RP places second in global study on microfinance business environment

MANILA, Philippines - The Philippines placed second in a study conducted by the Economic Intelligence Unit dubbed as Global Microscope on microfinance business environment.

The study was conducted among 54 developing countries. Among the different developing countries, Peru retained its position as the global leader on microfinance bureau’s environment.

According to the study, for the second year now, the Philippines and Bolivia top the Economic Intelligence Unit’s Global Microscope index. “The Philippines and Bolivia swapped positions and finished second and third, respectively, this year. Two newcomers, Pakistan and Kenya, joined the top 10, displacing Nicaragua and Uganda,” the study noted.

The three best-performing countries score especially well in two of the main index categories: regulatory framework and institutional development.

“The Philippines enjoys the best overall regulatory environment for microfinance, alongside Cambodia, which does not make the top 10 overall, and Pakistan which does,” it said.

The study noted key changes in the country’s microfinance environment. It noted that microfinance institutions in the Philippines or MFIs are able to offer a variety of services, and many do.

“Regulated MFIs can accept deposits, and those linked to the international payments system can accept remittances,” it said.

In terms of choices, clients in the Philippines have a wide choice of service providers, including local and national institutions.

Furthermore, the study noted that in 2010, the Bangko Sentral ng Pilipinas (BSP) began allowing rural, co-operative, and thrift banks to sell authorized micro-insurance products.

These institutions can be licensed as micro-insurance agents, and can only sell policies up to P190,000 or $4,000 under certain provisions, it noted.

The study also took note of the fact that in April 2010 the BSP issued a circular that set the rules for accrediting microfinance rating agencies, a move seen as encouraging local MFIs to be rated.

“Until recently, it was rare for microfinance banks (MFBs), rural banks, or thrift banks with microfinance operations to become externally rated,” the study said.

In 2010, BSP issued rules on the extension of housing microfinance and eased requirements for micro-lending in agriculture which the study said also contributed to the improvement in the microfinance environment.

At the same time, the study underscored the need to put in place a credit information system.

“The Credit Information System Act signed into law in September 2008 requires all regulated entities to submit positive and negative information to a new credit bureau under the Securities and Exchange Commission (SEC). However, the establishment of the Central Credit Information Corporation (CCIC) has not yet resulted in the operation of a functioning, active credit bureau, despite the fact that implementing rules and regulations (IRR) were approved in May 2009. According to local press, operations are now expected to begin in the third quarter of 2010,” it said.