BSP expands coverage of microfinance program

MANILA, Philippines – The Bangko Sentral ng Pilipinas (BSP) will soon allow all banks to provide microfinancing to the agriculture sector as part of efforts to spur lending in the countryside, BSP Governor Amando Tetangco Jr. said over the weekend.

This as the BSP is expanding the existing program with the Rural Bankers Association of the Philippines (RBAP) dubbed as the Microenterprise Access to Banking Services (RBAP-MABS).

The policy-making Monetary Board approved last week the expansion of the credit program to include all other banks, mostly rural banks that were not part of the previous program.

“It was a limited program but now it will be open to all,” Tetangco told reporters.

Under the program, banks will provide small agricultural farmers these microfinance loans or the so-called high-frequency loans because of the frequent payment schemes. Loan amortization can be as frequent as weekly or monthly.

The loans can be used to purchase farm inputs such as fertilizer, Tetangco noted.

Microfinance loans — usually up to P150,000 — also have no collateral requirements, cash flow and character based lending, with small and frequent amortizations, as well as simple documentary requirements.

He said these loans would help boost farmers’ output and consequently strengthen economic growth in the country.

However, he said banks need to have the technological capacity to engage in this type of lending. “To engage in microfinance lending you have to have the right technology,” he said.

Tetangco said the BSP is set to issue the circular next week, as a follow-through to the existing circular that implements the RBAP-MABS program as early as 2005.

The RBAP-MABS approach to agricultural microfinance was developed in 2004 with the aim of addressing the need of small farmers for formal agricultural financing.

Having worked with rural banks since 1998, the MABS program believes that the rural banks, strategically located in the countryside, are in the best position to provide financial services to the small farmers and fisherfolk who constitute 90 percent of the total farmers and fisherfolks in the country. –Iris C. Gonzales (The Philippine Star)