BSP urges banks to help microfinance sector

For nearly three consecutive years, the Bangko Sentral ng Pilipinas (BSP) has been aggressively pushing for the popularity, development, institutionalization and commercialization of microfinance in the Philippines.

Although the practice of microfinance has been around since the early 80s, it has only reached a more institutional and professional level when the BSP decided to get really serious in the late 90s.

However, BSP Governor Rafael B. Buenaventura continuous to push for greater involvement from the private sector especially the very liquid commercial and thrift banking sectors.

In a recent forum sponsored by the Bank Marketing Association of the Philippines (BMAP), Buenaventura took the opportunity to call on the commercial and thrift sectors to get involved in the development and commercialization of microfinance.

"I am urging the commercial and thrift banks to directly or indirectly support the development of microfinance," he said.

However, he admitted that the two banking sectors could not directly practice microfinance due to its very character.

Buenaventura urged the two sectors, which are awash with cash, to find ways such as through funding, offering grants, and expertise. These could result in banking and accounting skills training for smaller banks or other financial institutions that are or can be directly involved in extending microcredit.

"They must find one way or another (to get involved) that can result in assistance towards the development of microfinance," he added.

The BSP has already established a regulatory unit within the central bank to directly assist in the development as well as framing the proper regulatory environment for microfinance. It has also reached out to global players for directly or indirect assistance towards the same end.

It was cited in a study on the sustainability of microfinance commissioned by the Asian Development Bank (ADB). The study was undertaken by global consulting firm, Chemonics International Inc.

"The BSP is to be commended as one of the world’s leaders in terms of developing an enabling legal and regulatory framework to support the development of a sustainable microfinance industry," Stephanie Charitonenko, author of the study said.

The study pointed out that most of the Asian country’s endeavoring to launch microfinance initiatives are now looking at the Philippines as a successful model and that they are decided "to adopt some of the Philippine lessons for their specific contexts."

Focus of the BSP is the poorer sector of society that has the ability to engage in productive endeavors but are unable to tap credit.

"What they need is the opportunity to borrow, to get credit to start a business. That is the sector that we want to help through microfinance. They tap loans amounting to P1,000 to P5,000 which could increase to P100,000 when they are already operating. Eventually, they will graduate to the thrift or commercial banking system," the BSP chief added.

A recent BSP study indicated that the potential for microfinance loan demand is estimated at P26 billion, but that the potential supply is estimated at a mere P8.8 billion.

The information indicates that 30 percent of Filipinos living below the poverty line manage at least two livelihood or microenterprise activities. It also shows that over 40 percent of the almost 80 million Filipinos live below the poverty line.

Despite the large number of microentrepremeurs, less than one million avail of credit.

Studies indicate that best practices for both the financial institution dealing directly in extending micro-credit as well as the end beneficiaries were crucial for sustainability of the budding sector.

Over the years, microfinance was financed by non-government organizations (NGOs), which treated the practice of microfinance more like missionary work rather than a sustainable commercial and institutional exercise.