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Foreign funds in aid of SMEs shrinking

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Lourdes Pineda: Professionalize. PHOTO FROM RCBC.COM

MANILA, Philippines—The global financial crisis put the squeeze on the microfinance sector in the last four years, resulting in a drop in the flow of foreign donor money that allowed lenders to provide cheap financing to small borrowers.

According to Lourdes Pineda, president of Rizal Microbank (a unit of RCBC), the scarcity of these interest-free funds means microfinance institutions have no choice but to professionalize their operations to ensure the availability of cheap credit for borrowers at the “base” of the pyramid.

The microfinance industry remains the most viable replacement to informal sources of funds that charge usurious interest rates on borrowers with no other financing options, she said.

“Donor funds have shrunk because of the crisis,” Pineda told reporters at a recent press conference. “That’s why the industry’s portfolio has shrunk.”

Pineda was commenting on central bank data that showed that outstanding loans of microfinance institutions dipped from P8.4 billion as of the end of 2012 to P8 billion as of March this year.

She said donor funds, usually from charitable organizations overseas, had been instrumental in supporting the growth of the microfinance sector over the last decade. As of 2002, microfinance loans were only about P2.6 billion, Bangko Sentral ng Pilipinas (BSP) data showed.

The luxury of having cheap funds—instead of deposits from clients who need to be paid interest—allowed microfinance lenders to extend credit at low rates while still earning profits despite rising administrative costs.

“For the microfinance firms to survive without donor funds, they need to professionalize their operations,” Pineda said, citing the need to keep administrative costs at a minimum.

She said microfinance lenders also needed to adjust their interest rates to be able to compensate for the high costs.


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Tags: businesses , donor funds , Finance , Financial crisis , foreign aids , smes

  • Mario_Garcia

    MICRO FINANCE COMPANIES EQUALS LOAN SHARKS

  • joboni96

    Rizal Microbank (a unit of RCBC)

    pati microfinance
    pinagkakakitaan ng intsik switik

    padaanin na yan sa mga kooperatiba
    with proper monitoring

  • rodben

    Foreign donors are now much aware of too much thieves in Pinas gov’t today…

    • intsikbeho

      i’ve seen microfinancing operations and these operations at the bottom of the pyramid work in a more secured way that checks for delinquency.

      teams of SME form a group that as a collective pays for the delinquency of one of its members, each team would meet every week so visibility and contact is maintained which serves as a form of “keeping tabs” on their co-borrowers.

      delinquency was very low and even if there were delinquencies it was very minimal that the rest of the members do not really mind paying it off. loans were just 5k-20k. a 5 member team usually had about a total loan of less than 100k and team members are usually neighbors or friends or become friends.

      i thought it was a very good way of getting small time money very much accessible to the provinces. not in metro manila because people at the bottom in the metro seem to have lost their morals.

      regardless of the foreign aid, local business or banking sector could take over the loss of foreign aid. its small time money that helps.

    • spiritnsoul700

      You are right mate,

      And since the Philippines has brag of her bullish economy and huge foreign currency reserves, why still expect from foreign donors, and it is also time for the Philippines now to show her appreciation and gratefulness by been generous in return,

      This is the time the rests of the world are watching what The Philippines will do in return for all the good and generous deed from foreign donors who has been helping to keep The Philippines neck above water during her trying time

      Besides everyone knows that even local banks in The Philippines are MANIPULATORS. which is one of the many reasons why genuine foreign investors shun away from the Philippines,

      A clear example , a reputed German company closed its operation in the Philippines and shifted elsewhere, This particular German company material are world renown and much in demand worldwide including The Philippines.

      For the Philippines case …

      STRICTLY CASH TERMS AND FULL PAYMENT IN CASH MUST BE MADE IN ADVANCE, NO LC/CHEQUES, INSTALMENT PAYMENTS ARE ENTERTAIN, TAKE IT OR LEAVE IT



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