Microfinance loans continue to rise

MANILA, Philippines - Microfinance loans went up as of June this year, reflecting the continued efforts of the Bangko Sentral ng Pilipinas and the banking industry to promote financial inclusion.

BSP Governor Amando M. Tetangco Jr. said loans extended to micro-entrepreneurs amounted to P9.3 billion as of June this year, up 6.8 percent from P8.7 billion a year ago.

“It is clear, microfinance has become a viable proposition for banks. In fact, we can say that microfinance as a medium for financial inclusion, has strengthened the institutional stability of banks by generating reliable business opportunities,” Tetangco said.

“This is because the microfinance industry has evolved from a narrow focus on microcredit to a more holistic, sustainable and value-adding provision of financial services to our target market,” he added.

Tetangco said in the last four years, the return on equity of rural banks with microfinance operations was higher by an average of three percentage points versus that of the entire rural banking sector.

At the same time, 69 of the 183 banks with microcredit operations have 1.7 million micro-deposit accounts, he said. In early 2012, only 22 banks held on to micro-deposit accounts.

“The availability, accessibility and affordability of these financial products have drawn more micro entrepreneurs to do business with banks,” Tetangco said.

“From this, we have learned that developing appropriate products and delivery channels enable financial institutions to serve markets that were previously marginalized. This is a solid foundation to build on for our broader financial inclusion program,” he said.

The BSP, for its part, has helped create this environment for microfinance to prosper through its well-crafted regulations to support the safe and sound development of these products.

“We believe that financial inclusion, through microfinance, complements our financial stability objectives. Thus, our regulatory environment is conducive to expand financial access while preserving financial stability and integrity, deepening financial education, and ensuring consumer protection,” Tetangco said.

Moreover, microfinance institutions including banks and non-government organizations have helped change environment and widen their reach to small businesses and poor households.

Last month, the Philippines was ranked as the top country in Asia and the third in the world on the Economist Intelligence Unit’s Financial Inclusion survey.

“The EIU notes that countries like the Philippines, with a long tradition of microfinance, have better institutional and financial infrastructures, which can be leveraged to provide a wider range of services, and cater to more clients at the bottom of the pyramid,” Tetangco said.