NB Financial Health
After Typhoon Haiyan, Opening a Door to Financial Inclusion: Mobile-based savings accounts are helping low-income Filipinos hardest hit
As Casimira Amoren Isidto walked through the busy local market in her colorful flowered top, waving and chatting with the other vendors, she spoke of her plan for her family’s future with confidence. But just months ago, planning for the long-term didn’t seem possible.
In early November 2013, 33-year-old Casimira’s husband died of acute appendicitis. During the wake a few days later, winds began whipping around the house where family was keeping vigil, and Casimira sent her four young children to her sister’s home to take shelter. As the wood walls and tin roof began to shake with the ferocity of an approaching storm, she stayed by her husband’s casket as long as she could.
At that moment, the worst typhoon in history was making landfall in the Philippines.
“The house began to break apart around me,” said Casimira. “I grabbed a tarp to cover my husband’s body and ran to my sister’s house.”
When Typhoon Haiyan subsided, 16 million people in the Philippines were impacted by its wrath. More than 6,000 lost their lives. The storm destroyed or severely damaged over one million homes. That’s more than twice as many homes as were destroyed by the Indian Ocean tsunami in 2004, according to The New York Times.
Bogo, the closest town to Casimira’s village, was one of the hardest hit.
“[The typhoon] destroyed everything we have here, from infrastructure to agriculture,” Bogo City Mayor Celestino Martinez Jr. told the Philippine Sun-Star. “We didn’t expect it could do such damage.”
After burying her husband’s body in the local cemetery, Casimira gathered strewn pieces of her home, collecting scattered corrugated tin and wood to begin rebuilding, but it wasn’t enough. The Isidto family moved in with Casimira’s parents, whose home was less severely affected. With four young kids, she would now have to support the whole family on her tiny income from selling fish at the market.
People in the Philippines are extremely vulnerable to disasters: About 40 percent of the population lives on less than $2 a day, and most of the country’s 7,000 islands suffer from a severe shortage of modern infrastructure and chronic isolation from public services and safety nets.
Casimira is undoubtedly poor, but represents the higher end of the spectrum. Selling fish at the market earns her anywhere from $4 to $13 on a good day. It’s not enough to invest much in growing her business or saving for the future, or the huge expense she now faces of rebuilding a completely destroyed home, on top of the emotional trauma.
But Casimira is the kind of woman who is always thinking about what’s next for her young family. Shortly after the disaster, she heard of a no-strings-attached cash transfer, dispersed by a humanitarian aid agency to those households hardest hit by the storm. She knew it would give her a boost as she recovered her losses.
In January, Casimira was one of the first to sign up for the program, dispersed by Mercy Corps, which hopes to reach 25,000 households by June. Rather than handing out paper vouchers or physical cash, Mercy Corps partnered with the Philippines’ only purely mobile-based bank, called BPI Globe BanKO (BanKO), and based the new platform on experience gained from working with MasterCard on electronic cash transfer programs in other countries around the world.
BanKO represents the growing trend toward branchless banking in emerging economies, where many more people have cell phones than traditional bank accounts and rural — or island — areas are harder for a traditional brick and mortar branch to reach. Because BanKO’s target clients live on less than $2 a day, there was clear overlap with Mercy Corps’ aim of targeting those most vulnerable to the storm’s devastating effects.
“Electronic cash lets people purchase exactly what they need for themselves and their families,” said Erynn Carter, Mercy Corps country director. “It’s also a financial stimulus to local markets in these hard-hit areas.”
The money, about $87 per family total, is dispersed into BanKO’s mobile-based savings accounts, the first such account for most of the recipients who have never had a secure way to store money. Many have begun to use it for urgent needs and rebuilding supplies.
But what’s next?
The immediate cash boost is an important step in the economic recovery process, both for families like Casimira’s and the local vendors where she’ll buy the tools and goods she needs to recover. By some estimates, it will likely take years before the country recovers to its pre-typhoon state, and new storms and floods are likely to slow progress.
“Our first priority is to fulfill people’s immediate needs after the crisis,” said Carter. “But this moment also presents an opportunity to help families become more resilient when the next disaster hits.”
Mercy Corps and BanKO began thinking about financial products beyond savings accounts that would address low-income clients’ financial needs for the long-term.
(Casimira and her daughter, Trisha, 2, in their home on the island of Leyte in the Philippines.)
“Looking at post-Haiyan rebuilding, designing a specific product that meets the immediate and long-term needs of individuals and communities seem to be decision with both developmental and business value for BanKO,” said Rob Nazal, head of community banking.
Though the bank had an existing loan product, it was targeted toward microbusiness owners. “We’re hoping that this new product may be more customized towards the needs of our customers in the Visayas region, who may not necessarily be retailers,” Nazal added.
To create this product using customers’ input, Mercy Corps and BanKO invited IDEO.org to join them. IDEO.org, whose for-profit parent firm designed the first Apple computer mouse in 1980, puts a laser focus on the “end user” by developing products and services through human-centered design, as the industry has dubbed it. In this case, a woman like Casimira represents that end user, and any financial product developed would have to fit her needs, including ease of use and accessible price point. Without consumers’ input, the result might never gain traction.
Rather than asking low-income Filipinos what kind of financial product they might want, IDEO.org uses a game to elicit gut reactions – and what they might really need.
“The game is designed to get at some of the basics of a potential financial offering, but in a more playful way that takes your mind off of the fact that you might be talking about some very serious, complicated stuff,” said Behrouz Hariri, an IDEO.org fellow leading a game in the village of San Diego, about 35 minutes east of Tacloban City on Leyte Island.
Hariri and his team know that if they asked whether taking out a loan from a bank or a loan shark would be a better option, most interviewees will respond with the bank because it offers a better rate and is more trustworthy — and because it’s the answer the interviewer wants to hear. But, says Hariri, more people actually go to a loan shark because it’s convenient, fast, and their staff come out to villages.
And that’s a golden nugget of information that BanKO can use to tailor a future loan product aimed at this demographic.
As two shy, young women continued to play the game, Hariri discovered that the first thing they were willing to do when faced with a steep penalty was to burn a bridge with the hypothetical bank.
“That reaction tells us that they are many competitors out there that they can switch to,” said Hariri. “I think that will prompt to us to look at different options to see how we [BanKO’s future product] can be different, and what would make a client stay.”
These are insights that Mercy Corps and BanKO will use in the process of designing and marketing new financial services that are tailored to the needs of the rural poor, many of whom were among the hardest hit by Typhoon Haiyan. If successful, BanKO’s newest clients would get access to products that can help them expand existing businesses and smooth out unexpected financial shocks long into the future.
Kyla Yeoman is the program manager for Global Envision, a blog managed by Mercy Corps focused on market-based solutions to poverty.