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Also
known as “banking for the poor,” microfinance is a
financial innovation, which provides financial services
to poverty-stricken people. These services include
loans, microinsurance and savings.
Before
microfinance, the poor were not considered bankable, as
they have neither the collateral or steady employment to
ensure repayment of loans. They often fall prey to
predatory lending, which has interest rates ranging from
120 percent to 300 percent, and which entrench them
deeper into poverty.
The
success of microfinance contradicted this negative
impression. Nobel Prize awardee Professor Muhammad
Yunus’s Grameen Bank in Bangladesh is the most prominent
example.
The
Grameen Bank, which means Bank of the Villages in
Bangladeshi, started as Professor Yunus’s research
project to provide credit and banking services to the
rural poor. Lending from his own pocket, Yunus shelled
out $27 to help 42 families in the
village of Jobra and neighboring villages engaged in entrepreneurial
activities.
Thirty
years later, microfinance contributes to 40 percent of
rural poverty reduction in Bangladesh. The Grameen Bank
has also grown into a network of microfinance
institutions (MFIs) reaching 3.6 million families in 25
countries around the world.
Its
global network has reached the Philippines, with around
500 Grameen Bank replicas and MFIs working in the
country. These microfinance institutions have reached
1.5 million poor households, extending P1.5 billion to
P2 billion in micro-loans and generating P500 million to
P700 million in microsavings.
One of
the Philippine models is the Center for Agricultural and
Rural Development Inc. (CARD). Established in 1987, the
CARD now has 237,589 clients, with a loan portfolio of
$20,556,355 and a low portfolio at risk of 0.8 percent.
Aside
from the CARD, nongovernment organization Taytay sa
Kauswagan (TSKI—or Bridge to Progress) is also faring
well, with the largest number of clients in the country.
But
despite these successes, much still needs to be done.
According to the Asian Institute of Management, 3
million poor households still have no access to
microfinance, and only less than 15 percent of poor
households in Mindanao has been reached by
microfinancing.
Accordingly, microfinancing should continuously be
promoted. Sadly, the banks that should be at the
forefront of microfinancing in the country—Land Bank of
the Philippines and the Development Bank of the
Philippines—are lagging behind in this initiative. These
two banks should be reoriented. It is to the credit of
nongovernment organizations such as the CARD and TSKI
that microfinancing has remained viable in the
Philippines.
E-mail:
edgardo_angara@hotmail.com.
Web site:
www.edangara.com |
