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Post oil: Microloans and cooking oil green-up 'jeepneys'

An engineer says microloans and cooking oil can make over a fleet of old jeepney buses, and a city in the Philippines is ready to jump on board.

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Her biggest worry is that drivers will see this as a government handout and not make payments.

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"I've told the government, 'You are not out in front. We are,' " says Long Pineda, who heads microfinance operations for Rizal Commercial Banking Corporation. "If the drivers get the money from city hall, they might think, 'We don't need to pay this back. It's taxpayer money anyway.' But when they go to a bank, they know they have to pay it back."

The terms of the loan are still being negotiated, but the city and bank will likely agree on an interest rate of 2 percent a month.

"Microfinance is a very lucrative business," Ms. Pineda says, "but it also provides a service. Jeepney owners normally borrow from money lenders who [don't require credit histories but] charge close to 20 percent interest a month. It's a huge savings for [drivers]."

The Philippines has a history of innovative financial programs for low-income borrowers. These customers traditionally get turned away because of the perception that they're too risky.

But nonprofit organizations started setting up microfinance programs in the Philippines more than 30 years ago. The country's Central Bank actively regulates these loans. Such measures led the The Economist to rank the country as the second-best climate in the world to conduct microfinance.

If the jeepney program in Tanauan succeeds, it could stand as a strong example for communities looking for creative ways to solve their own energy needs.

Five years ago, the Philippines became the first country in Asia to pass a biofuels law.

The law was supposed to encourage small towns to gain energy independence using indigenous resources. Instead, many of the resulting projects involved large-scale production of jatropha, a nonnative plant that can be turned into biodiesel. Many of these projects were not successful.

"If you can crack community energy needs, if you can find a way to source locally, then you'll have made a major difference," says Lasse Holopainen, who worked for the Philippine department of energy when it researched the national law and now teaches a class on business and climate change at Ateneo University in Manila.

According to Pineda, community-based projects tend to work better than those immediately launched on a national level.

"It really works better if you start on the ground level," she says.

The Tanauan jeepney project is the bank's first green microfinance program – environmentally friendly efforts are often considered unprofitable by bankers in the Philippines. But, she says, she's excited about the possibilities for more programs such as this in the future.

The travel for this report was underwritten by a grant from the International Center for Journalists.


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