2012 MCPI Annual Conference Focusing on Responsible and Client-Centered Microfinance Hyatt Hotel, Manila, July 2012

4 Plenary sessions Poverty situation in the Philippines / Poverty outreach of microfinance institutions Understanding multiple borrowing in microfinance Creating an enabling environment for client- centered microfinance National microfinance client mapping initiative

2 Breakout sessions with 3 topics each Day 1 Beyond Credit: Products and Services for Microfinance Clients – Value chain finance – Savings products for microfinance – Financial education Day 2 Addressing the Risks and Vulnerabilities of Clients – Disaster risk reduction and management – Avoiding over-indebtedness – Truth and transparency in lending

Poverty situation in the Philippines / Poverty outreach of microfinance institutions Poverty situation (2009) – Poverty incidence of 26.5 percent (1/4 of population) or million Filipinos are poor – Region VII (10.8%), V (10%) and VI (9%) with biggest share of total poor families – Poorest among basic sectors are the fishers (41.4%), farmers (36.7%) and children (35%)

Poverty situation in the Philippines / Poverty outreach of microfinance institutions Poverty outreach (covering 10 MFIs) – Basic question: Are MFIs reaching the poor people? Generally low levels of penetration Widening gap between poverty concentration and rural poverty incidence MFIs serving the most number of poor households have relatively lower poverty concentrations – How to reach the poor? Modify product and look at the client’s potential business and capacity to pay Get the list of poor HH from DSWD Use the PPI for targeting as well as tracking performance

National microfinance client mapping initiative 112 MFIs; mapped out 1.3 million clients About 54% of served barangays in urban areas and 66 % in rural areas are saturated and over-saturated, respectively. About 40% of urban barangays and 53% of rural barangays have no outreach. No evidence of policy amongst MFIs to serve the poorer municipalities There are municipalities served by 10 or more MFIs while there are municipalities with none. High concentration of MFIs resulting in large outreach could likely lead to multiple borrowings

Understanding multiple borrowing in microfinance Basic question: Is there cause for concern about multiple borrowing? – Branch client data (Commonwealth) Average of 14% of clients of MFI branches 77-78% if including borrowing from other sources No strong evidence of multiple borrowing to specific characteristics and to delinquency – FGD results Vibrant lending and borrowing sectors emerging Prospects and risks with clients Interest rates are increasing despite competition

Creating an enabling environment for client-centered microfinance Government has put in place adequate policies from financial inclusion to consumer protection in the area of microfinance in past decades There are also private fund providers with a conscience Financial education is key Challenge now is for MFIs and other service providers to comply with the policies

Value chain finance Various modes – GDMPC’s as enabler for fisher-clients – LBP’s food supply chain program as financier in various stages of the value chain – Insol as BDS provider for potential entrepreneurs Cover value chain development when one talks of value chain finance Creating value for the low income producers

Savings products for microfinance BPI Globe BanKO – Technology driven but cost-efficient way of mobilizing savings/deposits Cantilan Bank – Microsavings – Savings for IPs – Money for health, education etc. – With financial education, e.g. how to save and budget

Financial education Appropriateness of method to conduct financial education NWTF Customer Service Department – Separate department that conducts training for borrowers – No fixed venue but where convenient – Borrowers are invited to attend the training CARD-MRI Development Institute – Trains team of trainers, including loan officers – Conduct of training during center meetings – Required attendance to training

Disaster risk reduction and management With high probability of risk in disaster, the objective is to lower the risk by increasing the capacity of the community; responses may be short term or long term MFIs are encouraged to establish protocols and policies to follow during disasters and emergencies. Framework must include: mitigation, preparedness, response, rehabilitation/recovery Also recommended is to develop a comprehensive Disaster Risk Management Framework, focused on pre-event and post- event protocols and policies.

Avoiding over-indebtedness Kasagana –Ka – Example of intervention: design of multiple products, product innovations, client protection strategies, culture of service for the staff – Networking as core strategy (one-stop shop) ASKI – Practices: build long- term relationships with clients, understand financial need of clients, offering other support aside from microcredit (e.g, micro-insurance, health, sanitation, marketing of clients’ products)

Truth and transparency in lending Requires the participation of all credit-granting institutions, including the clients, for a level-playing field Win-win situation both for the clients and institutions because it will foster responsible finance, transparency and better treatment of clients Importance: with clear understanding of true costs of borrowing, informed clients will be able to make informed decisions

 RB branching for MF operations  Microfinance-oriented banks  Rediscounting line for MFIs  EO 138  Credit with savings  Micro-insurance  OFW Remittances

Enabling Environment Poverty Situation MFI clients MFI  RB branching for MF operations  Microfinance-oriented banks  Rediscounting line for MFIs  EO 138  BSP circular 680  Financial learning centers  BSP circular 730, 754, 755  Credit with savings  Micro-insurance  OFW Remittances  Savings products  Value chain finance  BDS e.g., financial education  Approach to disaster mitigation  Avoidance of client over- indebtedness

Continuing challenges Still many underserved areas; challenge to MFIs is to target clients and come up with the right business model What can the role of other stakeholders be to support the MFIs There is hence a call for responsible microfinance especially in saturated and oversaturated areas

What is Responsible Finance? EU – Transparent and equitable delivery of financial services which benefit society at large – Fully disclosed, priced fairly, adapted to clients ICCO – Avoids harmful or unfair treatment of clients – Balance clients interests with providers (MFIs/Investors) – Balance people, planet, profit – Meeting triple bottomline BSP – Shared responsibilty (multi-stakeholder) – A responsible financial institution is strong, stable, transparent, inclusive and consumer-friendly

Responsible Microfinance Transparent pricing Avoiding over indebtedness Product adapted to clients needs Responsible investments

Client-Centered Microfinance