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Microfinance Activity in Philippines: Operational and Regulatory Challenges of the Microfinance Industry in the Philippines

This paper presents an overview of the Philippines microfinance industry, discussing its specificities, challenges and regulation. The government, recognizing the importance of poverty reduction, ranked microfinance as its top priority in the Medium-Term Philippine Development Plan. Yet, the microfinance industry in the country faces the following challenges: * Spread of credit pollution; * Issues of governance; * Non-adoption of performance standards by MFIs; * Unwillingness of MFIs to provide an array of financial and non-financial products; * Lack of focus on savings; * Insufficient outreach; * Morality issues; * Lack of a proper lending technology; * Lack of incentives for microfinance staff; * Lack of effective internal control systems; * Unsustainably rapid growth; * Lack of training and experience in the field of microfinance. Microfinance in the Philippines is supported by a market-based policy and regulatory framework, crafted by the government, including the Bangko Sentral Ng Philipinas (BSP). The government's microfinance policy has helped it transition from its earlier perceived identity as a dole-out agency of loans to a new role of a policy-making and regulating agent of microfinance activities.


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