Key microfinance stakeholders convened at the Century Park Hotel in Manila recently to discuss how the country’s microfinance sector can become more resilient and relevant in times of uncertainties such as the COVID-19 pandemic, economic shocks, and other natural disasters.
With the theme, “Microfinance: Thriving through Uncertainties,” this year’s annual conference of the Microfinance Council of the Philippines, Inc. (MCPI) was attended by close to 600 participants from microfinance institutions, developmental organizations, donors, investors, and relevant government agencies.
In his keynote speech, Bangko Sentral ng Pilipinas (BSP) Governor Felipe M. Medalla thanked the council for their continuing support to the government, stating that microfinance is one of the most important services that need to be considered for financial inclusion to succeed in the country.
“It’s hard to think of financial inclusion without looking at microfinance,” the BSP chief said. “I’m glad to hear that you (MCPI) consider the BSP as your number one ally. From our point of view, you are also a very important ally of the BSP.”
Comprised of 47 institutions, including 39 practitioners and 8 support institutions, the MCPI is a national network of microfinance practitioners and allied service institutions in the Philippines whose mission is to work towards sustainable, innovative, and client-responsive solutions to address poverty in the country.
The council’s key programs include advocacy, social performance management, and consumer protection in microfinance, capacity building for microfinance institutions, as well as performance monitoring and benchmarking, and the establishment of a knowledge and research center for microfinance.
Digitalization now driving change in the country’s economy
Earlier this year, the central bank highlighted the contribution of microfinance institutions (MFIs) in making financial products and services more accessible to micro and small enterprises, particularly in rural areas.
Seeing how digitalization is now driving transformative change in the new economy, it further stated that MFIs should start expanding their reach by integrating technology in all areas of their businesses — in the process, changing the way they operate and deliver value to their customers.
According to the BSP, MFIs are strategic partners of the government to achieve financial inclusion as 84 percent of local government units (LGUs) now have access to microfinance services. More than half (57 percent) of unbanked LGUs also have an MFI presence.
In a statement issued last September 28, the BSP chief cited the “Paleng-QR” project, an inter-agency program that aims to expand QR payments among small merchants, as one of the government’s efforts to make digital payments more accessible to Filipinos in partnership with local government units. He also cited the BSP’s ongoing efforts to develop a basic merchant account framework and the pilot testing of satellite technology to be used by two rural banks in Batangas province.
Medalla adds that the BSP is now also promoting targeted digitalization efforts to ensure the continued recovery of microfinance institutions (MFIs) from the COVID-19 pandemic.
According to the MCPI, the COVID-19 crisis only exposed how microfinance clients have become more vulnerable to economic shocks. With social performance management as a framework, microfinance institutions responded to the COVID-19 pandemic by designing financial and non-financial products and services that helped protect clients and increased their resilience.
To date, MFIs are now showing signs of recovery, with loan growth up 4.1 percent in 2021 following a 2.50 contraction in 2020. Repayment figures have also rebounded to 84% in February last year from as low as 56.5 percent in the second quarter of 2020.