Case Study on Philippines: Electronic Banking: Delivering Microfinance Services to the Poor in the Philippines

This paper argues that efficient and cheaper methods of providing financial services, such as electronic banking (e-banking) services should also be offered to microfinance clients. The paper:

• Presents an overview of the microfinance industry in the Philippines, as well as the recent developments of commercialization, competition and innovations in microfinance products and service delivery;
• Presents the following two cases of existing models wherein technological innovations of electronic banking are used to serve microfinance clients:
  • The use of mobile telephones through the short messaging services (SMS);
  • The distribution of automated teller machine (ATM) cards to microfinance clients.
• Takes a closer look at the implication for regulation particularly by the Bangko Sentral ng Pilipinas (BSP);
• Discusses the direction of policy, existing relevant regulations and rules.

The paper concludes that:

• Innovations undertaken by microfinance institutions (MFIs) in the Philippines consider the unique characteristics of poor and low-income clients;
• Innovations in the field of electronic banking will more effectively and appropriately reach the needs of this market;
• The following factors promise a bright future insofar as reaching the poor through electronic banking is concerned:
  • The regulatory approach of the BSP;
  • The receptiveness of the existing market as well as the potential users of the e-banking products.

By carefully managing all these factors, the future will open wide opportunities for expanded outreach and usage as well as increased diversification of services.