microfinance and the global financial crisis

31
1 Microfinance and The Global Financial Crisis By Dennis A. Monong People’s Credit and Finance Corporation

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Mr. Dennis Monong from the People’s Credit and Finance Corporation puts the role microfinance plays in times of uncertainty in perspective. (Jan 29, PACAP Community Development Fourm - Microfinance Amidst the Global Financial Crisis)

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Page 1: Microfinance and the Global Financial Crisis

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

Page 2: Microfinance and the Global Financial Crisis

2

Outline Outline

• PCFC and its Accomplishments

• Microfinance as an Industry

• Impact of the Global Financial Crisis on Microfinance

Page 3: Microfinance and the Global Financial Crisis

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

Page 4: Microfinance and the Global Financial Crisis

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

Page 5: Microfinance and the Global Financial Crisis

5

Investment Loans(livelihood)

Institutional Loans(MFI strengthening)

PoorPoor

MFI

LOANS

Capacity Building

Peoples Devt. Trust

Fund

THE PCFC MICROFINANCE PROGRAM COMPONENTS

Page 6: Microfinance and the Global Financial Crisis

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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

Page 7: Microfinance and the Global Financial Crisis

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PCFC’s Accomplishments

Page 8: Microfinance and the Global Financial Crisis

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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

`

Page 9: Microfinance and the Global Financial Crisis

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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

Page 10: Microfinance and the Global Financial Crisis

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

Page 11: Microfinance and the Global Financial Crisis

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

Page 12: Microfinance and the Global Financial Crisis

Loan Volume (‘Php Million’)Loan Volume (‘Php Million’)

loan releases by year

Page 13: Microfinance and the Global Financial Crisis

13

Status of Philippine

Microfinance Industry

Status of Philippine

Microfinance Industry

Page 14: Microfinance and the Global Financial Crisis

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

Page 15: Microfinance and the Global Financial Crisis

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Microfinance: Integrated into Philippine Financial System

BSP General Banking Law of 2000

NCC – DOF National Strategy for Microfinance

Microfinance Council: promotion of best practices

Page 16: Microfinance and the Global Financial Crisis

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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

Page 17: Microfinance and the Global Financial Crisis

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

Page 18: Microfinance and the Global Financial Crisis

18

ACTIVE MICROFINANCE CLIENTS, BY SECTOR

30%

21%

30%

17%

1% 1% FARMERS

FISHERFOLK

WORKERS ININFORMAL SECTOR

URBAN POOR

INDIGENOUSPEOPLE

YOUTH

Page 19: Microfinance and the Global Financial Crisis

19

ACTIVE MICROFINANCE CLIENTS, BY LIVELIHOOD ACTIVITY

53%

18%

11%

3%

10%3%2% TRADE

AGRICULTURE

AQUACULTURE

LIVESTOCK

SERVICES

FOOD PRODUCTIONAND PROCESSING

MANUFACTURING

Page 20: Microfinance and the Global Financial Crisis

20

LOAN RELEASES, BY SECTOR

34%

22%

27%

15%1%1% FARMERS

FISHERFOLK

WORKERS ININFORMALSECTORURBAN POOR

INDIGENOUSPEOPLE

YOUTH

Page 21: Microfinance and the Global Financial Crisis

21

LOAN RELEASES, BY LIVELIHOOD ACTIVITY

51%

22%

11%

3%

9%3%1% TRADE

AGRICULTURE

AQUACULTURE

LIVESTOCK

SERVICES

FOOD PRODUCTIONAND PROCESSING

MANUFACTURING

Page 22: Microfinance and the Global Financial Crisis

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Impact of the Global Financial

Crisis on Microfinance

Impact of the Global Financial

Crisis on Microfinance

Page 23: Microfinance and the Global Financial Crisis

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

Page 24: Microfinance and the Global Financial Crisis

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

Page 25: Microfinance and the Global Financial Crisis

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

Page 26: Microfinance and the Global Financial Crisis

Loan Volume (‘Php Million’)Loan Volume (‘Php Million’)

PCFC loan releases by year

Page 27: Microfinance and the Global Financial Crisis

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

Page 28: Microfinance and the Global Financial Crisis

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

Page 29: Microfinance and the Global Financial Crisis

How should the MFI face the challenge?

• With confidence

• With more discipline and prudence

• With creativity and passion

29

Page 30: Microfinance and the Global Financial Crisis

How to minimize the impact on MFI?

• Focus on portfolio quality

• Enhance risk management processes

• Diversify and expand all sources of financing

30

Page 31: Microfinance and the Global Financial Crisis

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Thank you and Have a Good

Day….

Thank you and Have a Good

Day….