In an effort to counter political patronage, the administration of Philippine President Benigno Aquino III has indicated its intention to alter current microfinance policies, which confer power to government agencies to lend directly to poor people.
In 1998, the President of the Philippines at the time, Joseph E Estrada, established the “National Strategy for Microfinance”, which limited government microfinance activities to wholesale lending to microfinance institutions (MFIs) through government financial institutions (GFIs) such as the Development Bank of the Philippines and the Land Bank of the Philippines. The directive was issued in response to a number of defaults in the government’s direct lending programs. The directive was repealed in 2006 by President Estrada’s successor, Gloria Macapagal-Arroyo, who replaced it with another directive that currently allows government agencies such as the Department of Social Welfare and Development (DSWD) and GFIs to launch their own microcredit initiatives in unbanked regions of the Philippines.
President Aquino said, “We will work to institutionalize the National Strategy for Microfinance that was formulated in 1998. We will also make sure that microcredit will not be used as a tool for political patronage.” [1]
Joselito S Almario, Executive Director of the National Credit Council (NCC), a division of the Department of Finance that focuses on credit policy and the provision of financial services to low-income individuals, stated that there is a need for a more permanent framework in the form of a law to govern the microfinance sector. He also stated that in the remote regions of Philippines, where DSWD is active in lending, the government’s main focus must not be to provide financial services but to first create an environment more conducive to economic activity [1].
By Medha Ravi, Research Associate
Source and Resources:
BusinessWorld news article, “Aquino proposes adoption of new microcredit tack”, http://www.bworldonline.com/content.php?title=Aquino%20proposes%20adoption%20of%20new%20microcredit%20tack&id=27427
MicroCapital.org story, March 1, 2011, “MICROCAPITAL BRIEF: Bangko Sentral ng Pilipinas (BSP) Study Indicates High Density, Advanced Technology, Larger Profits in Philippine Banking Sector”, https://www.microcapital.org/microcapital-brief-bangko-sentral-ng-pilipinas-bsp-study-indicates-high-density-advanced-technology-larger-profits-in-philippine-banking-sector/
MicroCapital.org story, October 19, 2010, “MICROCAPITAL BRIEF: Bangko Sentral ng Pilipinas (BSP) Approves Establishment of Microfinance Institutions in Underserved Areas of the Philippines”, https://www.microcapital.org/microcapital-brief-bangko-sentral-ng-pilipinas-bsp-approves-establishment-of-microfinance-institutions-in-underserved-areas-of-the-philippines/
MicroCapital.org story, September 8, 2009, “MICROCAPITAL BRIEF: Philippine Microfinance Industry Reaches $200m and Reflects on Challenges for the Future”, https://www.microcapital.org/microcapital-brief-philippine-microfinance-industry-reaches-200m-and-reflects-on-challenges-for-the-future/
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