ADB cites good prospects in Phl microfinance

MANILA, Philippines - The Asian Development Bank (ADB) has cited as “highly relevant, highly effective, high efficient, likely sustainable, and significant” its microfinance project in the Philippines which it funded through a $150-million loan.

In a report released yesterday, the multilateral funding institution said it extended a $150-million loan for the country’s Microfinance Development Program in 2005. At the end of the program in 2008, the number of active microfinance clients in the country doubled from 2.4 million in 2006 to 5.5 million. During the same period, about 2.6 million jobs were created.

The ADB said the program took a wider view of microfinance than simply lending.

This included helping to increase the number of microfinance institutions that offered micro-savings and micro-insurance services. There were six mutual benefit associations (MBA) offering microinsurance to 518,307 policyholders.

Data from the Bangko Sentral ng Pilipinas (BSP) indicate that there are four million families responsible for microloans amounting to P41 billion.

“ADB helped the Philippines expand its use of microfinance and learned some valuable lessons along the way,” it said.

Microfinance, or the provision of financial services such as loans to poor families, is recognized as a potent method of directly improving the lives of those most in need. When managed correctly, these small loans can be used to build small businesses and develop other income-generating activities that have a long-lasting impact.

“The program helped make microfinance institutions in the Philippines more sustainable by assisting in the adoption of performance standards by government regulatory agencies and those doing business related to microfinance,” the ADB said.

These standards promoted legal and ethical practices within the microfinance industry, whose clients can be vulnerable to exploitation.

Working in coordination with the Philippine government, the program promoted the use of electronic banking, particularly with mobile phone technology. This lowers costs and saves time for microfinance clients, who often make multiple small loan payments a month. Rather than physically visiting a microfinance office, or relying on a go-between, the client can pay quickly and cheaply using their mobile phone.

It also helped create new legislation, bolster a government regulatory agency and produced a consumer protection guidebook that helped improve the oversight of the industry and while increasing the financial understanding of clients.

There are now 200 banks and another 2,000 microfinance institutions (MFIs) in the Philippines servicing at least seven million microfinance clients.

The ADB said the Philippines is considered one of the countries in Asia with a relatively developed microfinance industry that provides financial services to the low-income sector.