Business
GMA News TV
Posted March 28, 2011
Not all banks can engage in the business of microinsurance, the Bangko Sentral ng Pilipinas (BSP) said Monday, noting that only "trained and documented" financial institutions should do it.
In a recent advisory to banks, BSP Deputy Gov. Nestor Espenilla Jr. said only authorized banks are allowed to engage in the "presentation, marketing, sale and servicing of microinsurance products."
He said banks can act as microinsurance agents only of insurers authorized by the Insurance Commission. Banks passing a qualifying exam and prescribed training course may act as microinsurance agents, and their articles of incorporation (AOI) should be amended to reflect this fact, Espenilla said.
"In view of the latter requirement, applicant banks shall amend their articles of incorporation by including a secondary purpose of acting as a microinsurance agent, and shall submit simultaneously the amended AOI to the BSP and Insurance Commission," he said.
The central bank will only issue a "No Objection" notice after banks have complied with the requirements, according to the BSP official.
The notice is a requirement by the Insurance Commission before issuing a license to engage in microinsurance, the official said.
The licensed bank shall submit the approved AOI on or before June 30, 2012, otherwise, the license shall no longer be renewed, according to Espenilla.
The "unauthorized conduct of microinsurance as well as other insurance-related activities shall subject a bank and/or the responsible directors and/or officers of the bank to the applicable sanctions and/or penalties under existing banking laws, rules, and regulations," according to the BSP.
Microinsurance is an important advocacy started by former BSP Gov. Rafael Buenaventura that BSP Gov. Amando Tetangco Jr. is now pursuing.
It is a highly regulated business as it impacts on the financial welfare of small borrowers whose trust and confidence in the system forms the bedrock of banking, especially in the countryside, the central bank said.
Thursday, March 31, 2011
Wednesday, March 30, 2011
Caraga solon claims creation of micro-insurance for Filipinos timely, badly needed
SURIGAO CITY, March 29 (PNA) -- There is a need to establish a micro-insurance system in the country that would make insurance accessible and affordable to all particularly in rural and poor communities.
Surigao del Norte Second District Representative Guillermo Romarate Jr. on Tuesday said that the establishment of micro-insurance in local government units is now very timely to protect lives and properties especially the poor which suffer the biggest brunt during the onslaught of unpredictable disasters.
Romarate, chairman of the House Committee on Insurance and member of the House Committee on Banks and Financial Intermediaries, recently conducted a committee hearing with private insurance company officials including former Central Bank Governor Jose Cuisia, who is now Philippine American (PhilAm) Life Insurance president, and the officials of the Insurance Commission here.
Insurance Commission Commissioner Atty. Emmanuel F. Dooc, Deputy Commissioner Atty. Vida Chiong and lawyers from the Insurance Commission were also present at the committee hearing.
The Insurance Commission met with bigwigs of the insurance industry to discuss possible amendments on the Insurance Code that will be relevant with the needs of the times.
Romarate said that despite of the great need to insure farms, life and properties at times affected by disasters, only 12 percent are now insured according to statistics.
Romarate said many think that insurance on farms, properties and even lives is an additional expense, attributing the apprehensions especially the marginal poor to the high cost of premiums.
“That is why there is a need to establish a micro-insurance system in this country to make provision of insurance accessible and affordable that will allow cheaper insurance premiums available to all," Romarate said.
On his part, Dooc said the clamor for establishment of micro-insurance in the country have been increasing over the years.
“The Quezon City Government is a great example who gave greater importance on micro-insurance for their constituents under the leadership of former Mayor Sonny Belmonte now Speaker and now Mayor Herbert Bautista. The Q.C. government has taken the lead for local government units to provide insurance through micro systems for their constituents” Dooc told the PNA in an interview.
Romarate said he will study the Quezon City Government experience on micro-insurance on how they partnered themselves with private insurance providers in providing very cheap premiums.
“We will duplicate this Quezon City experience to our LGUs in Surigao del Norte under my district,” Romarate said. (PNA)
DCT/LAM/BS/mec
Surigao del Norte Second District Representative Guillermo Romarate Jr. on Tuesday said that the establishment of micro-insurance in local government units is now very timely to protect lives and properties especially the poor which suffer the biggest brunt during the onslaught of unpredictable disasters.
Romarate, chairman of the House Committee on Insurance and member of the House Committee on Banks and Financial Intermediaries, recently conducted a committee hearing with private insurance company officials including former Central Bank Governor Jose Cuisia, who is now Philippine American (PhilAm) Life Insurance president, and the officials of the Insurance Commission here.
Insurance Commission Commissioner Atty. Emmanuel F. Dooc, Deputy Commissioner Atty. Vida Chiong and lawyers from the Insurance Commission were also present at the committee hearing.
The Insurance Commission met with bigwigs of the insurance industry to discuss possible amendments on the Insurance Code that will be relevant with the needs of the times.
Romarate said that despite of the great need to insure farms, life and properties at times affected by disasters, only 12 percent are now insured according to statistics.
Romarate said many think that insurance on farms, properties and even lives is an additional expense, attributing the apprehensions especially the marginal poor to the high cost of premiums.
“That is why there is a need to establish a micro-insurance system in this country to make provision of insurance accessible and affordable that will allow cheaper insurance premiums available to all," Romarate said.
On his part, Dooc said the clamor for establishment of micro-insurance in the country have been increasing over the years.
“The Quezon City Government is a great example who gave greater importance on micro-insurance for their constituents under the leadership of former Mayor Sonny Belmonte now Speaker and now Mayor Herbert Bautista. The Q.C. government has taken the lead for local government units to provide insurance through micro systems for their constituents” Dooc told the PNA in an interview.
Romarate said he will study the Quezon City Government experience on micro-insurance on how they partnered themselves with private insurance providers in providing very cheap premiums.
“We will duplicate this Quezon City experience to our LGUs in Surigao del Norte under my district,” Romarate said. (PNA)
DCT/LAM/BS/mec
Thursday, March 10, 2011
IC issues rules for microinsurance agents
BusinessWorld
Finance
Posted on March 07, 2011 08:35:27 PM
THE INSURANCE Commission (IC) has come up with looser licensing requirements for microinsurance agents in a bid to boost the nascent microinsurance industry.
IC released Insurance Memorandum Circular No. 6-2011 dated February 15, but uploaded to its website only last week, exempting microinsurance agents from the required regular licensure examination for insurance agents.
“The applicant for agent’s license shall, in lieu of the examination, undergo an approved and prescribed microinsurance training course and pass the qualifying examination at the end of the course,” the circular said.
IC issues licenses to agents before they can sell products, and this is renewed yearly. Insurance agents are required to pass a written examination by the insurance regulator.
Microinsurance agents, however, will just have to take a course designed by the microinsurance provider, Deputy Comissioner Vida T. Chiong explained to BusinessWorld in a phone interview yesterday.
The training course must cover basic concepts such as the importance of insurance, product types, standard policy provisions and obligations of insurance companies and agents, such as market conduct, claims settlement and the revocation of licenses.
The president of the insurance company and the trainer shall jointly submit to IC a list of those who passed the examination, within five working days after the conduct of the microinsurance training course.
The regulator relaxed the requirements because microinsurance only deals with limited premiums and limited coverages, IC Chief Insurance Specialist Reynaldo M. Vergara told BusinessWorld in a phone interview yesterday.
Insurance agents, in contrast, have the power to charge unlimited premiums and provide unlimited coverage, and therefore are covered by more stringent rules.
The new policy could also act as an incentive for more players to venture into microinsurance.
“[The policy] will encourage microfinance institutions rural banks, cooperatives and nongovernment organizations -- and other community-based institutions to be delivery channels for microinsurance products,” National Credit Council Deputy Executive Director Joselito S. Almario told BusinessWorld in a text message yesterday. “Even civic-oriented groups and sari-sari stores can join the fray!”
With more microinsurance providers, the poor would have greater access to these products, he added.
More microinsurance providers could also bring down delivery costs and consequently reduce premium costs. -- Diane Claire J. Jiao
Finance
Posted on March 07, 2011 08:35:27 PM
THE INSURANCE Commission (IC) has come up with looser licensing requirements for microinsurance agents in a bid to boost the nascent microinsurance industry.
IC released Insurance Memorandum Circular No. 6-2011 dated February 15, but uploaded to its website only last week, exempting microinsurance agents from the required regular licensure examination for insurance agents.
“The applicant for agent’s license shall, in lieu of the examination, undergo an approved and prescribed microinsurance training course and pass the qualifying examination at the end of the course,” the circular said.
IC issues licenses to agents before they can sell products, and this is renewed yearly. Insurance agents are required to pass a written examination by the insurance regulator.
Microinsurance agents, however, will just have to take a course designed by the microinsurance provider, Deputy Comissioner Vida T. Chiong explained to BusinessWorld in a phone interview yesterday.
The training course must cover basic concepts such as the importance of insurance, product types, standard policy provisions and obligations of insurance companies and agents, such as market conduct, claims settlement and the revocation of licenses.
The president of the insurance company and the trainer shall jointly submit to IC a list of those who passed the examination, within five working days after the conduct of the microinsurance training course.
The regulator relaxed the requirements because microinsurance only deals with limited premiums and limited coverages, IC Chief Insurance Specialist Reynaldo M. Vergara told BusinessWorld in a phone interview yesterday.
Insurance agents, in contrast, have the power to charge unlimited premiums and provide unlimited coverage, and therefore are covered by more stringent rules.
The new policy could also act as an incentive for more players to venture into microinsurance.
“[The policy] will encourage microfinance institutions rural banks, cooperatives and nongovernment organizations -- and other community-based institutions to be delivery channels for microinsurance products,” National Credit Council Deputy Executive Director Joselito S. Almario told BusinessWorld in a text message yesterday. “Even civic-oriented groups and sari-sari stores can join the fray!”
With more microinsurance providers, the poor would have greater access to these products, he added.
More microinsurance providers could also bring down delivery costs and consequently reduce premium costs. -- Diane Claire J. Jiao
Tuesday, March 8, 2011
Manulife eyes mutual funds, microinsurance
By TPT (The Philippine Star)
Updated March 01, 2011 12:00 AM Comments (0) View comments
MANILA, Philippines - The Manulife Financial Philippines is opening two new business sectors as part of its aggressive organic growth in the Philippine market.
First, it has launched its first micro-insurance operations areas in Mindanao.
Second, it launched a study on the feasibility of putting up its own asset management firm to manage mutual funds.
“We will create pilot areas in one or two provinces in Mindanao, to be spearheaded by the Philippine operations with the help of Manulife’s regional office,” David Wong, Manulife Financial senior vice president and regional executive for Malaysia, Philippines, Thailand and Vietnam, said.
Wong described the microinsurance market in the Philippines as “informal” as compared to other nations in the Asia Pacific region. But he said that the country was a leader when it comes to mandating microinsurance, under the so-called Regulatory Framework for Microfinance.
Leading the country’s microinsurance parade are the mutual benefit associations (MBAs), while the life and non-life insurance industry are still looking for the right formula.
MBA cater to the under-banked, un-banked and the lower segment of society.
“We would encourage a new and formal system of microinsurance, but we will pilot test these first,” Wong said, adding that each economy had its own peculiarities and culture.
However, the challenge for microinsurance is not so much the micro-products but the distribution and the collections of premiums processes. MBAs are by itself both the distributors and users of microinsurance.
Life and non-life insurance companies are tapping the banking sector to reach out to the microinsurance sector, since rural banks have already been catering to the microentrepreneurs.
Microfinance institutions (MFIs) as well as cooperatives and non-government organizations (NGOs), all cater to the same market for microinsurance.
In fact, the Bangko Sentral ng Pilipinas (BSP) has already allowed thrift and rural banks to help market microinsurance.
Meanwhile, Wong also admitted that they have formed a review team looking up the feasibility of putting up an asset management firm. Asset management companies put up mutual funds for the retail investors as well as investments of the insurer.
The leading asset management firms with huge mutual funds are lead by life insurers.
The Bank of the Philippine Islands (BPI) and the defunct Ayala Life Assurance Co. manages the ALFM mutual funds. Sun Life Financial has an asset management subsidiary called Sun Life Asset Management Co. (SLAMC).
Updated March 01, 2011 12:00 AM Comments (0) View comments
MANILA, Philippines - The Manulife Financial Philippines is opening two new business sectors as part of its aggressive organic growth in the Philippine market.
First, it has launched its first micro-insurance operations areas in Mindanao.
Second, it launched a study on the feasibility of putting up its own asset management firm to manage mutual funds.
“We will create pilot areas in one or two provinces in Mindanao, to be spearheaded by the Philippine operations with the help of Manulife’s regional office,” David Wong, Manulife Financial senior vice president and regional executive for Malaysia, Philippines, Thailand and Vietnam, said.
Wong described the microinsurance market in the Philippines as “informal” as compared to other nations in the Asia Pacific region. But he said that the country was a leader when it comes to mandating microinsurance, under the so-called Regulatory Framework for Microfinance.
Leading the country’s microinsurance parade are the mutual benefit associations (MBAs), while the life and non-life insurance industry are still looking for the right formula.
MBA cater to the under-banked, un-banked and the lower segment of society.
“We would encourage a new and formal system of microinsurance, but we will pilot test these first,” Wong said, adding that each economy had its own peculiarities and culture.
However, the challenge for microinsurance is not so much the micro-products but the distribution and the collections of premiums processes. MBAs are by itself both the distributors and users of microinsurance.
Life and non-life insurance companies are tapping the banking sector to reach out to the microinsurance sector, since rural banks have already been catering to the microentrepreneurs.
Microfinance institutions (MFIs) as well as cooperatives and non-government organizations (NGOs), all cater to the same market for microinsurance.
In fact, the Bangko Sentral ng Pilipinas (BSP) has already allowed thrift and rural banks to help market microinsurance.
Meanwhile, Wong also admitted that they have formed a review team looking up the feasibility of putting up an asset management firm. Asset management companies put up mutual funds for the retail investors as well as investments of the insurer.
The leading asset management firms with huge mutual funds are lead by life insurers.
The Bank of the Philippine Islands (BPI) and the defunct Ayala Life Assurance Co. manages the ALFM mutual funds. Sun Life Financial has an asset management subsidiary called Sun Life Asset Management Co. (SLAMC).
Regulator approves Pioneer microinsurance programs
Manila Bulletin
March 6, 2011, 12:54am
MANILA, Philippines – The Insurance Commission recently approved Pioneer Life’s micro-insurance programs – Group Credit Life Microinsurance and Group Personal Accident Microinsurance (long and short scale). Pioneer was one of the first to receive approval based on Insurance Memorandum Circular 01-2010, which emphasizes “the need for microinsurance, promoting its importance, defining its features and implementing regulations to ensure the safe and sound provision of microinsurance products to the poor.”
Pioneer has been spearheading industry efforts to make insurance available to the mass market, creating programs that are within reach of low income workers. It began conducting financial wellness sessions in 2006, to groups of both adults and the youth, sharing basic concepts of saving and investment. By 2008 Pioneer introduced savings and insurance products that are affordable and easy to acquire. Microinsurance was the logical next step. “Our vision is to become a model Filipino enterprise,” shares President and CEO of Pioneer Life Lorenzo Chan Jr. “In order to do that we have to go beyond serving the standard A-B and corporate markets. For us, microinsurance is a natural progression to bring a useful product to people who need it most.”
In partnership with NGOs and institutions offering microfinance, Pioneer has been offering microinsurance programs that meet the peculiar needs of this market such as the need to be covered for accidents, fire and flood. This early, the claims made by beneficiaries have helped keep kids in school and widows get back on their feet. “Microinsurance is an opportunity for us to make the customer our universe,” says Pioneer Life VP for Microinsurance Geric Laude. “We develop our programs only after we truly understand what their needs are.”
With the Insurance Commission’s approval of its programs, Pioneer is set to move fast forward towards a sustainable microinsurance business
March 6, 2011, 12:54am
MANILA, Philippines – The Insurance Commission recently approved Pioneer Life’s micro-insurance programs – Group Credit Life Microinsurance and Group Personal Accident Microinsurance (long and short scale). Pioneer was one of the first to receive approval based on Insurance Memorandum Circular 01-2010, which emphasizes “the need for microinsurance, promoting its importance, defining its features and implementing regulations to ensure the safe and sound provision of microinsurance products to the poor.”
Pioneer has been spearheading industry efforts to make insurance available to the mass market, creating programs that are within reach of low income workers. It began conducting financial wellness sessions in 2006, to groups of both adults and the youth, sharing basic concepts of saving and investment. By 2008 Pioneer introduced savings and insurance products that are affordable and easy to acquire. Microinsurance was the logical next step. “Our vision is to become a model Filipino enterprise,” shares President and CEO of Pioneer Life Lorenzo Chan Jr. “In order to do that we have to go beyond serving the standard A-B and corporate markets. For us, microinsurance is a natural progression to bring a useful product to people who need it most.”
In partnership with NGOs and institutions offering microfinance, Pioneer has been offering microinsurance programs that meet the peculiar needs of this market such as the need to be covered for accidents, fire and flood. This early, the claims made by beneficiaries have helped keep kids in school and widows get back on their feet. “Microinsurance is an opportunity for us to make the customer our universe,” says Pioneer Life VP for Microinsurance Geric Laude. “We develop our programs only after we truly understand what their needs are.”
With the Insurance Commission’s approval of its programs, Pioneer is set to move fast forward towards a sustainable microinsurance business
Friday, March 4, 2011
Aquino proposes adoption of new microcredit tack
BusinessWorld
Top Story
Posted on March 04, 2011 12:15:17 AM
BY DIANE CLAIRE J. JIAO
THE AQUINO administration wants to reverse the existing state policy on microfinance, saying government agencies should stay away from direct lending to the poor as this could be exploited for political purposes.
"We will work to institutionalize the National Strategy for Microfinance that was formulated in 1998. We will also make sure that microcredit will not be used as a tool for political patronage," President Benigno S. C. Aquino III said in a speech last week.
Asked if this meant drafting a microfinance law, Sec. Ricky A. Carandang of the Presidential Communications and Development Strategic Planning Office said: "We will wait first for the recommendations from the Cabinet."
The Palace could also draft its own Executive Order or push for a bill from Congress, National Credit Council (NCC) Deputy Executive Director Joselito S. Almario told BusinessWorld.
The NCC is the arm of the Department of Finance focused on creating a credit policy framework that will improve the delivery of financial services to the low-income sector.
In 1998, then President Joseph E. Estrada issued Executive Order (EO) 138 setting the National Strategy for Microfinance. It was in reaction to the government’s experience with direct lending programs to the poor, which resulted in many defaults.
EO 138 limited microfinance programs to government financial institutions (GFIs) such as the Development Bank of the Philippines and the Land Bank of the Philippines that lent wholesale to microfinance institutions (MFIs) such as rural banks, nongovernment organizations and cooperatives.
The directive, however, was repealed in 2006 by Mr. Estrada’s successor, Gloria Macapagal-Arroyo, through EO 558. Amid the public outcry that followed, she issued EO 558-A that allowed the Department of Social Welfare and Development (DSWD) to carry out their own microcredit programs in unserved areas. Government non-financial agencies state firms could also launch their own microcredit initiatives with the approval of the Office of the President.
"This is open to political patronage because these loans can be given to the poor as dole-outs," PinoyME Foundation President and CEO Danilo A. Songco told BusinessWorld.
Mr. Aquino made his statement in last week’s 5th anniversary of PinoyME, a non-stock, non-profit organization that provides funding and training to microfinance institutions. It was founded by his mother, former President Corazon C. Aquino, in 2006 along with business and academic leaders.
Messrs. Almario and Songco agreed with making EO 138 permanent via a law. "[Senator Teofisto D. Guingona III] filed a microfinance bill as a congressman, and we are hoping that he can do the same now in Senate," Mr. Songco said. Mr. Almario said he sent a proposed microfinance bill to the office of then-Senator Aquino in 2008, adding this could be used as a reference for Malacañang’s initiatives.
"An EO will be more expedient and will set the policy direction of the government. But, we have seen how easy it is to revoke an EO, so we also need a microfinance framework made permanent through a law," he said.
Industry players stressed the importance of a national strategy, saying GFIs are the best providers of credit programs for the poor. "In the past, when all government agencies had their own lending programs, they suffered from low payback rates," said Benel P. Lagua, president of state lender Small Business Corporation. The government is effectively creating a deficit by "throwing money to unproductive programs," NCC’s Mr. Almario added.
Mr. Aquino said during his speech that his administration would consolidate remaining credit programs for the poor under "more competent branches of government" to make them more efficient.
In an e-mail, meanwhile, Social Welfare Secretary Corazon J. Soliman told BusinessWorld that their Self-Employment Assistance Kaunlaran (SEA-K) lending program had a national repayment average of 72-75%.
According to the department’s 2009 annual report, SEA-K released a total of P189.452 million to more than 1,600 livelihood projects nationwide, benefitting more than 35,000 families.
The DSWD also provides lending windows for the poor in far-flung areas where microfinance institutions cannot enter, Undersecretary Celia C. Yangco told BusinessWorld.
But NCC’s Mr. Almario argued that these areas had bigger problems that lending alone cannot solve. "They try to go to regions without banks and cooperatives, like the uplands. But the reason why there are no microfinance institutions there is because there is no infrastructure, no market, no economic activity," he said.
The government has to come into these areas not to lend money to the poor but to create an environment where economic activity can thrive first, Mr. Almario said. "We need farm-to-market roads in the uplands. We need peace and order in Mindanao," he said. "When we have these, MFIs will naturally enter these municipalities."
GFIs also oppose the lower interest rates used by government credit programs, saying they are unable to compete. "The subsidy is disguised in the lower interest rates," the NCC’s Mr. Almario explained. "This distorts the market because people think, ‘Why is this interest rate lower than the others? I’ll just borrow here instead’."
Moreover, subsidized credit isn’t sustainable, PinoyME’s Mr. Songco said.
The DSWD’s Ms. Yangco said GFIs and the private sector were pricing themselves out of the market but the NCC’s Mr. Almario argued that high interest rates were not obstacles, citing the prevalence of loan sharks.
"The most effective way of helping the low-income sector is not by bringing down interest rates, but by making credit accessible to them," he said. "GFIs can focus on the lending, and the government can focus on creating the best environment for microfinance to thrive. It’s a partnership."
Top Story
Posted on March 04, 2011 12:15:17 AM
BY DIANE CLAIRE J. JIAO
THE AQUINO administration wants to reverse the existing state policy on microfinance, saying government agencies should stay away from direct lending to the poor as this could be exploited for political purposes.
"We will work to institutionalize the National Strategy for Microfinance that was formulated in 1998. We will also make sure that microcredit will not be used as a tool for political patronage," President Benigno S. C. Aquino III said in a speech last week.
Asked if this meant drafting a microfinance law, Sec. Ricky A. Carandang of the Presidential Communications and Development Strategic Planning Office said: "We will wait first for the recommendations from the Cabinet."
The Palace could also draft its own Executive Order or push for a bill from Congress, National Credit Council (NCC) Deputy Executive Director Joselito S. Almario told BusinessWorld.
The NCC is the arm of the Department of Finance focused on creating a credit policy framework that will improve the delivery of financial services to the low-income sector.
In 1998, then President Joseph E. Estrada issued Executive Order (EO) 138 setting the National Strategy for Microfinance. It was in reaction to the government’s experience with direct lending programs to the poor, which resulted in many defaults.
EO 138 limited microfinance programs to government financial institutions (GFIs) such as the Development Bank of the Philippines and the Land Bank of the Philippines that lent wholesale to microfinance institutions (MFIs) such as rural banks, nongovernment organizations and cooperatives.
The directive, however, was repealed in 2006 by Mr. Estrada’s successor, Gloria Macapagal-Arroyo, through EO 558. Amid the public outcry that followed, she issued EO 558-A that allowed the Department of Social Welfare and Development (DSWD) to carry out their own microcredit programs in unserved areas. Government non-financial agencies state firms could also launch their own microcredit initiatives with the approval of the Office of the President.
"This is open to political patronage because these loans can be given to the poor as dole-outs," PinoyME Foundation President and CEO Danilo A. Songco told BusinessWorld.
Mr. Aquino made his statement in last week’s 5th anniversary of PinoyME, a non-stock, non-profit organization that provides funding and training to microfinance institutions. It was founded by his mother, former President Corazon C. Aquino, in 2006 along with business and academic leaders.
Messrs. Almario and Songco agreed with making EO 138 permanent via a law. "[Senator Teofisto D. Guingona III] filed a microfinance bill as a congressman, and we are hoping that he can do the same now in Senate," Mr. Songco said. Mr. Almario said he sent a proposed microfinance bill to the office of then-Senator Aquino in 2008, adding this could be used as a reference for Malacañang’s initiatives.
"An EO will be more expedient and will set the policy direction of the government. But, we have seen how easy it is to revoke an EO, so we also need a microfinance framework made permanent through a law," he said.
Industry players stressed the importance of a national strategy, saying GFIs are the best providers of credit programs for the poor. "In the past, when all government agencies had their own lending programs, they suffered from low payback rates," said Benel P. Lagua, president of state lender Small Business Corporation. The government is effectively creating a deficit by "throwing money to unproductive programs," NCC’s Mr. Almario added.
Mr. Aquino said during his speech that his administration would consolidate remaining credit programs for the poor under "more competent branches of government" to make them more efficient.
In an e-mail, meanwhile, Social Welfare Secretary Corazon J. Soliman told BusinessWorld that their Self-Employment Assistance Kaunlaran (SEA-K) lending program had a national repayment average of 72-75%.
According to the department’s 2009 annual report, SEA-K released a total of P189.452 million to more than 1,600 livelihood projects nationwide, benefitting more than 35,000 families.
The DSWD also provides lending windows for the poor in far-flung areas where microfinance institutions cannot enter, Undersecretary Celia C. Yangco told BusinessWorld.
But NCC’s Mr. Almario argued that these areas had bigger problems that lending alone cannot solve. "They try to go to regions without banks and cooperatives, like the uplands. But the reason why there are no microfinance institutions there is because there is no infrastructure, no market, no economic activity," he said.
The government has to come into these areas not to lend money to the poor but to create an environment where economic activity can thrive first, Mr. Almario said. "We need farm-to-market roads in the uplands. We need peace and order in Mindanao," he said. "When we have these, MFIs will naturally enter these municipalities."
GFIs also oppose the lower interest rates used by government credit programs, saying they are unable to compete. "The subsidy is disguised in the lower interest rates," the NCC’s Mr. Almario explained. "This distorts the market because people think, ‘Why is this interest rate lower than the others? I’ll just borrow here instead’."
Moreover, subsidized credit isn’t sustainable, PinoyME’s Mr. Songco said.
The DSWD’s Ms. Yangco said GFIs and the private sector were pricing themselves out of the market but the NCC’s Mr. Almario argued that high interest rates were not obstacles, citing the prevalence of loan sharks.
"The most effective way of helping the low-income sector is not by bringing down interest rates, but by making credit accessible to them," he said. "GFIs can focus on the lending, and the government can focus on creating the best environment for microfinance to thrive. It’s a partnership."
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