The People’s Development Trust Fund: Setting Up a Trust Fund for Capability Building

This paper was written to assist NAPC in formulating a
capability-building program that will make most efficient and effective
use of the People's Development Trust Fund for the benefit of
micro-finance institutions and their clients. In doing so, it looks
into the sufficiency of these funds to accommodate or match the
capability-building needs of the micro-finance institutions and their
clients. This matching of funds with capability building needs is
viewed on two levels. First, in terms of the theoretical role of
financial institutions, particularly micro-finance, in economic
development. Second, in terms of a sector growth continuum-a diagram
that identifies where micro-finance institutions are today, what they
hope to be in the short to medium term, vis-à-vis how the Fund can help
them realize their full growth potential in the long-term.

What is the People's Development Trust Fund?

The creation of the People's Development Trust Fund (herein referred to
as "the Fund or PDTF"), was mandated by Book II of R.A. 8425, also
known as, "The Social Reform and Poverty Alleviation Act". The Fund was
envisioned to exist in perpetuity, the principal of which cannot be
withdrawn—only the interest and other income earned by the fund to use
for micro-finance and micro-enterprise development capability building
needs, with parallel efforts in providing a supportive and appropriate
policy environment, and an institutional framework for a private-led
micro-finance market.

The principal of the Fund, P 4.5 Million Pesos, shall be sourced from
earnings of the Philippine Amusement and Gaming Corporation (PAGCOR),
as well as appropriations by Congress, voluntary contributions, grants,
gifts from local and foreign sources as may be accepted or decided by
National Anti-Poverty Commission (NAPC), the Lead Convenor of this
effort. A Fund Manager shall be identified via bidding (a government
department, agency or financial institution), to professionally manage
and maximize the earning potential of the Fund in accordance with
existing government rules. A Program Management Secretariat shall also
be established to oversee the daily operations as well as maintain the
integrity of the Fund's undertakings.

The Implementing Rules and Regulations (IRR) of Book II,
operationalizing the Fund have been formulated and readied for Cabinet
level discussion as of November 2001. The National Anti-Poverty
Commission (NAPC) as Lead Convenor, shall facilitate these discussions
until the Rules are signed by the President, Her Excellency Gloria
Macapagal-Arroyo, of the Republic of the Philippines.

Objectives of this Paper

This writer has been commissioned to assist NAPC in formulating a
capability-building program that will make most efficient and effective
use of the PDTF for the benefit of micro-finance institutions and their
clients. In doing so, this writer shall look into the sufficiency of
these funds to accommodate or match the capability-building needs of
the micro-finance institutions and their clients. This matching of
funds with capability building needs shall be viewed on two levels.
First, in terms of the theoretical role of financial institutions,
particularly micro-finance, in economic development. Second, in terms
of a sector growth continuum—a diagram that identifies where
micro-finance institutions are today, what they hope to be in the short
to medium term, vis-à-vis how the Fund can help them realize their full
growth potential in the long-term.

Finally, NAPC has expressly requested assistance in targeting what they
believe is the broader definition of the "entrepreneurial poor". This
means, the bottom 30 percent of poor families, those with net asset
value of less than P 25 thousand pesos per annum. This concern shall be
addressed in the context of the growth continuum described above.

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