Banking on Grameen: Is it Viable in the Philippines?

This paper evaluates the performance of Grameen-style lending to poor people in the Philippines. The country lags behind in terms of economic growth with half the rural population living in poverty. This study shows that Grameen-style banking in the Philippines for rural poor people, especially women, can be highly successful for both, the borrower and lender.

Rural banks are increasingly adopting group lending techniques and expanding their outreach. The study finds that outreach to very poor communities has been limited, and there is a need to direct more attention to them. However, MFIs have gained experience in working with very poor clients, and have improved customization of financial products for them.

The study makes the following recommendations for Grameen-style banking to contribute significantly to rural poverty alleviation:

• Gradually expanding financially strong MFIs to the poorest rural areas through equity investment, technical assistance and expansion of savings;
• Mainstreaming other microfinance areas such as non-business loans and insurance products without compromising Grameen-style approaches;
• Backing policy dialogue and reform for all MFIs;
• Giving more emphasis to capacity building;
• Adjusting reporting requirements of MFIs.