The Bangko Sentral ng Pilipinas (BSP) defines microfinance as the provision of a broad range of financial services such as deposits, loans, payment services, money transfers and insurance products to the poor and low-income households, for their microenterprises and small businesses, to enable them to raise their income levels and improve their living standards. It is also defined as the provision of financial services to low-income clients, including the self-employed.
Microfinance in the Philippines began as early as 1960. These came in loans that rural banks and cooperatives gave to finance agricultural activities. However, these were discontinued due to low repayment rates and problems in the financing scheme.
This was followed by subsidized credit programs fueled by the government in the hopes of providing affordable credit programs and help ease poverty. Similarly, this was also discontinued due to repayment problems in addition to corruption in government programs.
In the 1980s, based on the history of credit programs, NGOs decided to follow suit but this time, used the example from other countries. NGOs adopted practices from Bangladesh’s Grameen Bank and Association for Social Advancement (ASA).
Targeting entrepreneurial poor, microfinance programs began giving non-collateralized credit to grouped clients. Since the 80s, the industry evolved from being in the margins to becoming mainstream with commercial banks eyeing to enter the industry.
In addition to financial intermediation, many microfinance financial institutions (MFIs) provide social intermediation services such as group formation, development of self-confidence, and training in financial literacy and management capabilities among members of a group.
The sector is currently composed of over 2,000 microfinance institutions including branches, which take the form of rural or thrift banks, cooperatives, and non-governmental organizations. Of these, the top 10 players comprise 88% of the market share in terms of number of borrowers. The number one institution in terms of borrowers is ASA Philippines, with its’ clients amounting to 1 million.
ASA Philippines alone comprises 25% of the entire market. ASA Philippines operates nationwide, providing both financial and non-financial services to its clients. This is closely followed by the CARD NGO, with a market share of 19%.
Similar to ASA, CARD NGO also operates nationwide. Although both have their headquarters in Luzon, with CARD situated in Laguna and ASA in Ortigas, both institutions have branches all over the country. Next in line are CARD Bank (16%) and Pagasa (5%).
The other institutions that follow suit only, at best, is able to capture 4% or less of the market. All other 1,000+ MFIs share the remaining 23%. The table below enumerates the top 10 institutions as of 2015, with their gross loan portfolio, number of borrowers, amount of deposits, and number of depositors.
|Institution||No. of Active Borrowers||Gross Loan Portfolio in PhP||Depositors||Deposits in PhP|
The study does not include cooperatives because they do not report in the MIX market. Cooperatives would be able to compete in terms of total loan portfolio but would lag in terms of outreach that ASA Philippines, CARD NGO, and CARD bank have.
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