napc and microfinance

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NAPC and NAPC and Microfinance Microfinance Andrea S. Alforte Microfinance Unit, NAPC Secretariat

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Page 1: NAPC and Microfinance

NAPC and NAPC and MicrofinanceMicrofinance

Andrea S. AlforteMicrofinance Unit, NAPC Secretariat

Page 2: NAPC and Microfinance

PRESENTATION OUTLINEPRESENTATION OUTLINE

• Basic Microfinance Concepts• Microfinance and Poverty

Reduction• NAPC Mandates in Microfinance

Page 3: NAPC and Microfinance

Basic Microfinance ConceptsBasic Microfinance Concepts

Page 4: NAPC and Microfinance

Paradigms on creditParadigms on credit

MODERN•Asset

• poor are bankable• collateral free

• banking at doorsteps• demand driven

TRADITIONAL

• liability

• poor can’t pay

• collateral req’t• bank as only source

of formal credit• subsidized credit/ supply driven

Page 5: NAPC and Microfinance

RA 8425 defines MicrofinanceRA 8425 defines Microfinance

Purpose•Improve HH’s asset base •expand access to savings

Credit - savings mobilization program

exclusive for the poor Characteristics- small loan- simple application- collateral free- alternative loan repayments- minimum savings

Page 6: NAPC and Microfinance

Core PrinciplesCore Principles

• Low-income households need sustained access to financial services.

• The poor have the capacity to repay their loans and to save.

• Microfinance institutions can be operationally and financially self-sufficient.

Page 7: NAPC and Microfinance

Who are the MF Players?Who are the MF Players?

MICROFINANCE CLIENTS(3.1 million as of March 2006)

MICROFINANCE INSTITUTIONS Rural/Thrift/MF Banks, NGOs,

Cooperatives(about 1,817 MFIs)

Capacity Building Support Agencies/

Institutions

Policy/Regulatory/ Supervisory AgenciesGFIs/ Wholesalers

DONOR COMMUNITY

Capacity Building Support Agencies/

Institutions

Page 8: NAPC and Microfinance

Target Clients of MFTarget Clients of MF

• Economically active and entrepreneurial low-income households

• Those who have a stable economic activity and will be able to sustain and enhance that activity

Page 9: NAPC and Microfinance

Types of Projects FinancedTypes of Projects Financed

• Consumer trading/marketing• Home-based micro-enterprises• Food processing/services• Agri-based

Page 10: NAPC and Microfinance

Small

Medium

Large

MicroPoverty Threshold

Very Poor

Moderately Poor

Vulnerable Non- PoorE

NT

ER

PR

ISE

RIS

KS

/vu

lner

abili

ties

Classification of the poor as target for microfinance services ( Adapted from the JBIC Study on Sustainable MF for Poverty Reduction in the Philippines, Sept. 2004)

Microfinance Clients SituationMicrofinance Clients Situation

Page 11: NAPC and Microfinance

How can MF Assist the Poor?How can MF Assist the Poor?

• If provided on a sustainable basis, microfinance can:– Build viable businesses,– Help increase income,– Build assets, future investments and

savings,– Generate employment,– Reduce vulnerability to external shocks

Page 12: NAPC and Microfinance

Microfinance and Poverty Microfinance and Poverty ReductionReduction

Page 13: NAPC and Microfinance

Gov’t Poverty Reduction Gov’t Poverty Reduction ProgramProgram

• Asset Asset ReformReform

• Human Human DevelopmeDevelopment Servicesnt Services

• Employment Employment and and LivelihoodLivelihood

• Security and Social Protection

• Participation in GovernanceParticipation in Governance

MICROFINANCE/MICRO-ENTERPRISE

Page 14: NAPC and Microfinance

MF in Poverty Reduction MF in Poverty Reduction StrategyStrategy

• Increased livelihood and employment opportunities

• Strengthening the capacity of marginalized groups to engage in productive enterprises

Page 15: NAPC and Microfinance

NAPC Mandates in MFNAPC Mandates in MF

Page 16: NAPC and Microfinance

NAPC Institutional MandatesNAPC Institutional Mandates

• Coordinate with different national and local government bodies and private sector to assure full implementation of social reform and poverty alleviation programs

• Oversee, monitor and recommend policies to ensure effective formulation, implementation and evaluation of policies, programs and resource allocation

• Ensure meaningful participation of the basic sectors

• Develop and promote microfinance

Page 17: NAPC and Microfinance

NAPC’s Thrusts/Functions on MFNAPC’s Thrusts/Functions on MF

1. Development of a policy environment, especially in the area of savings generation

2. Rationalization of existing government programs for credit/guarantee

3. Utilization of existing government financial entities for provision of MF products and services for the poor

4. Promotion of mechanisms necessary for implementation of MF services, including indigenous MF practices

Page 18: NAPC and Microfinance

Policy Environment for MFPolicy Environment for MF

• RA 8425 – directs creation of NAPC, organization of PDTF and PCFC privatization and capitalization (1998)

• General Banking Act of 2000 – Section 13-(i) and 13- (iv) encourages application for microfinance-oriented banks

• RA 9178 promoting establishment of Barangay Micro Business Enterprises (Nov 2002)

• Administrative Order 86 – organizes National Credit Council to rationalize directed credit programs of government (1996)

• Executive Order 138 – directs non-GFIs to stop retailing credit (1998)

• Executive Order 110 – Directing the PCFC as the Administrator of the People’s Development Trust Fund (2002)

• New regulations for credit cooperatives (2002)

Page 19: NAPC and Microfinance

NAPC’s Thrusts/Functions on MFNAPC’s Thrusts/Functions on MF

1. Development of a policy environment, especially in the area of savings generation

2. Rationalization of existing government programs for credit/guarantee

3. Utilization of existing government financial entities for provision of MF products and services for the poor

4. Promotion of mechanisms necessary for implementation of MF services, including indigenous MF practices

Page 20: NAPC and Microfinance

Credit Policy PrinciplesCredit Policy Principles

• Greater role of the private sector (MFI) in financial services provision

Enabling policy environment to facilitate increased participation of MFI

Market-oriented financial and credit policies (interest on loans and deposits)

Non participation of the gov’t in the implementation of credit and guarantee programs

viable/sustainable private (micro) financial market

Page 21: NAPC and Microfinance

NAPC’s Thrusts/Functions on MFNAPC’s Thrusts/Functions on MF

1. Development of a policy environment, especially in the area of savings generation

2. Rationalization of existing government programs for credit/guarantee

3. Utilization of existing government financial entities for provision of MF products and services for the poor

4. Promotion of mechanisms necessary for implementation of MF services, including indigenous MF practices

Page 22: NAPC and Microfinance

GFI Credit Windows for MFGFI Credit Windows for MFINSTITUTIO

NPROGRAM TARGET

AVAILERSFOCUS

GROUPSPeople’s Credit and Finance Corporation (PCFC)

Wholesale lending to retailers

Capacity-building loans

• Accredited MFIs • Rural/urban microentrepreneurs

Quedan and Rural Credit Guarantee Corporation (QUEDANCOR)

Wholesale lending to retailers

• Countryside Lending Conduits (CLC)• Agri-Cooperatives

• Agri-fishery/forestry projects

Land Bank of the Philippines (LBP)

Wholesale lending to wholesalers Wholesale lending to retailers

• Cooperatives• Countryside Financial Institutions (CFIs)• MF NGOs

Development Bank of the Philippines (DBP)

Wholesale lending to retailers Business development loans Capacity-building loans

• MF Banks• MF-oriented banks• MF NGOs• Savings & Credit Coops

Page 23: NAPC and Microfinance

INSTITUTION

PROGRAM TARGET AVAILERS

FOCUS GROUPS

National Livelihood Support Fund (NLSF)

Wholesale lending to retailers

Capacity-building loans

• Coops• NGOs• Banks

• Agrarian Reform Communities (ARCs)

Small Business Guarantee and Finance Corporation (SBGFC)

Wholesale lending to retailers

• MFIs • Manufacturing• Processing• Trading• Services

UCPB-CIIF Finance and Development Corporation (UCFDC)

Wholesale lending to retailers

• Farmer-based/owned coops and organizations• Rural Finance Institutions (RFIs)

• Coconut farmers

Page 24: NAPC and Microfinance

NAPC’s Thrusts/Functions on MFNAPC’s Thrusts/Functions on MF

1. Development of a policy environment, especially in the area of savings generation

2. Rationalization of existing government programs for credit/guarantee

3. Utilization of existing government financial entities for provision of MF products and services for the poor

4. Promotion of mechanisms necessary for implementation of MF services, including indigenous MF practices

Page 25: NAPC and Microfinance

ADB Technical AssistanceADB Technical Assistance

• Conduct nationwide survey of 53 MFIs and 424 MFI clients in frontier areas

• 3 FGDs with 39 BS Representatives

• On-site Training and Mentoring of 29 MFI units in frontier areas

• 20 Microfinance education seminars in frontier areas (3,300+ participants)

Page 26: NAPC and Microfinance

MF Sector Strengthening ProjectMF Sector Strengthening Project

• Provision of technical assistance to MFIs on ASA methodology

• Trained local practitioner-trainers on ASA

• Documentation of successful MF practices

• Development of ASA Instructional Manual

Page 27: NAPC and Microfinance

NAPC Executive Mandate on MFNAPC Executive Mandate on MF

• Monitor the July 2001 & 2004 SONA target on MF: – make MF as a cornerstone in the fight against poverty

– 300k new women borrowers per year (2001-2004); 3 million clients (2004-2010)

• E.O. No. 110 (PCFC as PDTF Adm.)– reiteration of Section 10 of RA on NAPC’s function over

PDTF

• NAPC as the main policy body over microfinance (6th NAPC EB -2/36/03)

Page 28: NAPC and Microfinance

MF/ME DatabaseMF/ME Database

• Local policies• Map of areas with MF services• Directory of Microfinance

Institutions• Credit Windows of Wholesale

Microfinance Providers

Page 29: NAPC and Microfinance

NAPC’s Mandate on PDTFNAPC’s Mandate on PDTF

• Source funds for the establishment of/and augmentation of PDTF

• Recommend the accreditation of organizations/institutions acting as resource partners for institutional development

• Ensure that validation/monitoring activities are conducted for PDTF-funded projects

• Promote research and development work on livelihood & MF technology, publications/communications programs for poor beneficiaries

Page 30: NAPC and Microfinance

People’s Dev’t Trust Fund (PDTF)

Php 4.5 Billion Fund(accumulated in 10 yrs)

only the interest earnings can be used as grant

Capacity building/ institutional strengthening of

MFIs

Page 31: NAPC and Microfinance

PDTFPDTF

• PDTF ExeCom• Identify strategic activities to

augment PDTF• Recommend to PCFC projects,

organizations and institutions for PDTF accreditation

Page 32: NAPC and Microfinance

Other ActivitiesOther Activities

• Conducted Regional Training on Gender Issues in Microfinance (Luzon, Visayas, Mindanao)

• Membership to Microfinance Program Committee