Bangko Sentral expects loan costs to go down for microentrepreneurs

Bruce Rodriguez, ABS-CBN News

Posted at Mar 18 2021 07:21 PM

Bangko Sentral expects loan costs to go down for microentrepreneurs 1
A woman tends to her mini sari-sari store near Wawa Dam in Sitio Kayrupa, Barangay San Rafael, Rodriguez, Rizal on November 20, 2020. George Calvelo, ABS-CBN News

MANILA - The Bangko Sentral ng Pilipinas said it expects the borrowing costs of microentrepreneurs to fall in step with record-low benchmark interest rates as well as innovations that can help lower the costs of microfinance institutions.

"We expect of course that the interest rate for the micro-enterprises to be lower as a result of the lower interest rates," said BSP governor Benjamin Diokno. 
 
Ellen Joyce Suficiencia, Director for Financial Inclusion at the BSP said, based on their dialogue with one of the biggest microfinance non-government organizations, microentrepreneurs pay an effective interest rate of around 6 percent a month for their microfinance loans.
 
To lower these costs, she said the BSP hopes the microfinance industry will adopt digitalization and scale up innovation so that they can spread the cost to more customers.

Diokno noted bank loans to microentrepreneurs, such as sari-sari store owners, vendors, etc stood at P25.1 billion during the second quarter of 2020, an 863 percent increase from P2.6 billion in 2002.

The BSP and other government institutions have been highlighting microfinance as a flagship program on poverty alleviation since 2000.

“We remain committed to this advocacy, as microfinance continues to be a crucial source of sustainable financing for rural communities and microenterprises,” Diokno explained.

He also shared, from 400,000 in 2002, the number of microfinance borrowers also surged to over two million by the second quarter of 2020.

Moreover, from 119 banks in 2002, there are now 149 banks that offer microfinance products and services. 

Diokno also said, aside from bank microfinance credit, latest data showed that non-bank microfinance institutions (MFIs) such as non-government organizations catered to 5.2 million clients with P41.9 billion in loans in 2019. 

Diokno also shared improvements in its financial inclusion campaign, as the number of basic deposit accounts grew by 53 percent, or 2.1 million new basic deposit accounts as of the third quarter of 2020 compared to end-2019.

It also recorded 18.8 million new e-money accounts during the same period, or a 30 percent increase.

"The pandemic has certainly contributed to this impressive growth as people started to see the benefits of having an account in order to perform digital payments," Diokno explained.

To further improve the local microfinance sector, the BSP, under its Financial Inclusion Steering Committee, also aims to facilitate the Philippine Guarantee Corporation to explore the development of a loan guarantee program for MFIs. 
 
Diokno said this will encourage government and private commercial lenders to extend loans to MFIs for re-lending to their target market, and enable a continuous flow of credit to the entrepreneurial poor. 
 
Likewise, he said, the BSP will also support MFIs in terms of technical assistance and technology matching grants to help them keep up with digital innovations.
 
Diokno said, they're set to conduct a financial inclusion survey this year with results due in 2022.
 
Based on the 2019 survey, only 29 percent of adult Filipinos have a bank account.

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