Microfinance expands to Visayas, Mindanao

MANILA, Philippines - Financial institutions involved in microfinance are slowly moving out of urban centers in Luzon to far flung areas in the Visayas and Mindanao to extend financial services in rural areas, a top official of the Microfinance Council of the Philippines said yesterday.

Ruben de Lara, president of the Microfinance Council of the Philippines, said in a press conference that financial institutions have started providing financial and non-traditional products such as microinsurance, business development, client protection, among others in Visayas and Mindanao.

“The financial and social development needs of the provinces are changing and the requirements are not just financial but the non-traditional as well,” De Lara stressed.

He pointed out that major players in the microfinance business have reached a concensus recognizing that poverty eradication through provisions of microfinance services is important for the island of Mindanao.

“Especially for such places as the Autonomous Region of Muslim Mindanao where traditional lenders as banks are reluctant to go. The goal is to bring microfinance services not reached by traditional financial service providers,” he added.

The official said a two-day microfinance conference is being held in Davao City to address issues as client protection for microfinance borrowers, the vulnerabilities of the poor, how to bring the microfinance program to difficult areas of the country, innovations in the sector and fostering collaboration and partnership even among competing microfinance service providers.

Latest figures show that 214 banks involved in microfinance have outstanding loans of over P6.4 billion to nearly 900,000 microentrepreneurs who have over P1.5 billion in savings.

The Bangko Sentral ng Pilipinas (BSP) was mandated by the General Banking Law in 2000 to recognize microfinance as a legitimate banking activity and to set the rules and regulations for its practice within the banking sector.

The BSP has, since then, institutionalized microfinance within the BSP and has proactively taken significant initiatives to enable the development of sustainable microfinance.

The BSP’s three-pronged program include the provision of policy and regulatory environment, increasing the capacity of the BSP and the banking sector in microfinance, SME, finance operations, and promoting the development of a sound, sustainable and inclusive financial system.

It would be recalled that the business information arm of The Economist Group - The Economist Intelligence Unit (EIU) - has declared the Philippines as the best in the world in terms of its microfinance environment.