Microfinance In The Philippines Habaradas Umali Final 2013

Only available on StudyMode
  • Download(s) : 52
  • Published : July 29, 2015
Open Document
Text Preview
CBRD
Center for Business Research & Development

Working Paper 2013-05

The microfinance industry in the
Philippines: Striving for financial
inclusion in the midst of growth

Dr. Raymund B. Habaradas
Mr. Mar Andriel Umali
September 2013

CBRD

Working Paper
2013-05

Center for Business Research & Development

The microfinance industry in the
Philippines: Striving for financial
inclusion in the midst of growth
Dr. Raymund B. Habaradas
Mr. Mar Andriel Umali
De La Salle University
September 2013

The CBRD Working Paper Series constitutes studies that are preliminary and subject to further revisions. They are being circulated in a limited number of copies only for purposes of soliciting comments and suggestions for further refinements. The studies under the Series are unedited and unreviewed. The views and opinions expressed are those of the author and do not necessarily reflect those of the Center. Not for quotation without permission from the author(s) and the Center.

© 2013 DLSU-CBRD

The microfinance industry in the Philippines:
Striving for financial inclusion in the midst of growth1
Abstract

Several factors have contributed to the growth of the microfinance industry in the Philippines – the adoption of a sound business model – patterned after Grameen Bank – that caters to a large untapped market, assistance from government and / or donor agencies, a supportive policy and regulatory environment, and innovations based on Internet and mobile technology. However, microfinance institutions (MFIs) continue to face challenges that could affect their ability to reach more poor people even as they strive to achieve financial sustainability. To better understand the challenges faced by MFIs in meeting both their social and economic goals, we propose a research program that addresses the gaps in measuring the ‘quality’ and ‘welfare’ dimensions of financial  inclusion, and that complements the development-economics literature by examining MFIs from a business-strategy perspective.

Keywords: microfinance, developing economy, outreach, financial sustainability

1

Presented during the 1st National Business and Management Conference held at the University of San Carlos, Cebu City on August 30-31, 2013.

1

1.0

Introduction

In many developing countries, microfinance plays a vital role in providing the poor (i.e., small farmers, fishermen, and micro-entrepreneurs) with access to credit and helping them improve their lives by encouraging entrepreneurial activity (Arch, 2005; Bhatt & Tang, 2011; Khandker, 1996; Llanto, 2004). It has also proven to be “a potent tool for poverty reduction by  helping the poor increase their income, smooth consumption, build assets, and reduce their vulnerabilities in times of contingencies and economic shocks” (Micu, 2010, p.4). As an industry, microfinance has grown tremendously over the past decades, with players offering  financial  services  to  those  who  were  “previously  marginalised”  (Arch,  2005,  p.227). According to Micu (2010, p.4), “it now reaches more than 100 million poor people all over the world through a combined portfolio of US$15 billion.” Moreover, programs such as ACCION’s  BancoSol in Bolivia, Bank Rakyat Indonesia’s Unit Desa program in Indonesia, and the Grameen  Bank in Bangladesh are often cited as evidence that “it is possible for microfinance institutions to make small loans to large numbers of poor people in a sustainable manner” (Bhatt & Tang, 2011,  p.319).

The Philippine government has long recognized the critical role of microfinance in its poverty alleviation efforts. A key development is the formulation in 1997 of the National Strategy for Microfinance,  which listed the following principles as the foundations of the  government’s  microfinance policy: (a) an enabling policy environment that facilitates the increased participation of the private sector in microfinance, (b) market-oriented financial and credit...
tracking img