BPI establishes microfinance unit

After being content with using the BPI Foundation Inc. as its outlet for microfinancing, the Bank of the Philippine Islands (BPI) has finally formalized microlending into its system by forming a microfinance unit curiously under its corporate banking division.

BPI vice president for microfinance Josaias T. dela Cruz said that they will basically be lending to microfinance institutions (MFIs) since it does not have the capability for direct lending.

"Aside from wholesale lending to MFIs, the funds will also held develop capacity building," Dela Cruz said.

MFIs are the institutions on the ground that will be directly lending to microborrowers. Among them are non-government organizations (NGOs), rural banks, and cooperatives.

The microfinance arm of BPI will also tap strategic partners like the Grameen Fund, and CordAid to expand its portfolio while gaining valuable knowledge and technical education from the agencies.

BPI injected a seed capital of P500 million to the infant unit, and already P400 million are in the pipeline for loan approvals.

The interest rate for wholesale lending is 10.5 percent versus existing market rates of between 12.5 to 13.5 percent.

NGOs and rural banks have been microlending for the past years but have been seeking better lending rates. After all, microlending entails a huge overhead for voluminous paperwork, manpower and manhours, and other technical works.

Government and rural banks have been asking thrift and commercial banks to participate in microlending by extending lending facilities with competitive rates for relending by the MFIs.

Other commercial banks like the Allied Banking Corp. (Allied Bank) claim to directly lend to microborrowers, but only in selected branches.

The Bangko Sentral ng Pilipinas (BSP) encourages rural banks to engage directly in microlending, while encouraging commercial and thrift banks to join the bandwagon through wholesale lending or special lending windows.

In fact, the BSP offers incentives to banks opening microfinance-oriented branches so long as it is devoted solely to microlending.

Microentrepreneurs, and the small and medium enterprises (SMEs), are considered the engines of growth of the economy. But access to formal credit has always beeen their problem, despite the fact that they reported delinquency rate was a mere two to three percent.

BPI, through the BPI Foundation, has already extended microcredit amounting to P57 million to 14 non-profit institutions covering 2,000 end-borrowers.

Mostly female, the microentrepreneurs include farmers, vendors, growers, bakers, tricycle operators, and repair shops. The loans amounted to as low as P2,000 to as high of P200,000 with a repayment rate of 95 percent. – Ted Torres