microfinance and the global financial crisis
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1
Microfinance
and
The Global Financial Crisis
By
Dennis A. Monong
People’s Credit and Finance Corporation
Microfinance
and
The Global Financial Crisis
By
Dennis A. Monong
People’s Credit and Finance Corporation
2
Outline Outline
• PCFC and its Accomplishments
• Microfinance as an Industry
• Impact of the Global Financial Crisis on Microfinance
3
People’s Credit & Finance Corporation
People’s Credit & Finance Corporation
“The lead government entity specifically tasked to mobilize resources from both local
and international funding sources for microfinance services for the exclusive use
of the poor” - Republic Act 8425:
Social Reform and Poverty Alleviation Act
4
PCFC MANDATE :
to provide the poor with access to credit
PCFC MANDATE :
to provide the poor with access to credit
STRATEGY : Wholesale Lending to accredited microfinance institutions
5
Investment Loans(livelihood)
Institutional Loans(MFI strengthening)
PoorPoor
MFI
LOANS
Capacity Building
Peoples Devt. Trust
Fund
THE PCFC MICROFINANCE PROGRAM COMPONENTS
6
The Poor, preferably women (end clients)
Microfinance Institutions (conduits-partners)
Targeted Targeted ClientsClientsTargeted Targeted ClientsClients
Low income households below poverty level
Rural Banks and Thrift Banks Coops and Coop Banks Non-Gov’t./Peoples Organizations
7
PCFC’s Accomplishments
8
GEOGRAPHICAL COVERAGE: MFI Visibility Map GEOGRAPHICAL COVERAGE: MFI Visibility Map
As of December 2008, PCFC thru its 191 Active MFIs PARTNERS is serving:
• 82 of 82 Provinces (100%)• 131 of 131 cities (100%)• 1,369 of 1,497 towns (91%)
GEOGRAPHICAL COVERAGE
LEGENDNGO CooperativeCooperative Bank Rural Bank Thrift BankLending Investors
`
9
PCFC PARTNER- MFIs
PCFC PARTNER- MFIs
51, 27%
42, 22%2, 1%18, 9%
76, 40%
2, 1%
Coops NGOs LisCoop banks Rural banks Thrift banks
Number of MFIs, By Type As of December
2008
10
End client OutreachEnd client Outreach
July 2004:1,184,167
32,120112,155
324,108
791,099
1,396,326
2,252,883
2,625,753
-200,000
100,000
400,000
700,000
1,000,000
1,300,000
1,600,000
1,900,000
2,200,000
2,500,000
1996 1998 2000 2002 2004 2007 As of
Nov
2008
11
Loan Volume (‘Php Million’)Loan Volume (‘Php Million’)
1,095
2,564
4,133
6,833
10,403
12,037
0
3,000
6,000
9,000
12,000
15,000
1998 2000 2002 2004 2007 As of
Dec
2008
302
1,065
2,010
2,8783,070
3,478
-
800
1,600
2,400
3,200
4,000
1998 2000 2002 2004 2007 As ofDec2008
Cumulative Loan Releases Outstanding Loans
Loan Volume (‘Php Million’)Loan Volume (‘Php Million’)
loan releases by year
13
Status of Philippine
Microfinance Industry
Status of Philippine
Microfinance Industry
14
1996 - 2008
Poor women: strong borrowers, entrepreneurs and change agents
Tremendous growth in outreach
MFIs: efficient, responsive delivery of microfinance services
Established performance standards and indicators
From Microcredit to Microfinance
Entry of new private sector players
15
Microfinance: Integrated into Philippine Financial System
BSP General Banking Law of 2000
NCC – DOF National Strategy for Microfinance
Microfinance Council: promotion of best practices
16
Microfinance Players
1996 – CARD, Inc., Negros Women for Tomorrow Foundation, Inc. Tulay Sa Pag-unlad, Inc. (TSPI) , Taytay sa Kauswagan, Inc. (TSKI), etc.
1999 – Rural Banks, Cooperative Rural Banks and Cooperatives
2005 – Private Commercial Banks
Sources of data: MFPC Secretariat.
Over all Accomplishments on Microfinance and SEA –K
As of October 2008INDICATORS JUL '04 - DEC '06 JAN - DEC '07 JAN - OCT '08 AS OF OCTOBER 2008
Geographical Coverage Provinces 82 out of 82
Cities 131 out of 131
Towns 1,454 out of 1,497
Outreach:
Active MF Clients: 2,452,022 1,136,765 1,409,120 4,997,907 Microfinance 2,395,540 1,111,463 1,388,503 4,895,506
SEA K 56,482 25,302 20,617 102,401
New Jobs Generated: 986,184 570,120 743,815 2,300,119 Microfinance 938,420 544,818 723,198 2,206,436
SEA K 47,764 25,302 20,617 93,683
Amount of Loans Released: (PBn)
For Active MF Clients: 60.947 25.945 56.014 142.907 Microfinance 60.655 25.824 55.910 142.389
SEA K 0.292 0.121 0.105 0.518
For New Jobs Generated: 28.208 13.305 31.085 72.597 Microfinance 27.945 13.183 30.980 72.108
SEA K 0.263 0.121 0.105 0.489
18
ACTIVE MICROFINANCE CLIENTS, BY SECTOR
30%
21%
30%
17%
1% 1% FARMERS
FISHERFOLK
WORKERS ININFORMAL SECTOR
URBAN POOR
INDIGENOUSPEOPLE
YOUTH
19
ACTIVE MICROFINANCE CLIENTS, BY LIVELIHOOD ACTIVITY
53%
18%
11%
3%
10%3%2% TRADE
AGRICULTURE
AQUACULTURE
LIVESTOCK
SERVICES
FOOD PRODUCTIONAND PROCESSING
MANUFACTURING
20
LOAN RELEASES, BY SECTOR
34%
22%
27%
15%1%1% FARMERS
FISHERFOLK
WORKERS ININFORMALSECTORURBAN POOR
INDIGENOUSPEOPLE
YOUTH
21
LOAN RELEASES, BY LIVELIHOOD ACTIVITY
51%
22%
11%
3%
9%3%1% TRADE
AGRICULTURE
AQUACULTURE
LIVESTOCK
SERVICES
FOOD PRODUCTIONAND PROCESSING
MANUFACTURING
22
Impact of the Global Financial
Crisis on Microfinance
Impact of the Global Financial
Crisis on Microfinance
Current Scenario: The Global Financial Crisis
•Global Financial markets has deteriorated in recent months•Financial Sector deleveraging has continued•Market confidence has fallen•The Philippine economy is affected but remains resilient
23
Microfinance prior to Global Financial Crisis
•Availability of funds was not considered to be a concern •Microfinance sector was so attractive for the investors•In the Philippines, microfinance got the attention of the commercial investors
24
Effects of Global Financial Crisis on Microfinance
•Microfinance Sector - decrease available capital
- Will have a negative domino effect
- less adversely affected •Wholesale MFIs – more cautious, lower appetite and might
increase interest rates•Retail MFIs – big players will adjust to economic changes
small MFIs might experience difficulty •Client – lower loan demand for some borrowers,
Increase in food and fuel prices might lead to
borrowers default and dropout
25
Loan Volume (‘Php Million’)Loan Volume (‘Php Million’)
PCFC loan releases by year
Sources of data: MFPC Secretariat.
Over all Accomplishments on Microfinance and SEA –K
As of October 2008INDICATORS JUL '04 - DEC '06 JAN - DEC '07 JAN - OCT '08 AS OF OCTOBER 2008
Geographical Coverage Provinces 82 out of 82
Cities 131 out of 131
Towns 1,454 out of 1,497
Outreach:
Active MF Clients: 2,452,022 1,136,765 1,409,120 4,997,907 Microfinance 2,395,540 1,111,463 1,388,503 4,895,506
SEA K 56,482 25,302 20,617 102,401
New Jobs Generated: 986,184 570,120 743,815 2,300,119 Microfinance 938,420 544,818 723,198 2,206,436
SEA K 47,764 25,302 20,617 93,683
Amount of Loans Released: (PBn)
For Active MF Clients: 60.947 25.945 56.014 142.907 Microfinance 60.655 25.824 55.910 142.389
SEA K 0.292 0.121 0.105 0.518
For New Jobs Generated: 28.208 13.305 31.085 72.597 Microfinance 27.945 13.183 30.980 72.108
SEA K 0.263 0.121 0.105 0.489
Is it worth investing in MFI at this time?
• Certainly, we must invest during this time of
crisis. Providing firm commitment to the poor is
crucial.
• More confidence and support are needed by the
sector during this time.
• There is an opportunity to invest even more
(number of clients would increase)28
How should the MFI face the challenge?
• With confidence
• With more discipline and prudence
• With creativity and passion
29
How to minimize the impact on MFI?
• Focus on portfolio quality
• Enhance risk management processes
• Diversify and expand all sources of financing
30
31
Thank you and Have a Good
Day….
Thank you and Have a Good
Day….
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