The Informal Sector
by Ma. Saturnina Hamili
The informal sector may be viewed as an important component of the phenomenon of poverty and how people cope with their situation. The article of Tita Evasco-Branzuela in the book edited by Dr. Dejillas as well as Dr. Dejillas article on Small Business Enterprises and the Market Economy in another book he edited were used for this reflection paper. The close connection between Mediated Economics and the Informal Sector is one of the insights I gained in these two (2) courses. The informal sector can be seen as an “off-shoot” or a reaction of the poor sectors of under-developed countries to the economic conditions in their country. As seen in the reflection paper I prepared on Mediated Economics, the conceptual model showing the concepts and variables as well as their relationship to the central concept “monetary system” and the new alternative paradigm for viewing and transforming today’s monetary system, can be very useful in analyzing and arriving at action models for the work being done by Christian Children’s Fund (CCF).
The reasons why people engage in economic activities within the informal sector have been known to me as a social worker/community organizer, and they are the same as what were reflected in the above papers: basically related to poverty. These include people having no capacities or skills to have other sources of income or livelihood, no capital, already had previous experience in this type of activity, have friends or relatives who are engaged in the activity and therefore, they joined said relatives,and other similar reasons. However, a new insight for me now is the relationship between the monetary system and the existence of the informal sector. The reasons why the informal sector exists in the countries cited in the article by Branzuela are quite interesting. These included: 1) the existing structure of taxation; 2) economic controls; 3) sharp increases in government sector spending; 4) general deterioration in moral standards (I am not sure as to what this means or its relation to the proliferation of informal sector activities in the economy unless of course, it means the “illegal activities” which are allowed by government and which seem to have become “acceptable” to society); 5) inflation and 6)weak deterrence against tax evasion.
As far as the Micro-Enterprise Development and Livelihood Program of CCF is concerned( also called Income-Generating Projects-IGPs), we usually contract trainors for the parents who are found eligible to undertake IGPs. These trainors focus their training on skills to assess the viability of a Project as reflected in their Project Proposal or simple Feasibility Study. The training also focus on how the Parent Committee or Credit Committee should screen the applicants for loans and also on monitoring techniques for IGPs already existing. As a result of the significant numbers of Projects or enterprises that have failed and that were unable to repay their loans, CCF has stopped the use of CCF funds (called subsidies) for purposes of lending to or capitalizing IGPs. The Projects now encouraged to apply for loans from other lending institutions such as the DTI. There are around 12- 15 out of 52 Parent Associations who have demonstrated relative degree of “success” based on criteria set up by CCF . It is too long to present these here and to describe what is meant by “successful Projects”. Anyway, I would like to go back to my insight that perhaps what is lacking in our work with these Parent Associations (they were provided with a revolving fund for lending out to qualified members) is the conceptual model which considers the six categories and the interrelationship between the variables presented in the model prepared by Dr.Dejillas. Again, it will take more than this reflection paper to really use the conceptual model to get a broader perspective on the situation of our existing IGPs. Utilization however, of both the conceptual model and the alternative paradigm will be done to improve not only the problem-solving process but also to contribute to a holistic model for transformation.
The National Anti-Poverty Commission (NAPC) is providing support to the 14 basic sectors of Philippine society. These basic sectors represent the poor in this country. RA 8425 otherwise known as the Social Reform and Poverty Alleviation Act enacted in 1997 institutionalized the participation of the basic sectors in the anti-poverty initiatives of the government. CCF is quite active in the children sector. As a matter of fact, CCF played an important role in institutionalizing the participation of children as a separate basic sector in NAPC. The “workers in the informal sector” and the “cooperative” sector are included in the 14 basic sectors. The Sectoral Agenda prepared by the “informal sector” for 2001 and beyond included were based on major issues which included:
- access to credit;
- stringent policies/requirements on credit windows for small businesses;
- security of livelihood and workplace from police harassment
Among the agenda prepared by the Sector for the present administration included: Asset Reform- Setting up of micro-credit guarantee fund for Informal Sector (IS)workers; establish more flexible, accessible and responsive credit policies.
- Human Development Services – Establish common market for products (social and physical infrastructure)
- Employment and Livelihood Service – Social security and protection thru amendment of SSS IRR on accreditation of coops and associations as collecting agents of SSS;
- Finalization and implementation of EO 452 for security of vendors in the workplace.
- Basic Sector Participation – Increase IS awareness on anti-labor legislation;
- Establish more friendly, reasonable regulations and policies at the local level for small transport operators and drivers;
- Security and Social Protection – Issuance of an EO outlining government policy on protection and recognition of IS, emphasizing security of livelihood and workplace.
The above issues and demands of the Informal Sector focus on their need for security and protection. Given the conceptual model and the alternative paradigm, the above focus only on the exogenous factors. The endogenous factors which represent obstacles to strengthening the informal sector are hardly mentioned. This is perhaps due to the fact that NAPC is a medium for “advocating the demands” of basic sectors for government action needed to improve the situation of the poor sectors in Philippine society. For an NGO like CCF, it is also very important to not only look into how its organized groups can participate in basic sector activities on the barangay, municpal, provincial, regional and national levels but it should also continue to strengthening the organizational base and capacity of the Parent Associations and the various IGP groups assisted by CCF all over the country.
The inter-connectedness of people’s actions, decisions, choices and their value system should be an important component of the program. In CCF, the Micro-Enterprise Dev. (MED) and Livelihood projects are viewed in relation to how the income from these activities increase the capacity of families to improve the health, nutrition and education of their children. Since the basic moving factor in the participation and involvement of parents in MED and IGPs is “money”, the insights related to money should be applied to this program as well. The value system of the person is related to such problems experienced by CCF projects: high rates of delinquency in repayments of loans; use of capital for other purposes, that is, other than the business applied for; very low profit or income from the business. Aside from the value system, the variables identified in the conceptual model and the impact of globalization on the local economy, should also be studied for purposes of arriving at alternative schemes and interventions.
That small business enterprises are playing an important role in the nation’s economy is another insight gained by this student. The presence of SBEs in the market can be a strong guarantee to ensure healthy competition among firms. The more business enterprises operate in the market, the more the economy becomes alive, vibrant and dynamic. But this condition implies that the entry, existence , and growth of SBEs are protected and encouraged. As of now, there are only a handful of SBEs existing among CCF beneficiary communities. Most are small informal types of businesses. How to assist this small informal types of businesses to become SBEs is perhaps another challenge to CCF.
In line with its Vision of a self-reliant and socially responsible family and community where children are cared for and grow up to become healthy, responsible, productive and free members of society, the capacity of families to participate in the socio-economic life of the community should be enhanced. A holistic, integrated approach to this continues to be one of the major challenges of CCF today and for the coming years.