Amando M Tetangco, Jr: Developments in the Philippine microfinance
sector
Keynote message by Mr Amando M Tetangco, Jr, Governor of Bangko Sentral ng Pilipinas
(BSP, the central bank of the Philippines), at the 14th Citi Microentrepreneurship Awards
(CMA), Manila, 17 May 2016.
* * *
It is a pleasure to be with you today as we launch the 14th year of this nationwide
microentrepreneurship swards with our partners - Citi Foundation, Citi Philippines and the
Microfinance Council of the Philippines, Inc. (MCPI).
Yes, 14 years and counting. To me, what has kept this awards program relevant and
meaningful year after year are the changes and enhancements that have been introduced in
response to developments on the ground.
For indeed, the environment for the development of the microfinance sector continues to
improve based on sustained coordination and cooperation with industry players and
stakeholders. This includes microentrepeneurs, banks, microfinance institutions, agencies of
government, stakeholders from civil society, the private sector as well as multilateral
institutions.
Industry figures mark our progress. In December 2002, for instance, there were 390,635
microfinance borrowers from 119 banks. By 31 December 2015, the number of banks
providing microfinance loans had increased by nearly 43% to 170 while the number of
borrowers had increased by 277% to roughly 1.47 million.
Overall, microfinance loans increased by 333% from P2.6 billion in 2002 to P11.3 billion in
2015.
If we base it on their savings, we can say that microfinance has improved the financial
standing of these microentrepreneurs. Together, they have accumulated savings of about
P4.5 billion as of December 2015. We have no comparative data for 2002 deposits;
compared however to the deposits of as December 2011, this represents a 22% growth.
Ladies and gentlemen, we are fully aware that we can do so much more to lift more Filipinos
from poverty through microfinance. Nevertheless, we are encouraged by global surveys that
indicate that the Philippines has one of the world's best environment for promoting the quality
of life of people through sustained development of the microfinance sector.
For instance, in recognition of the BSP's work, the Economic Intelligence Unit's 2015 Global
Microscope on Financial Inclusion ranked the Philippines first in Asia and the third in the
world in terms of regulatory environment for financial inclusion.
And together, we are committed to continue to find better ways to grow microfinance. One
such strategy is through mentoring of our microentrepreneurs under the CMA program.
The mentoring is aimed at improving their enterprises by providing support suited to their
specific business needs. It covers, among others, helping products and services become
more competitive in local and/or international markets; providing guidance in identifying
critical processes and areas for improvement; offering technical advice on infusing innovation
into enterprises; and facilitating the development of business competencies. The end goal is
for microenterprises to eventually transition into small and even medium enterprises.
This mentoring program was piloted last year. This year we plan to fully refine the program
based on lessons learned from the engagement of the University of the Philippines Institute
for Small-Scale Industries (UP ISSI) which mentored 13 past CMA winners for about 7 to
8 months. Let me share some key lessons.
One is the challenge of informality - this is where the informal status of microenterprises or
their lack of legal personality to conduct business limits their capability to expand and market
their products.
Another is the limited capacity of microenterprises when it comes to financial recording and
documentation which makes them susceptible to poor accounting and planning. This affects
their ability to make sound business decisions.
At the BSP, we recognize that informality and lack of capacity remain major hurdles that
impede the growth of microenterprises. As a response, the BSP has issued guidelines on
sound credit risk management practices (Circular 855) that provide an empowering approach
to support small businesses. For instance, microfinance loans and other credit
accommodations not exceeding P3 million are exempted from the submission of financial
documents such as Income Tax Returns (ITRs) and other supporting financial statements.
Similarly exempted are start-ups during the first three years of their operation or banking
relationship.
The objective here is encourage microenterprises to build banking relationships that will help
them grow for the long term.
Broader government initiatives converge with this way of thinking. For instance, the Go
Negosyo Act and Negosyo Centers provide support for MSMEs such as facilitation of
business registration and training in finance and marketing. Negosyo Centers can also link
MSMEs to value chains that will enable them to access secured and sustainable markets to
keep them more viable.
We also have the Barangay Micro Business Enterprises (BMBEs) Act that seeks to
encourage the formation and growth of micro business enterprises by intergrating them with
the mainstream economy through incentives, marketing assistance, as well as training
programs in production and management.
In addition, microfinance institutions (MFIs) and other financial service providers support
MSMEs through financial products and other services critical to the entry, survival,
productivity, and growth of enterprises.
I am happy to share that the ISSI diagnostics also highlighted positive findings. For instance,
ISSI found that especially when faced with high market demand, microenterprises are
resilient to operational issues - in Filipino we describe them as "madiskarte".
This indicates that given appropriate training and mentoring as well as adequate funding
support, our microentrepreneurs can favourably respond to business opportunities.
In other words, ladies and gentlemen, we stand to gain more benefits by having an
increasingly nurturing environment for microenterprises. Given this, I am confident that the
nomination process for CMA that we are launching today will generate an even better
harvest for this year.
In this connection, we all look forward to meeting more successful and innovative
microenterprises that have the capacity to grow as well as the readiness and the desire to
contribute to making lives better not only for their families but also for their communities.
Indeed, we want MSMEs to develop to their full potential and to help drive economic growth
that is broad-based and inclusive.
Mabuhay ang microentrepreneurs! Mabuhay ang ating mahal na bansang Pilipinas!
Mabuhay po tayong lahat!