Phl has best microfinance framework

The Philippines has the best policy and regulatory framework for microfinance in the world, according to the Economic Intelligence Unit (EIU).

The EIU is a global consultancy and research outfit that helps business leaders prepare for opportunity, empowering them to act with confidence when making strategic decisions.

Bangko Sentral ng Pilipinas (BSP) Monetary Board member Ignacio R. Bunye said one of the key reasons for the distinction is the existence of a regulator that issues supportive and enabling policy as well as capacity building regulations.

“Our main approach as been, and will continue to be, to facilitate the delivery of commercially sustainable microfinance products and services,” Bunye said during awarding ceremonies of the Rural Bankers Association of the Philippines – Microenterprise Access to Banking Services (RBAP-MABS) program.

A few years back, the BSP was recognized as the only central bank that was encouraging the practice of microfinance to the private sector.

Bunye said the BSP studied microfinance extensively, resulting in regulations and best practices such as using group support or liability arrangements, cash flow-based lending, and high frequency amortization.

The BSP relaxed some regulations regarding branching for rural banks practicing microfinance. That included the establishment of micro-banking offices (MBOs).

Due to its positive attitude towards microfinance, the BSP held talks and discussions with the private sector for the type of regulations needed to boost the sector.

At the same time, the regulator instituted prudent standards for the conduct of microfinance operations by prescribing the use of portfolio-at-risk to monitor and measure portfolio quality, in the context of risk-based supervision.

“This approach has allowed bank supervisors to fully understand the risk profile of microfinance,” Bunye added.

He pointed out that from the crude micro-loans, microfinance advocates from the public and private sectors created such schemes as micro-deposits, microinsurance, micro-agriculture, housing microfinance and microfinance plus.

From transactions that required the personal presence of the microborrower in bank branches, micro transactions can now be done through short message system or text messaging.

Last data indicate that there are four million families that have been responsible for making microloans reach P41 billion.-The Philippine Star (June 10, 2012)