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
