Microfinance loans breach P7-billion level

MANILA, Philippines -  Loans extended by banks engaged to the microfinance sector have breached the P7-billion level as financial institutions continue to move out of urban areas in Luzon to far-flung areas in the Visayas and Mindanao.

Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr. said about 202 banks all over the country that are providing microfinance services extended P7.1 billion worth of loans to 942,072 clients.

Tetangco added that the savings of the microfinance clients have reached P3.5 billion.

“Ten years ago, micro-entrepreneurs who have no collateral, financial records, and credit histories were rarely seen in bank offices. Today, over 200 banks have embraced them as valuable clients that have the capacity and character to repay their loans and to save in a formal institution,” he stressed.

He pointed out that microfinance clients are served by microfinance non-government organizations and cooperatives that have long been in the business of microfinance, as well as banks who now see both the business opportunity and social value of serving the entrepreneurial poor.

He added that microfinance clients now have the opportunity to choose from a wide range of financial services from a variety of providers.

“Microfinance clients are also increasingly benefiting from a range of financial products like micro-agriculture loans, housing microfinance loans and microinsurance,” the BSP chief explained.

According to him, microfinance institutions (MFIs) continue to expand the scope of their operations and scale up their reach through technology-based delivery channels that improve efficiency and reduce service costs.

In fact, Tetangco said a number of microfinance banks have tied up with telecommunications and network service providers and are now part of the electronic money ecosystem providing financial services.

“With mobile technology, banks need not send out loan officers to far-flung areas every week and bear prohibitive costs to serve more clients in frontier, hard-to-reach parts of the country,” he said.

The 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. It has institutionalized microfinance within the central bank 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 central bank and the banking sector in microfinance, SME, finance operations, and promoting the development of a sound, sustainable and inclusive financial system.

For his part, Citibank country officer for the Philippines Sanjiv Vohra said the launching the 2010 Citi Microentrepreneur of the Year Awards to recognize the achievements of microentrepreneurs who have set up businesses and are now providing a reliable source of income for their families.

Vohra said Citi is one of the world’s largest corporate donors to the microfinance sector as Citi Foundation has invested more than $80 million over the past 11 years in funding to support 365 microfinance programs in 60 countries.