Microfinance in the Philippines: An Overview

Microfinance is often defined as the provision of small loans, usually called microcredit, to the underprivileged in order to help them put up their own businesses and become self-reliant. In the Philippines, where the poverty incidence rate stands at 40%, microfinance has begun to play a major role towards helping the poor explore different methods of sustainable development. The government has since helped this happen by establishing the Microfinance Unit (MFU) within the National Anti-Poverty Commission (NAPC). There are several major microfinance institutions in the Philippines, but among the largest is that of the Ayala Corporation and the International Institute for Rural Reconstruction (IIRR). These institutions work towards reducing poverty through the different means of microfinance and sustainable development by conducting financial programs that will benefit the poor. Specifically, they provide financial services such as microcredit, microsavings or microinsurance to the poor. These different forms of microfinance are largely done by the aforementioned institutions with support from the national government in terms of building up their institutional capacity to support greater scales of financial service. It has been noted that the presence of a national microfinance strategy, as well as the establishment of various related institutions will work towards improving the Philippine economy. As outlined in the national strategy for microfinance, one of the end goals of the multi-faceted program is to achieve a liberalized and market-oriented economy where both the private and government sectors work together in order to sustain the continued development of appropriately-oriented financial and credit policies. Overall, the practice of microfinance in the Philippines has yet to reach its full potential and only time can tell if it will be an effective tool as a method of poverty reduction. References Performance Monitoring Report (2005). Microfinance Council of the Philippines, Inc. Retrieved October 22, 2007 from http://www.microfinancecouncil.org/ Regulatory Framework for Microfinance in the Philippines (2001). Philippine Department of Finance. Manila, Philippines: DOF Republic of the Philippines National Strategy for Microfinance. Global Development Research Center – Governance of Microfinance Institutions. Manila, Philippines: National Credit Council of the Philippines