Microfinance balloons into P12-billion industry

FROM just a handful of lenders and several thousand borrowers in the 1970s, the business of microlending and microfinance has ballooned into a P12-billion industry serving an estimated 7 million poor Filipinos, most of them women.

This surfaced at a recent workshop involving a number of public and private agencies from both the entrepreneural and academic  sectors who committed themselves to learn from the past while pushing onward.

From just a handful, the number of microfinance institutions, or MFIs, now total 500, it was noted.

“A supportive regulatory and policy environment, including the phaseout of government-directed credit programs, helped spur the growth of microfinance in the country,” a policy-issues paper on microfinance and microenterprise development jointly submitted by the Pinoy Me Foundation and the Hanns Seidel Foundation said.

Government-directed credit programs are more known as subsidy or dole-out programs, which compete and interfere with commercially driven lending that teaches people to be credit-savvy and responsible at the same time.

The paper, titled “Mainstreaming Micro,” acknowledged the commercialization of microfinance that created new opportunities but ushered in new challenges, as well.

For instance, the paper found that rising competition among MFIs has encouraged multiple borrowings, which is bad particularly if this leads to overindebtedness.

The paper’s authors, all 11 of them, said this rather odd finding needs to be scrutinized further.

The authors also noted that most microfinance borrowers are not really poor if one goes by the official definition, and that these borrowers are urban-based.

“Microfinance has so far been an urban phenomenon that finances large retail or trading microenterprises. Because 70 percent of the poor in the Philippines are in rural areas, the challenge is how to reach the rural, agriculture-based poor population,” the authors said.

They added the chronic poor tended to borrow consumption rather than for income-generating purposes.

The authors include Dr. Cayetano Paderanga, Dr. Gilbert Llanto, Ronald Cua, Piedad Giron, Joselito Almario, Fernando Aldaba,  Salvador Sibayan, Pinky Abelleda, Erwin Tiongson, Danilo Songco and Angelica Espinosa.

They collaborated with the Agricultural Credit Policy Council, the Philippine Development Assistance Program, the John J. Carol Institute of Church and Social Issues, the Microfinance Council of the Philippines and Punla Foundation. –Jun Vallecera / Reporter, Businessmirror