A Cooperative Born Out of Necessity: From Loan Shark Victims to the Billionaire's Club
IN 2001, government employees and minimum wage earners in Buug town, Zamboanga del Sur Sibugay, were trapped in a shackle of past dues and interest rates. The sight of loans sharks loitering around the municipal hall and small sari-sari (sundry) stores were too familiar.
While the predatory environment certainly did not make headlines, people were getting desperate as their bills piled up. For instance, the 10% monthly interest rate charged by loan sharks was only compounded every time they missed a payment. But when a family member got sick or children needed school supplies, borrowers had no choice but to accept these crushing terms.
In the end, they were being bled dry, and the sheer weight of their debts pulled them deeper into their financial graves.
Located about five hours away from Zamboanga City, Buug is a third-class municipality with a little less than 40,000 population. Residents rely on subsistence farming, cottage industries, and trade for their income.
It was in this environment that the Sibuguey Valley Multipurpose Cooperative (SIVAMPCO) was formed by 18 local government employees who pooled in P2,000 to register the organization.
Their idea was simple: ask for a token fee to become a member, and they can immediately apply for loans at just 2.5% diminishing interest—a fraction of what loan sharks charged.
Felix S. Trapa, who was the assistant municipal treasurer when he reluctantly took the reins for SIVAMPCO, said the microcredit co-op’s philosophy originated from the Visayan community-based credit system called “bubu-ay.”
As such, they never had a long-term plan for the cooperative. In fact, it remained a closed-type co-op for about four years, exclusive to municipal employees, before they decided to open it and invite more members.
The “bubu-ay” is a type of rotating savings system where members religiously contribute, and each one will receive the pooled amount on a scheduled basis (monthly, bi-monthly, yearly, etc.).
Mr. Trapa said that opting for a closed-type cooperative had its advantages. For one, they could automatically deduct the loan payment from the payroll of the government employee. Second, they haven’t yet established a system nor crafted a blueprint to grow SIVAMPCO.
After all, SIVAMPCO was created specifically as a direct foil to the loan sharks.
However, the core members couldn’t have envisioned how a small payroll deduction cooperative for municipal workers would eventually grow into a ₱1.2 billion institution only 14 years later.
But the journey wasn't easy.
The Early Struggles: Building Trust Brick by Brick
For its first four years, SIVAMPCO operated as a closed-type cooperative serving only government employees. Membership requirements were simple but strict: A ₱250 membership fee and a 20% equity requirement for first-time borrowers.
"At first, even getting members to meet the share capital requirements was difficult," recalls Mr. Trapa. "These were people already struggling with debt. But we knew if we didn't build this alternative, nothing would change."
His experience as a municipal accountant and later municipal treasurer allowed Mr. Trapa to implement sound fiscal policies and auditing best practices. While running a cooperative was admittedly outside of his comfort zone, accounting rules remain constant.
Opening the co-op presented a new set of challenges. For example, they had to hire account officers tasked to conduct a credit investigation, checking into the background of each applicant.
However, the cooperative implemented unorthodox but effective policies:
● No loan restructuring allowed - payments had to stay current
● Three months of non-payment put loans "under surveillance"
● Each account officer is responsible for only 300 accounts, which allows them to monitor delinquencies personally.
The fiscal discipline and policies that Mr. Trapa and his fellow board members introduced paid off. By 2005, SIVAMPCO had grown its loan portfolio to ₱4 million - enough to expand services to an even broader community.
“We never advertised our services. Our cooperative grew to what it is now through word-of-mouth, courtesy of our satisfied members,” he says.
Breaking the Loan Shark Cycle
The impact was immediate and profound. Where loan sharks had charged 10% monthly interest, SIVAMPCO offered an initial 2.5% diminishing interest rate. The co-op will even reduce the rates further to 1.5-2% for “members of good standing.”
"Suddenly, our members could actually pay off their debts," explains a long-time manager. "For the first time, a sick child or family emergency didn't mean financial ruin."
The cooperative's strict 5% past-due allowance policy (setting aside ₱5 million for every ₱100 million in loans) kept finances healthy while allowing some flexibility in case of default.
More importantly, SIVAMPCO officials made sure to consistently reach out to members so that they feel a sense of ownership. But while they were quite generous with their loan terms, they were unforgiving with borrowers who deliberately tried to commit fraud.
To date, the cooperative has already filed lawsuits against at least 10 borrowers. While the amount was negligible relative to its assets, SIVAMPCO wanted to flash a warning: mess with the members’ money, and suffer the consequences.
As a result, the co-op enjoys an 85-89% repayment rate, which is above the self-imposed policy of 83%.
Word about the swift growth of SIVAMPCO quickly got around. Suddenly, banks and financial institutions wanted a slice of the pie. By 2005, Land Bank of the Philippines offered a virtual blank check as a credit line. “But we never really utilized because we were very liquid at that time,” he explains.
From ₱2,000 to ₱1.2 Billion
While credit and loans still make up about 75% of its annual income, Mr. Trapa said the board saw the need to diversify its portfolio. In 2010, it invested P15 million to construct a commercial building, the co-op’s first foray into real estate. To date, the organization already has five commercial buildings to its name, the latest of which is a P22-million, 4-story structure.
SIVAMPCO's growth strategy also focused on land acquisition, which allowed the co-op to purchase 67 hectares of rice and coconut farms. It also tried its hand in insurance and a travel and tour business.
Mr. Trapa said they are painfully aware of the hardships suffered by farmers due to the shortage of solar dryers, milling plants, and mechanized equipment. While the co-op could have looked the other way and continued to enrich itself using the fiscal model that slingshot SIVAMPCO to the billionaire status, he refused to live in a bubble.
So, the company earmarked P80 million to construct a rice milling facility, which will begin this year or in 2025, to provide farmers with a lifeline and escape the cycle of poverty.
The co-op is also very aggressive in expanding its reach, aiming to open 12 branches through next year in Zamboanga del Sur, Zamboanga del Norte, Zamboanga Sibugay, and Lanao del Norte. It means hiring more employees to add to its roster of 110.
The Importance of Networking
When SIVAMPCO joined the Federation of Peoples' Sustainable Development Cooperative (FPSDC) in 2010, it gained access to wholesale lending opportunities, training programs in cooperative management, and international exposure through Asian Credit Federation events.
"FPSDC became our safety net," notes the co-op executive. "When we needed guidance on large projects or wanted to benchmark best practices, we had experts to consult."
From its humble ₱2,000 beginning to its current billionaire status, SIVAMPCO proves that cooperatives can end predatory lending. As they prepare to celebrate their 25th anniversary in 2026, one thing is clear: This is just the beginning of their people-first revolution.
But behind the impressive numbers are real transformations: Farmers who doubled yields through cooperative-funded equipment, parents who sent children to college with education loans, and small entrepreneurs who grew their sari-sari stores into thriving businesses.
As to the loan sharks, he remarks: “We can still see them around on their motorcycles sometimes. But they are not as prevalent as before.”
