Microfinance reaches 5M households

October 10, 2009 12:30 pm 

MANILA, Oct. 10 — In the aftermath of storm “Ondoy,” microfinance will play a key role in the rehabilitation of Metro Manila, which accounts for a third of the country’s gross domestic product (GDP).

Instead of the short-term benefits of dole-outs, microfinance is considered globally as a critical tool in fighting poverty.

In the Philippines, where 40 percent in a population of 92 million are poor, microfinance extends easy credit to entrepreneurs, among them: meat and vegetable vendors in public markets and sidewalk sellers of garments, toys, and household goods. Microfinance enables them to earn enough for their families and for the education of their children.

According to the Microfinance Council of the Philippines (MCP), microfinance reaches only a third of the country’s 4.3 million poor families. This is a more conservative figure than that of the Bangko Sentral ng Pilipinas (BSP), which estimates that financial institutions and non-governmental organizations (NGOs) engaged in microfinance already reach two-thirds or five million families, each family averaging five members.

Total outstanding microfinance loans by 221 of the country’s financial institutions, most of which are rural banks, stand at P6 billion. Including NGOs, the total microfinancing portfolio can easily double to P12 billion. Equally important, micro-enterpreneurs have generated savings of P2 billion.

Microfinance in the Philippines started in the 1980s, using the Bangladesh Grameen model. In 1997, the country adopted a national strategy for microfinance, but it was only in 2002, a year after President Gloria Macapagal-Arroyo assumed power, that microfinancing became a business buzzword, with banks and NGOs given the incentives to lend to the poor.

This year, the Philippines’ experience was lauded in the pilot annual index for microfinance conducted by the Economist Intelligence Unit (EIU). Initially limited to South American and Caribbean countries, EIU expanded this year’s survey to cover 55 countries all over the world with partial funding from the International Finance Corp (IFC), the private sector investment arm of the World Bank.

In the survey, the Philippines placed third after South American countries Peru and Bolivia and first outside South America. The country received high scores for legal and regulatory framework and institutional development.

With micro-entrepreneurs in mind, the Rural Bankers Association of the Philippines recently celebrated its 52nd anniversary with the theme, “Banking on the base of the pyramid.”

With microfinance, that pyramid base is no longer as wide. (PNA)

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