Microfinance in the Philippines

This report reviews the growth of the Philippines microfinance industry, and discusses the implications of commercial banks entering this market.

The Philippines microfinance sector has been traditionally dominated by rural banks, NGOs and finance cooperatives. In 2009, a number of commercial banks sought entrance into the retail microfinance market. Currently, the Philippines microfinance sector exhibits an increase in:

• Growth of volume of microfinance activity;
• Number of financial institutions engaging in retail microfinance operations;
• Commercialization;
• Amendments to policy and regulatory environment to support the microfinance industry;
• Range of microfinance products and services.

Despite growth in microfinance, a substantial portion of the microfinance population remains underserved. The current interest of some commercial banks in retail microfinance may provide this underserved population greater access to credit. Various players bring different advantages to the marketplace. While commercial banks bring with them size and economies of scale, rural banks and NGOs have the advantages of specialized knowledge. The provision of retail microfinance by commercial banks could result in a more expansive microfinance market in the Philippines.