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

Filipino life relies on "jeepneys." Riding one to work or school is routine for most people here. The eclectic utility vehicles – a mash-up of jeep and jitney – attract passengers with their flashy ornaments and bold paint jobs. However, for all their color, these small buses are decidedly not green.

With 15-to-20-year-old engines that are far from fuel-efficient, jeepneys exhale a sizable share of the country's carbon emissions.

That's why engineer Chips Guevera set out to convince jeepney owners in the Philippines to convert their diesel engines to run on filtered cooking oil.

Shrinking the industry's carbon footprint, he says, could improve air quality and curb the country's fossil fuel consumption.

"It's a no-brainer," he says in his small garage in Makati, one of 17 cities that make up metro Manila. "The costs are lower and it's better for the environment."

Mr. Guevera, who also sells the recycled and filtered fuel, touts how used cooking oil around Manila is already cheaper than diesel. Still, it's difficult to convince owners to take a risk on something new, especially when most can't afford the conversion kit that his company, Alterenergy Systems, sells.

While Guevera spreads the message in the nation's capital, he's inspired a nearby city to take matters into its own hands and to nudge jeepney owners toward a petrol-free future.

The government of Tanauan, a few hours south of Manila, has teamed up with one of the country's major banks to create a special program that will lend drivers the money needed to convert their vehicles. Already, the city council has set aside 600,000 Filipino pesos ($13,800) to fund a pilot program for 10 jeepneys.

Under the plan, drivers without the credit history or collateral needed for a normal loan may borrow the government money from Rizal Commercial Banking Corporation. As the jeepney owners repay the loan, the original amount of the loan goes back to the city while the bank pockets the interest.

Tanauan Mayor Sonia Torres Aquino put the plan in motion after her son-in-law and adviser, Jovi Bengzon, visited Guevera's garage. He returned very impressed.

"It smelled like fried chicken," jokes Mr. Bengzon. "But it worked."

If the pilot program runs smoothly, Ms. Aquino says it could expand to help more of Tanauan's 350 jeepney drivers save on fuel.

"It will be very economical for them," she says. "It is also environmentally sound; but to start, they will have to spend some money – more than they are used to."

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

"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.