Arroyo wants one million new microfinance clients by 2004

The microfinance industry continues to look for ways to improve their lot, and thus improve the lot of the poorest among the poor including the so-called "hard-to-service" sectors.

That was the theme of the two-year-old Microfinance Council of the Philippines Inc. (MCPI) during its annual meeting last week. The council’s members are made up of rural banks, thrift banks, credit unions, cooperatives and non-government organizations (NGOs)-microfinance institutions (MFIs).

One particular challenge hurled at them was made by Pres. Gloria Macapagal-Arroyo late last year when she dared them "to develop one million new clients by 2004."

"To meet this challenge, players will need to increase operational efficiency in a significantly improved manner," the MCPI said in its annual report. "The sector will also need to deepen its current outreach to more hard-to-service poor clients like indigenous communities, upland farmers fisherfolk and small tenant farmer-sectors that are currently under-served."

The MCPI plans to submit a draft bill to Congress seeking an exemption from the payment of percentage taxes on that part of NGO-MFIs and microfinance-oriented banks for a period of 15 years.

In the short-to medium term, it will continue to seek grants from local and foreign donors for various programs and development projects such as improving governance of MFIs and the wide spread promotion of performance standards.

Already it has initiated talks with the Rural Bankers Association of the Philippines (RBAP) for a proposed project on microfinance that will be funded by the German Agency for Technical Cooperation (GTZ). It remains in constant contact with the United National Development Program (UNDP), the Asian Development Bank (ADB) task Force on Microfinance, and the Ford Foundation. It will also tap the assistance from technical experts such as the United States Agency for International Development (USAID) for training programs.

The 22-member council wants to assume a role as repository of information for microfinance-related NGOs, and that it could closely coordinate with relevant stakeholders and seek support from government agencies.

"The council is also expected to advocate for and initiate the establishment of a credit bureau and risk-rating agency for microfinance," it stated in its report.

Not too long ago, proponents of microfinance got the proverbial shot-in-the-arm when the Bangko Sentral ng Pilipinas (BSP) said it would set-up a unit for the sector.

"In view of the commitment of the BSP to encourage micro-lending, the Monetary Board (MB) approved the adoption of a microfinance unit and the creation of an inter-sectoral microfinance committee to centralize and oversee program," BSP Deputy Governor Alberto Reyes said.

Among the duties of the microfinance committee, is formulating guidelines for examination of micro-lending institutions, training programs for examination of banks and other institutions, and the cetralization of all microfinance institutions.

The unit will also be the vehicle for mobilizing and administering possible international and local donor funds as well as our own BSP funds to be earmarked primarily for microfinance training, advocacy and research," BSP Monetary Board member Antonio L. Alindogan told The STAR in a separate interview.

The BSP has also issued regulatory orders to develop, enhance and propagate microfinance.

Circular 272 allows the banks regulatory flexibility to adjust to the peculiar characteristics of microfinancing particularly its focus on cash flow-based lending that is primarily not covered by traditional collateral. Circular 273 exempts, on a selective basis, organizations and interested persons from the current general moratorium on the establishment of new banks.

Other challenges facing the fledgling financial sector are: proper regulatory functions, regulations, and practices by both private and government sectors; staff piracy; the pawnshop mentality; commercialization of microfinance;

MCPI president Jaime Aristotle Alip urged the member MFIs, to continue to face up to the challenge of the sector aside from the challenge set by President Arroyo. Alip is the chief executive of the highly-successful Center for Agriculture and Rural Development Inc. (CARD).

He pointed out that poverty continues poise a major challenge to Philippine society and that it is increasing instead of decreasing daily.

"We all have a part to play in the seemingly unending battle to reduce poverty in this country," Alip said. "We consider it our fortune to partner with the poor and to dream big things with them."