Microfinance trends should be understood first before plunging your capital to micro-lending. At this point, I will focus with microfinance in the Philippines.
My previous post tackled the dream of former President of the Republic of the Philippines, the late Corazon Aquino. In the press release, PinoyME Foundation chief executive Danilo Songco expound on the 5-5-5 goal, i.e, having five million filipinos accessing 5 billion pesos with micro-credits within 5 years (2006-2011).
Please note the number, the five. (Well, that will be another post)
The press release is giving us an outlook of the microfinance business in the Philippines.
Let us have a short history of microfinance in the Philippines .
In the early 1980s, because of the success of Grameen Bank of Bangladesh, the group lending methodology was seen as viable approach of microlending. During those years, non-government institutions were the sources of microfinance. In 1985-1995, NGOs were slowly developed into formal financial institutions. Some positioned themselves using market-oriented approaches like the Grameen Bank Approach Replication (GBAR).
From 1996, we can see that there were plenty of players coming out. Rural banks and thrift banks realized the viability of microfinancing. So, these banks slowly poured in some capital through microfinance. As results:
- Competition increases
- Individual Lending Approach gains popularity
- Innovations are plenty
10 Trends in the Microfinance Sector in the Philippines
- Top 20 MFIs are likely to dominate the sector in outreach and in volume of aggregate portfolio
- 300 MFIs will continue to operate with more than 1,000 to 3,000 partners/clients
- Region-based MFIs will have to be competitive to maintain their current client base
- Increased competition in urban and peri-urban areas will force MFIs to go down market in the poverty pyramid
- MFIs will need to develop lending technology that will address micro-entrepreneurs’ needs for larger size of loans
- Large scale MFIs are now establishing internal units that provide business development services
- Sustanable MFIs are now providing micro-insurance services through member-owned Mutual Benefit Associations
- Big MFIs are now tapping the power of mobile banking by developing technology
- Group Liability as the main feature of Group Lending would diminish
- Individual Liability as a feature will be preferred by the market.
So, you know now where to position yourself.
As always, I often say that make microfinance as your self-help opportunity.
Poor people are bankable and mostly of the microfinance players are tapping the upper part of the poverty pyramid, ie., the entrepreneur-poor. You still have three layers to go in. And the bulks of poor people are at the lower part.
Again, I want to hear from you. Feel free to comment and suggest. I am always willing to answer.
Philippine Microfinance Industry – (a downloadable PDF)