MICROCAPITAL BRIEF: Philippine Microfinance Industry Reaches $200m and Reflects on Challenges for the Future

At a recent event gathering a number of Filipino public and private agencies from both the entrepreneurial and academic sector it came to light that the microfinance industry in the Philippines has grown into a PHP 12 billion (USD 200 million) industry. There are currently around 500 microfinance institutions (MFIs) serving about seven million borrowers. The event covered a paper entitled “Mainstreaming Micro” on microfinance and microenterprise development recently published by the Pinoy Me Foundation, a social investment banker for MFIs in the Philippines, and the Hanns Seidel Foundation, a German non-profit organization whose mission is political education. The paper indicated “a supportive regulatory and policy environment, including the phase-out of government directed credit programs, helped spur the growth of microfinance in the country.”

However, the paper adds that the borrowers from MFIs in the Philippines are primarily not the poorest in the country. The authors of the paper commented, “microfinance has so far been an urban phenomenon that finances large retail or trading microenterprises. Because 70 percent of the poor in the Philippines are in rural areas, the challenge is how to reach the rural, agriculture-based poor population,” Another challenge the authors of the paper highlighted is that as MFIs have become more prevalent the industry has become more competitive, which could potentially lead to the overindebtedness of clients.

By: Christine Chang, Research Associate

Additional Resources:

Balita-dot-ph website: Microfinance swells to P12-B industry, April 19, 2010: http://balita.ph/2010/04/19/microfinance-swells-to-p12-b-industry/

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