Microfinance reach too small
Published on Thursday, 18 October 2012 00:00
Written by ANGELA CELIS
Microfinance services in the Philippines are only able to reach 3.2
percent of the country's population, a study from the Asian Development
Bank (ADB) showed.
In a report titled, Microfinance Development Strategy 2000: Sector
Performance and Client Welfare, the bank said that the total number of
borrowers in the Philippines as reported by microfinance institutions is
only three million, as of end-2010.
This figure is equivalent to 3.2 percent of the 94.1 million population
as of 2010.
The data from ADB also show that microfinance services reach only 14.1
percent of the poor population in the county, or those who are below the
World Bank's international poverty line of $1.25 a day. The poor
population in the Philippines as of end-2010 is 21.3 million.
"Despite the growth in outreach and microfinance providers in Cambodia
and Philippines, penetration rates were only 3.2 percent and 1.4
percent, respectively," the report said.
As of end-2011, the Philippines had 14,935 microfinance providers, which
the ADB said was due to the large number of cooperatives that have
microfinance operations.
The ADB said that Viet Nam leads the six countries studied in the
report, in terms of the scale and outreach of microfinance services, as
well as in terms of penetration rates.
The report said that this was achieved by Viet Nam with heavy subsidies
to the state-owned Viet Nam Bank for Social Policy.
"Cambodia, Pakistan, and the Philippines, despite their well-established
policy and regulatory frameworks, were far from the scale and outreach
of Viet Nam," the report said.
"However, the microfinance industry in these countries is commercially
oriented, offering more diverse products and services to clients with
more licensed or formal institutions operating in the market," the study
added.
The ADB said that the six countries studied represent 33 percent or $916
million of the agency's microfinance portfolio in 2000 to 2010.
Pakistan received the largest amount of assistance with $488.9 million.
The Philippines had the second largest share of microfinance support
from the ADB among the six countries with 19 percent or $173 million, of
which $150 million was a sector development program loan approved in 2005.
"These two countries received the major share of the assistance among
the six countries due to their relatively large program loans, which
covered comprehensive policy reforms and capacity development for the
sector," the ADB said.
The report said that the ADB support had effective results for creating
a policy environment conducive to microfinance in Cambodia, Pakistan,
Philippines, and Tajikistan.
"In the Philippines, ADB support enhanced the policy and regulatory
environment by removing regulatory impediments and policy distortions,
which in turn contributed to the growth of the sector," the report said.
The ADB said that microfinance needs to reach more of the poor in Asia
and the Pacific.
The study finds that the penetration of microfinance among the poor in
the entire region remains low.
"As of the end of 2010, some 20 percent of the population living below
the poverty level of $1.25 per day had direct access to microfinance
services in 21 developing countries receiving ADB microfinance support.
This level was below ADB's goals," the agency said.
The report said that around 2.7 billion people worldwide, equivalent to
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.
They represent a key and still largely untapped market segment for
financial inclusion, the ADB said.
"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,"
Vinod Thomas, Director General of Independent Evaluation, said.
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CARLOS ANI - International Microfinance Consultant - SEEDFINANCE Corporation Chairman
Mailing address: PO Box 90 UPLB Los Banos Laguna, Philippines 4031
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