Emergency kit during calamity

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Torrential rains brought about by tropical storm Maring recently pounded parts of Luzon including Metro Manila into submission, causing floods in a number of main thoroughfares.

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Aside from floods and the resulting massive traffic jams, another usual sighting during these unfortunate times is families that found their homes submerged in flood waters being relocated to higher, dry grounds by barangay and municipal officials. Here in the Philippines, these high-ground and dry locations usually mean empty basketball courts and barangay halls that are converted to relocation sites. Meanwhile, the usual parties subject to relocation efforts when calamities occur are families in rural communities, aside of course from the informal settlers living in high-risk areas like those close to creeks and rivers in the metropolis.

What we hope to see, and be assured of, in the future whenever heavy rains and floods hit the country again is rural families being financially secure even in the face of these calamities.

As these come with predictable regularity, it is important for the rural banks to continue to tailor their operations accordingly. This means, for example, to go easy on loans for newly planted crops that will suffer from the onset of torrential rains. Since the ability to make accurate predictions is not perfect, or an off-season weather disturbance suddenly appears, some of the loan portfolios go sour.

When these threaten to adversely affect the banks, the Rural Bankers Association of the Philippines (RBAP) immediately applies for regulatory relief from the Bangko Sentral ng Pilipinas. Such “relief” is a temporary measure to help the banks survive the crisis while they and their clients are recovering.

Any increase in loan demand after a calamity depends on the extent of the resulting devastation. If it is so sweeping as to completely destroy entire livelihoods as Typhoon Pablo did in four of Davao Oriental’s municipalities, there is no loan increase to speak of. If, however, it is the cyclical disturbance, there may be increased demand as rebuilding begins.

For rural banks, however, it is important that some source of income is still available so that these borrowers can start paying their loans immediately, even if only for a fraction of the regular installment amount. Rural bank clients tend to have thinner financial cushions, which make it difficult to even pay such a fractional amount. This explains why rural banks in weather-challenged areas must plan very, very carefully at all times.

One of the ways to provide protection to poor individuals who have little savings is through the use of customized financial tool catering to low-valued assets and compensation for illness, injury or death, which is made possible through microinsurance.

Fortunately, financial institutions like rural banks offer microinsurance products that cater specifically to the needs of the poor. Microinsurance is a very important tool to aid low-income households through insurance plans tailor-fit to their needs, as it has limited amount of premiums, contributions, fees and charges that do not exceed 5 percent of the current daily minimum wage, and a ceiling on guaranteed benefits that do not exceed 500 times the current daily minimum wage.

Admittedly, utilization of insurance among Filipinos in general is still very low, what more among those in rural communities wherein they feel that they would rather spend money for food and other basic things than on insurance.

And thus, there’s the rub: people have yet to see insurance as a necessity, not until the time comes when they actually need it. That’s the thing about insurance. You hate, and dread, the moment that you will actually need it. That fear is multiplied a hundred fold when that time indeed does come—and you don’t have insurance.

Located generally in the same community as their target market, rural banks are in the best position to understand the specific needs of the rural communities compared to bigger financial entities. As such, they have been permitted to act as agents of microinsurance products through Bangko Sentral ng Pilipinas (BSP) Circular 683, series of 2010. This authority allows rural banks to serve as channel partners on microinsurance, facilitate client’s enrolment, and collect premiums and claims administration.

On the other hand, the Rural Bankers Research and Development Foundation Inc. (RBRDFI), the training arm of the Rural Bankers Association of the Philippines, assists rural banks in the enhancement of their microinsurance services by providing a step-by-step guides and ready-to-use templates of documents required by the BSP and the Insurance Commission. RBRDFI conducts basic training courses on microinsurance to qualify rural banks as microinsurance agents and brokers. They also promote insurance literacy among rural bank clients through training and educational tools and materials.

To date, RBRDFI has trained more than 200 rural banks and 450 bank officers and staff in basic microinsurance

While lost lives (hopefully it does not come to that) cannot be replaced when the full force of Mother Nature takes its toll on us, lost properties can be, to a degree. More importantly, microinsurance provides that financial safety net and peace and mind, so much so that all poor families have to worry about when the next typhoon hits is their personal safety. Never mind their belongings. Microinsurance has that covered, and then some.

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