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Filipino MFIs Putting Client Protection and Development Above All

- An experience of Nepalese Delegation

A delegation of Nepalese microfinance officials visited the Philippines from January 15-19, 2018 on the invitation of the Microfinance Council of the Philippines Incorporation (MCPI). The delegation led by CSD Chairman Mr. Shankar Man Shrestha comprised of 10 other members namely Mr. Damber Bahadur Deuja - Sahara Nepal SACCOS Ltd., Mr. Bhim Bahadur Bhandari - Pioneer Bahuuddeshiya Sahakari Sanstha Ltd., Mr. Ishwor Lal Rajbhandari & Mr. Lokendra Paudel - DCRDC, Mr. Indra Prasad Poudel & Mr. Min Prasad Sharma Bhattarai – Shreejana Bikas Kendra, Mr. Mahadev Chaudhary Tharu & Mr. Prim Bahadur Tharu - UNYC Nepal and Mr. Manoj Kumar Sharma - Jeevan Bikas Samaj.

The delegates visited three prominent microfinance institutions (MFIs) of the Philippines – KMBI (Kabalikat Para sa Maunladna Buhay, Inc.), ASHI (Ahon Sa Hirap, Inc.) and ASA Philippines. They also engaged in discussions with the officials of BSP (Bangko Sentral ng Pilipinas), the Central Bank of the Philippines on matters relating to government policy on microfinance and the regulatory framework of the Central Bank. During the discussion, it was found that the authorities of the Philippines Central Bank are very positive towards MFIs and that the regulation is very conducive and friendly towards strengthening the MFIs.

In the Philippines the interest rate is deregulated. Despite charging an interest rate of approximately 3% per month, the interest rate charged by the MFIs has never been raised as an issue. This is because the profit earned by the MFIs are not distributed among the promoters but rather invested in various schemes aimed at the protection and development of clients. The MFIs were found to be solely committed towards the growth and development of their member clients. The clients themselves had no complain about the interest rate. Rather, they were proud of the various support provided by the organization for their families' benefit and development.

The profit the MFIs make are kept as retained earnings to expand financial as well as social services to their members. MFIs like KMBI is financially self-sustainable and does not borrow funds from any external sources as they mobilize savings from their members as their capital build up.

One very important feature of the Philippines microfinance sector is that they have been strictly practicing the fundamentals of microfinance from the very beginning till date. They have kept their mission of serving the poor and ultra-poor intact. They still follow weekly meeting of their clients and have been emphasizing on the value formation among the members. They take important messages to their members every week and work towards creating right value, culture and character in them. These weekly meetings are not just limited to installment collection like in the case of Nepal. They have cultivated the right culture and discipline among members. The members have been following group guarantee on loans as usual and they do not make collateral based loans. They have implemented various health programs, loan products as well as life insurance schemes on their own or in cooperation with insurance companies. Some MFIs have even employed doctors and nurses to provide health services to their clients.

Another notable feature of theirs is that despite the existence of so many MFIs, the loan size of borrowers are kept small but suitable to their needs and capacity. The clients are not tempted with bigger loans. The loan size starts from Peso 4,000 to a maximum of Peso 100,000 in general and the higher size loans over Peso 100,000 are given to only extremely capable entrepreneurs who have grown from the bottom up. Even 12 to 15 years old clients were found to have loan sizes within Peso 100,000. The MFIs motivate their members to build their own capital from the profit earned from their business and undertake prudent clients targeting process. They do not inject non-poor families in their program and follow the set criteria of client's identification. The clients are enrolled in their program only after a rigorous scrutiny of their background, character and socio-economic conditions. Besides, they have strong mechanism to monitor their clients. The staffs are all motivated and well trained and they know how to perform their job well.

The ASA Philippines CEO, Mr. Kamrul H.Tarafder who has 1.5 million clients and over 7,000 staffs said,"We are guided by the vision and mission set by our organization. We are not lured by anything else but committed to provide best of services to our members. We believe that for every Peso that we earn, we owe to our clients." He further added,"We put our valued clients above all. We always remained watchful of their progress. Our institutional development is linked to their development. Our strength is our well cultured and disciplined clients who are backed by our disciplined, capable and dedicated staff."

The delegation found the microfinance environment in the Philippines very conducive to MFIs for the benefit of their clients. Moreover, MFIs are given huge tax exemption and are charged only 2% tax on their net profit. Most MFIs believe in self-regulation. There are no unscrupulous clients’ duplications and multiple financing to borrowers as witnessed in Nepal. They thoroughly scrutinize the members before they are admitted to their program. Even those who borrow from two organizations are given option to leave one of the MFIs within a year and encouraged to stick to one organization only. The clients poaching practice is at minimum.

The delegation had discussion with the officials of the Microfinance Council of the Philippines Incorporation (MCPI) on the evolution and practices of microfinance in the Philippines. MCPI is the network of MFIs in the Philippines.

The delegates had opportunity to visit the headquarter of the Asian Development Bank (ADB) in Manila which had supported Nepal for the Rural Microfinance Project that was successfully implemented by RMDC and had created a milestone in the history of microfinance in Nepal. The delegates met with Ms. Mayumi Ozaki and Mr. Shigehiro Shimozaki who briefed on the efforts of ADB in Financial Inclusion in the Asian Countries. During the visit they also interacted with Mr. Som Nath Subedi, Alternate Director of Nepal to the Board of ADB and Dr. Ramhari Lamichhane, Director General of Colombo Plan Institute in the Philippines who shared their experiences with the delegation.

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