PROMOTING POLICIES on guaranteed lending to low income and small entrepreneurs will be among the key points of the central bank’s financial inclusion strategy in the next six years, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said.
“Under the National Strategy for Financial Inclusion 2022-2028, the BSP will give priority attention to critical financial infrastructures, including guarantee mechanisms to boost lending to the entrepreneurial poor and other disadvantaged groups,” Mr. Diokno said at an online briefing on Thursday.
The governor said they will continue to work with the Philippine Guarantee Corp. to expand credit guarantee programs for micro, small, and medium enterprises and the agriculture sector.
“We are also committed to strengthen the credit surety fund to improve the creditworthiness of rural, micro and small enterprises as well as cooperatives providing microfinance loans to these borrowers through surety cover for these bank loans,” he said.
Mr. Diokno said there are 144 banks currently offering microfinance services. Their portfolios include about two million borrowers with loans worth P26 billion.
Meanwhile, nonbanks that offer microfinance like cooperatives have extended credit to 8.8 million members with outstanding loans worth P288 billion. Nongovernment organizations offering the services have also extended P50 billion in credit to 6.2 million clients.
“Microfinance has long served the entrepreneurial poor. With its uncollateralized loans, simple requirements, fast processing, and frequent amortization, microfinance has become a better alternative to “5-6” lending,” Mr. Diokno said.
Microfinance institutions (MFIs) have more on-ground presence in rural areas, making it a “last mile” financial service provider during the pandemic, he said. These institutions reach 84% of local government units compared with the 69% covered by banks. Microfinance institutions are also present in 57% of unbanked local government units, he noted.
“This has made them ideal as payout centers of banks and e-money issuers that partnered with the government for the distribution of financial assistance or ayuda in far-flung areas,” Mr. Diokno said.
“The digital transformation of MFIs will help in transitioning microfinance clients from cash to digital transactions,” he added.
While their operations are mainly traditional and on-ground, the central bank said microfinance institutions are also starting to tap digital technology to serve their clients.
Among these include an Albay rural bank that allows users to access free data for subscribers of their partner telco. Meanwhile, a thrift bank launched a mobile app to enable its microfinance clients to check their payment schedule and settle their loan obligations remotely.
The central bank targets to have 70% of Filipinos be part of the formal financial system through a bank or e-money account by 2023. It also wants 50% of the country’s payments done online by the same year. — Luz Wendy T. Noble