise (VE), a nonprofit organization that conducts livelihood training in Uganda, teaches livelihood that utilizes the productive assets that they provide for their participants. They also train their participants on how to market their produce. This approach is proven to be effective in increasing the income and monthly consumption of the ultra-poor who trained under their poverty intervention program (Sedlamyr et. al., 2020).

The studies and program cited here are meant to address poverty on the community or “micro” level. How can the impact of a “micro” training in finance and livelihood be translated to national or “macro” perspective in eradicating poverty? Moving forward, the government must look on policy proposals on how they can efficiently equip the poor and make them “graduate” out of poverty. Teaching the poor innovative ways of managing their finances and livelihood makes it more sustainable than merely being a “reactionary” government.