Philippines: Rural Banks

Jul 2012
Philippines, July, 09 2012 - The recent anniversary celebration of the Rural Bankers of the Philippines–Microenterprise Access to Banking Services (RBAP–MABS) showcased how the concept and importance of microfinance has evolved in the last 15 years.

Microfinance today is a far cry from what it was in 1997: products are no longer just loans for microenterprise, but have expanded to micro-deposits, microinsurance, micro-agri, housing microfinance, and microfinance plus for growing enterprises.

Delivery mechanisms for microfinance are not only done through group disbursements, but are also accomplished through simple text messages powered by electronic money.

The Bangko Sentral ng Pilipinas (BSP), as the country’s central monetary authority and “bank of banks,” has taken deliberate steps to ensure that such positive developments can take place.

The BSP’s main objective in its approach to bank-based microfinance is to enable the delivery of commercially sustainable microfinance to its intended beneficiaries (i.e., micro, small, and medium enterprises or MSMEs)—with the government only providing a supportive role through policy, regulation, and capacity building.

In accomplishing this, the BSP studied the success of microfinance practices around the world. It then set in place regulations that recognized and accepted best practices such as the use of group support or liability arrangements, cash flow based lending, and high frequency amortizations.

The Bangko Sentral also liberalized entry into the banking system, encouraging microfinance non-governmental organizations (NGOs) that wanted to transform into formal financial institutions.

It has likewise liberalized branching regulations, allowing for the establishment of micro-banking offices and paving the way for innovations.

While the BSP allowed for these improvements in the banking system, it also instituted prudent standards for the conduct of microfinance operations. It did so by prescribing the use of “portfolio-at-risk” to monitor and measure portfolio quality, in the context of risk-based supervision.

This approach has allowed bank supervisors to fully understand the risk profile of microfinance, and not lead the banks to simply avoid exposure to this market.

MABS, a USAID-funded, technical assistance program that enables rural banks to provide microfinance in a sound and sustainable manner, has been the BSP’s partner in ensuring that its policies remain responsive to the changing needs of the market.

MABS has over 90 partner rural banks that have cumulatively disbursed more than P41 billion to micro-entrepreneurs through the years. Since the start of the program, MABS partner banks have been able to provide viable microfinance services in the countryside, as well as pioneer various innovations in terms of product and service deliveries.

MABS partner banks are among the providers of housing microfinance, micro-agri loans and microinsurance. They also implement mobile banking for microfinance services.

In line with the BSP’s larger goal of building an inclusive financial system, RBAP–MABS has laid the groundwork in institutionalizing the dynamic approach to delivering much needed financial services to the underserved market.

It is indeed heartening to know that the cooperation and collaborations between the public and private sector have allowed microfinance to flourish in a sound and sustainable manner.

With this type of Public-Private Partnerships, we can all look forward to the eventual attainment of true financial inclusion in our country—where everyone will have access to the financial services that they need.

Source : MB

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