1. Microfinance Yesterday, Today and
Tomorrow: What is the Next Best Prac;ce?
Pia Bernade=e Roman Tayag
Bangko Sentral ng Pilipinas
2010 RBAP‐MABS Na.onal Roundtable Conference
Hya= Hotel and Casino, Manila
June 2‐3, 2010

2. Presentation Outline
 Microfinance: The Story so Far
 The Role of a Supportive Regulatory
Environment
 Looking Forward: Microfinance Tomorrow
 Key Opportunities and Challenges
 Direction for Policy and Regulation

3. Microfinance Yesterday
 Microfinance was once seen as a very risky activity
provided mostly by civic-oriented institutions
 Microfinance was limited to loans or microcredit
 Traditional banking was still focused on using
collateral to ensure security/ repayment
 Regulator/ Supervisor did not yet have the
framework for microfinance practice within the
banking sector

4. Role of a Supportive Policy and Regulatory
Environment
 Following the General Banking Law, the BSP established the framework
for microfinance practice within the banking sector
 Allowed the establishment of new banks and transformation of NGOs
into the formal financial system
 Provided incentives for microfinance practice as well as necessary risk
management for its sustainable practice
RISKS HOW WERE THEY ADDRESSED?
Bank’s limited technical know-how in Required banks to have clear microfinance
the methodologies and technologies of methodology and clear underwriting standards
microfinance
Inadequate risk management system Required adequate risk management systems (i.e.
attune to the peculiar characteristics daily monitoring of portfolio-at-risk and
of microfinance corresponding provisioning requirements)
Governance issues especially with Clear and comprehensive governance standards
banks that were transformed from imposed
NGOs

5. Microfinance Today
 Microfinance is fully mainstreamed into the formal
financial system
 Interest of commercial investors
 Expansion of the range of microfinance services
offered
 Innovation in delivery channels
 Moving toward financial inclusion

6. Role of a Supportive Policy and Regulatory
Environment
 Provision of the framework for the he wider range
of products offered by microfinance institutions
 Provision incentives for wholesale microfinance
 Recognition of the importance of third party
independent ratings to enhance investing climate
 Liberalization of branching regulations
 Recognition of the potential to leverage the reach
of brick and mortar offices through using e-money
platforms and the use of bank and non-bank based
delivery channels to reach the financially excluded
more efficiently.

7. Key Opportunities
Wider range of products/ More options of providers
increased and diversified income Lower costs/ greater
streams convenience
Larger market beyond usual Wider range of products for all
reach of brick and mortar offices financial service needs
Lower costs of delivery Being reached, even those hard
Access to commercial funding to reach

8. Key Challenges
 For Banks/ Microfinance Institutions
 Continued strength and stability of the institution
 Lowered cost and increased efficiency in operations
 More appropriately designed products and services
 Increased client satisfaction through transparent pricing
and fair practices
 Maintenance of credit underwriting standards in light of
increased competition and possible over- indebtedness

9. Key Challenges
 For Clients
 Financial Inclusion brings in new consumers who are
potentially vulnerable. They need appropriate
information and increased capacity to use financial access
to their best interest.
 Financial literacy
 Awareness of consumer rights
 Awareness of redress mechanisms
 With increased competition, clients must maintain credit
discipline/ upgrade personal finance capacity

10. Role of a Supportive Policy and Regulatory
Environment
 Close and continuous monitoring of market
developments. Regulations remain appropriate
and responsive
 Review of enhancement of e-money platform/ operations
through recognition of e-money technology providers
 Review of policies on OBOs
 Review on the definition of microfinance and microfinance
loans
 Supporting increased SME lending
 Review of consumer protection regulations
 Price transparency
 Fair treatment

11. Role of a Supportive Policy and Regulatory
Environment
 Steady advocacy for personal finance and financial
literacy
 Quick response to emergent risks
 Financial crime
 Abuse of financial services
 Over-indebtedness

12. Thank you.
PROMAN@BSP.GOV.PH
WWW.BSP.GOV.PH