Social entrepreneurship thru Microfinance

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  • It is important to have a policy and regulatory environment favorable to the MF industry in order to have sustainable MFIs that would continue to provide the much needed financial services to poor households.
  • RA 8425 defines microfinance as a credit and savings mobilization program exclusively for the poor to improve the asset base of households and expand access to savings of the poor. It involves the use of viable alternative credit schemes and savings programs including the extension of small loans, simplified loan application procedures, collateral-free arrangements, alternative loan repayments and minimum requirements for savings.
  • Development grants for capacity-building of microfinance institutions and beneficiaries shall be funded out of the earnings or income of the PDTF. The Corpus of the PDTF is the amount allotted by the RA 8425 in the total amount of Four Billion and Five Hundred Million Pesos (Php 4,500,000,000) over a span of ten years, but remains to be adequately funded with only Php 100 million in trust at present. The disbursable portion shall consist primarily of the earnings of the PDTF and may include additional amounts expressly donated, contributed or granted by local or foreign sources.

Transcript

  • 1. Pursuing social and financial returns Microfinance as Anti-Poverty Strategy
  • 2. Striking a balance: Social and economic goals
    • Strengthen the capacity of marginalized groups to engage in productive enterprises
    • Sustain economic interventions for the poor over the long term
  • 3. Sowing the seeds: Systems, policies, institutions in place
    • Social Reform and Poverty Alleviation Act (RA 8425)
      • National Anti-Poverty Commission (NAPC)
      • Microfinance Services for the Poor
      • People’s Development Trust Fund (PDTF)
      • Government Financial Institutions (GFIs)
  • 4. NAPC ORGANIZATIONAL STRUCTURE
  • 5. NAPC’s Thrusts/Functions on MF
    • Development of a policy environment, especially in the area of savings generation
    • Rationalization of existing government programs for credit/guarantee
    • Utilization of existing government financial entities for provision of MF products and services for the poor
    • Promotion of mechanisms necessary for implementation of MF services, including indigenous MF practices
  • 6. RA 8425 defines Microfinance
    • Purpose
    • Improve HH’s asset base
    • expand access to savings
    Credit - savings mobilization program exclusive for the poor Characteristics - small loan - simple application - collateral free - alternative loan repayments - minimum savings
  • 7. People’s Dev’t Trust Fund (PDTF) Php 4.5 Billion Fund (accumulated in 10 yrs) only the interest earnings can be used as grant Capacity building/ institutional strengthening of MFIs
  • 8.
    • ELIGIBLE PURPOSES OF PDTF
      • Consultancy and training services for microfinance institutions, LGUs and their beneficiaries on the establishment of the necessary support services, social and financial preparation, preparation of plans and programs including fund sourcing and assistance, establishment of credit and savings M&E mechanisms;
      • Scholarships or training grants for microfinance staff and officers and selected beneficiaries;
      • Community organizing for microfinance, livelihood and microenterprise training services;
      • Livelihood/microenterprise project/program feasibility studies and researches;
  • 9.
      • Savings mobilization and incentive programs, micro insurance and other similar facilities;
      • Information and communication systems such as baseline surveys, development monitoring systems, socio-economic mapping surveys, organizational assessments and other similar activities;
      • Legal and other management support services such as registration, documentation, contract review and enforcement, financial audit and operational assessment;
      • Information dissemination of microfinance technology and microenterprise development; and
      • Other activities to support microfinance and livelihood/microenterprise development.
  • 10. GFI Credit Windows for MF
    • Cooperatives
    • Countryside Financial Institutions (CFIs)
    • MF NGOs
    • Countryside Lending Conduits (CLC)
    • Agri-Cooperatives
    • Accredited MFIs
    TARGET AVAILERS
    • Agri-fishery/forestry projects
    • Rural/urban microentrepreneurs
    FOCUS GROUPS  Wholesale lending to wholesalers  Wholesale lending to retailers Land Bank of the Philippines (LBP)  Wholesale lending to retailers Quedan and Rural Credit Guarantee Corporation (QUEDANCOR)  Wholesale lending to retailers  Capacity-building loans People’s Credit and Finance Corporation (PCFC) PROGRAM INSTITUTION
  • 11.
    • MF Banks
    • MF-oriented banks
    • MF NGOs
    • Savings & Credit Coops
     Wholesale lending to retailers  Business development loans  Capacity-building loans Development Bank of the Philippines (DBP)
    • MFIs
    • Coops
    • NGOs
    • Banks
    TARGET AVAILERS
    • Manufacturing
    • Processing
    • Trading
    • Services
    • Agrarian Reform Communities (ARCs)
    FOCUS GROUPS  Wholesale lending to retailers Small Business Guarantee and Finance Corporation (SBGFC)  Wholesale lending to retailers  Capacity-building loans National Livelihood Support Fund (NLSF) PROGRAM INSTITUTION
  • 12. Reaping the fruits: Significant Developments in MF
    • Overall Microfinance Program Status
    P 49.22 B P 59.02 B Amount of Loan Releases SONA 2 (Beginning July 2004) Cumulative from SONA 1 (Beginning July 2001) 648,005 (33%) New Jobs Generated from Microfinance (SONA 2) 1,993,606 3,433,049 Active Microfinance Clients SONA 2 (Beginning July 2004) Cumulative from SONA 1 (Beginning July 2001) 1,410 2,188 Number of MFIs Including branches 80 of 80 117 of 117 1,453 of 1,500 (97%) Geographical Coverage Provinces Cities Towns As of September 2006
  • 13. Active Microfinance Clients by Sector
  • 14. Coming to terms: Basic Sectors on Microfinance
      • Microfinance is understood as lending and microenterprise financing
    lending ME financing MF = government program CHEAP HIGH INTEREST  
  • 15.
      • Access to microfinance can be improved thru capacity building of MFIs and potential clients
      • Lack of working capital is a major constraint to microenterprise operations
      • Stringent requirements of formal financial institutions stir a continuing dependence on informal loan sources
      • There is capacity to save whether in formal or informal arrangements, except for those with very low incomes
      • There is willingness to put up businesses based on existing opportunities which can be better enhanced by the provision of training and support services
  • 16. Looking ahead: Remaining Challenges
    • Unserved areas and underserved sectors
    • Poorly informed poor
    • Credit pollution
    • Requirement for non-financial services for microenterprises
    • Commercial principles and social objectives