ADB claims microfinance success in PH
Published on 18 October 2012 Hits: 521 Written by MAYVELIN U. CARABALLO
REPORTER
BUT BANK SAYS ONLY 3 MILLION FILIPINOS HAVE ACCESS TO LENDING FOR THE POOR
A study from the Asian Development Bank (ADB) Independent Evaluation
Department that was released on Wednesday said that the lender's
microfinance support had been effective in the Philippines as of 2010,
however, many Filipinos still do not have an access to microfinance loans.
According to the study entitled "Microfinance Development Strategy 2000:
Sector Performance and Client Welfare," in the Philippines, support for
microfinance formed part of ADB's country partnership strategy,
particularly in the government's efforts to achieve the Millennium
Development Goals.
However, it noted that of the current Philippine population of 94.1
million, only 3 million poor Filipinos had access to microfinance loans.
The ADB study explained that this few number of Filipinos reflects a
3.2-percent penetration rate of microfinance.
"Penetration rates compare active borrowers against a potential client
base of the population living below the international poverty line of
$1.25 per day," it added.
However, while only few Filipinos have access to microfinance loans, the
study had observed that ADB's microfinance development strategy had been
effective in the country with notable improvements in the policy, legal,
regulatory, and supervisory frameworks.
Besides Philippines, the ADB study added that growth in outreach and
sustainability provides evidence that microfinance institutions capacity
was also strengthened in Cambodia and Tajikistan.
"In these three countries, the interventions addressed key constraints
to sector growth with appropriate choices of financing instruments to
ease the expansion of microfinance services," it added.
In terms of promotion of pro-poor innovations and financial technology,
the study revealed that ADB's support for this area was very limited and
mainly through technical assistance.
"Support to Cambodia, Philippines, and Sri Lanka laid the groundwork for
the expansion of savings and microinsurance products and services,
through the development of appropriate regulatory frameworks and support
for product development," it added.
Meanwhile, in the Asia and the Pacific region, the study said that
microfinance needs to reach more of the poor, but in a financially
sustainable way.
It also emphasized the twin goals of microfinance—reaching the poor and
being financially sustainable, adding that microfinance has become
increasingly commercialized in the region. The study stressed the role
of government and agencies such as ADB in addressing the financial needs
of the poor, while at the same time ensuring the institutional
sustainability of microfinance providers.
"Despite the increasing popularity of microfinance in recent years,
expanding the access of poor households to institutional financial
services remains a great challenge to governments and development
agencies," according to the Director General of Independent Evaluation
at ADB, Vinod Thomas.
Low penetration in Asia
It also found that the penetration of microfinance among the poor in
Asia and the Pacific remains low.
Moreover, the study added that as of the end of 2010, some 20 percent of
the population living below the poverty level of $1.25 a day had direct
access to microfinance services in 21 developing countries receiving ADB
microfinance support.
"This level was below ADB's goals," it said.
The study added that microfinance is seen in the region as an important
means to helping low-income households take advantage of economic
opportunities and improve living standards. However, the degree to which
it actually reaches the poor and improves their welfare is under public
scrutiny.
It also noted that for microfinance to have a greater impact on reducing
poverty in the region, it needs to better target the poor and focus more
on educating them in using basic financial services, as well as more
effectively link microfinance services to complementary pro-poor
interventions.
Furthermore, the study also noted that about 2.7 billion people
worldwide, or 70 percent of the adult population in the world's
developing countries, have no access to formal financial services, such
as savings or checking accounts, representing a key and still largely
untapped market segment for financial inclusion.
"Improvements in the policy environment and integrating microfinance in
the formal financial sector do not automatically improve outreach to the
poor. Deliberate and innovative approaches are needed to benefit more
people currently not reached by traditional financial institutions,"
Thomas said.
Government-to-person payments also have the potential to become an
effective means for financial inclusion, primarily through social
transfers and wage and pension payments, which have been implemented in
Bangladesh, Cambodia, India, Indonesia, Pakistan and the Philippines, it
explained.
In May 2000, the ADB approved its MDS to provide a strategic framework
and broad guidance for its support in the microfinance sector.
Since then, the ADB said that it has been one of the largest providers
of microfinance support in the region and it had approved nearly $2.8
billion through 88 loans, grants, technical assistance operations, and
private sector investments.
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