Thi Hien Chi
Bank of Vietnam, Vietnam
PLAN FOR MICRO CREDIT
Background of Microfinance as well as participant’s Institution
Bank of Vietnam takes past in microfinance activities in terms of setting
up legal framework for these activities and institutions that practice
is very popular in Vietnam now, many institution practice microfinance in
many provinces all over in Vietnam but there’s still non-legal framework
on the field
planned, we, State Bank of Vietnam, will submit the final draft of
microfinance framework to Prime Minister as well as to other members of
Government as the last step in processing the legal document in 4th
quarter of the year 2002.
framework on Microfinance maybe approved as a single document, otherwise
it will be a part of another legal document, legal framework on banking
activities of institution other than credit institutions. The process of
this document might take a longer time of setting, submitting and
I know, the draft of a legal document on microfinance is also in
processing in Indonesia. I hope that we can exchange further experiences,
facts, ideas for a better practice of microfinance in Vietnam as well as
can provide TA and training for SBU’s staff in field of practicing
Microfinance activities, fact – difficulties (especially in the lack of
a legal document regulating these activities). BRI can also help SBU in
contacting with relevant government bodies in Indonesia to exchange
experiences regarding Microfinance and Regulating Microfinance as well as
experiences in setting up a legal framework on this field.
If the legal document on Microfinance in Vietnam is approved by
Government in 2002:
Dec, 2002 – early 2003 :
Training for SBU’s staff on Microfinance activities; on shifting
MFI into formal ones
: Implementing Regulations on Microfinance all
over Vietnam, on all Microfinance activities
If the legal document on Microfinance will not be accepted as a
single legal document, we will insert Regulations on Microfinance
activities in the legal document on banking activities of institutions
other than credit institutions (as mention above):
4th quarter of 2002 : Complete the final draft
1st quarter of 2003 : Submit the final draft to the Prime Minister and other
members of Government
During that time : Fieldtrip
to other countries to get further understanding on Microfinance practice
and how other countries regulate these activities.
for Rural Economic Development
of Rural Development
is one of developing countries in the region covering a surface of 181,
035 km2 with a total population of 11.7 million people,
equivalent to households. 85% of the population lives in rural areas where
farming, fishing and traditional crafts are the daily business activities.
The royal Government of Cambodia gives top priority to its social
development programme for poverty alleviation in rural areas and uses all
means and resources for the rehabilitation of economic development in
order to raise living standards of rural people. Therefore the government
has introduced a key mechanism for poverty alleviation. It is support and
strengthening of microfinance services in rural areas through the Rural
development Bank and International Micro Credit Operators (MFOs) for
provision of credit services in support of agriculture and rural economy
based on free market for development, efficiency and sustainability.
PRASAC (Programme de
Rehabilitation et d’Appui au Agricole du Cambodge) means support
Programme for the Agricultural sector in Cambodia. PRASAC started in 1995
as a European Union (EU) Sponsored Cambodian emergency relief and
rehabilitation programme in Six provinces. The Cambodian counterparts are
Ministry of Rural Development, Agriculture and Rural Development Bank. The
first phase of PRASAC was in 1998 named PRASAC I and has ended in April
1999. PRASAC II, the second phase, run from May 1999 until December 2003.
Finally Credit scheme of PRASAC was renamed into PRASAC CREDIT ASSOCIATION
or PCA, to be licensed with the ministry of interior and registered with
the National Bank of Cambodia to be Micro Financial Institution (MFI).
OPERATION OF MICRO CREDIT SCHEME OF PCA
There are two main loan products
of PRASAC Credit Association (PCA):
Character based (village) group
loans (guarantor groups of 5 – 10 persons). The villagers are organized
in guarantor groups in order to access loans for income generating
activities without the need for collateral. There are two models of Saving
& Credit Associations as group loan delivery mechanism:
This loan product is tailor made
for villagers who form solidarity groups for the single purpose to gain
access to group loans. The solidarity groups guarantee for each other by
peer pressure without need to provide physical collateral to PCA. Group
members decide who joins the group. They elect their group leaders who act
as contact persons for loan processing.
SCA model 2 is a village level
financial intermediary that manages its own internal funds. Member are
encouraged to save monthly a
minimum of about 0.1 $ to 0.2 $ to build up the internal fund.
internal fund is further capitalized by:
Procedures to process group loans:
Branch manager and responsible Credit Officer visit the field to ascertain
the operational area, to detect the economic potential, client needs and
requirement, living conditions, main occupation (like rice growing) or
existing competition of NGO’s or other Credit Provides etc.
Second Stage: After positive decision to activate a
operational area, the Branch manager shall visit the local authorities in
order to have PCA recognized officially as credit provider. PCA explains
to all officials on villages, commune and district level its objectives,
policy, procedure mission and vision.
Third Stage: after
written permission from local authorities, credit shall create a specific
plan how to explain to the villagers the objectives and policy and how the
people of the district, villages can have access to loan from PCA. In
specific meeting sessions at village level (at 3 to 4 before actual loan
processing) PCA staff explain all details about loan size, loan circles,
loan duration, interest rate, guarantee etc.
Processing of loan application forms. PCA credit staff together with SCA
committee and group leaders shall set a date to process all loan
application in the village. All loan applicants are required to have their
application verified with their thumb print on the form. After completion
all forms must be handed over to PCA staff to complete process at
responsible PCA branch.
Fifth Stage: Loan distribution in the village.
The loan disbursement will be authorized by the PCA Branch loan committee.
PCA Credit staff will together with respective SCA committee /group
leaders set a date of loan
distribution a village grounds. Every group member must verify with
his/her thumb print the actual receipt of the loan principal.
The target clients for individual
business loan are micro entrepreneurs operating in rural and semi –
urban economy of Cambodia. Target clients are producing (or offering
services) in rural and semi – urban
PCA gives priority to
entrepreneurial activities that are linked to the agricultural sector,
such as veterinarian services, manufacturing of farm tools, repair of farm
tools and equipment, trade in farm inputs and produce etc. However, PCA is
also targeting clients engaged in non-agricultural sector in order to
diversity its portfolio and the corresponding lending risks.
2.1 Procedures to Establish Individual Loan:
First Step: The credit officer responsible for the designated area
will visit the prospective individual clients. During the first meeting
PCA credit staff will ask general questions to find out whether the future
possible loan should be classified purely as individual loan or qualifies
as small and medium enterprise loan.
Second Step: The second meeting with the potential client PCA
credit staff will check the loan application form, certify ID cards and
assess the business and cash flow plan of the applicant. PCA staff will
also remind to the clients about loan conditions and ask the client to
meet at his/her house to check his/her activities within maximum 3 days.
Within that time PCA staff will visit local authorities to verify
applicants residential status, identification, family registration cards
Third Step: The loan conditions (including amount, interest rate,
duration, collateral, guarantor family and outside) should be discussed
and finalized. All documents have to be passed to Branch Manager for final
decision. If decision is positive all legal verification and loan contract
documents have to be arranged (thumb prints).
Forth Step: PCA staff informs the prospective client about the
positive/negative loan decision. More discussions might have to follow on
Branch Managers level In case of a negative decision. In case of a
positive decision a date has to fixed for loan disbursement. At the time
of loan disbursement in PCA Branch Office, PCA credit staff should again
explain loan procedures, especially repayment conditions of principal and
PROPOSE MICRO CREDIT SCHEME
According to the situation of
micro finance in Indonesia and Cambodia, there are many points that are
different. But we have some common status, products, principal’s etc.
through the training course, we have got new concepts and good experiences
from BRI to improve micro credit scheme in Cambodia. It means we will
select all good successful mythologies and strategies of BRI that there
are no in Cambodia so that the Cambodian micro credit scheme could get
success in implementation and improve.
TIME FRAME & IMPLEMENTATION
Depend on the policy of government
on micro credit scheme we need much time to change experiences each other
for successful implementation. The action plans for implementation in
To extend micro financial services;
To reduce interest rate;
To encourage wide competition among micro finance operators to
reduce interest rate and operate more efficiently and sustainable manner;
To promote domestic saving mobilization;
To promote local authorities to act as facilitators in coordination
and cooperation with micro finance operators;
To include good experiences that get from BRI or training in micro
for Community Development and Education (CCDE), Indonesia
Center for Community Development and Education (CCDE) is a local
NGO in Aceh. It was established in November 30,1993. The painful life of
women who have less access. Forward natural, economic, education, politic
and gender injustice encouraged 3 founders of CCDE established CCDE.
existence of CCDE is to response the painful condition of women’s life
in Aceh. Therefore, is set two main programs for empowering and
strengthening women in Aceh.
provides social services and financial services
The social service includes, training and other educational
The financial service is by providing micro credit for 28 women
group in four districts in Aceh
The objective of Micro Finance Programs are
To alleviate poverty
To Empower and strengthen women in small business
CCDE has been provided micro credit scheme for woman through women
groups. CCDE sets the micro credit schemes with women in democratic nuance
Small scale loan
Proposal micro credit
scheme which will be enhanced
CCDE ACTION PLAN 2003
Business Development Corporation
PROPOSED MICROFINANCE AND
In the Government National dialogue and Medium term development
Strategy (MTDS) and its recently adopted Small and Medium Enterprises (SME)
policy, the private sector development is defined to play a paramount role
for the future of PNG. The next step is to address the weakness of the
existing financial system in order to improve the provision sector.
expected changes in relevant legal framework therefore need to emphasize
enhanced economic integration on micro and small enterprises as well as
for those who want to save money for their future financial needs.
the commercial banking sector does not cater for the poorer strata of the
population, which is the majority, the demand for services bye the less
affluent remains an attended a number of attempts have been made by
NGO’s government departments and the donor community to addresses this
issue. Various type of micro credit schemes have been piloted but with
rather limited success. Most of them have been established on an adhoc
basis without qualified staff and sufficient resources. Very few know of
each other existence and all try to reinvent the wheel. Four of these
schemes is the supply of credit. Saving are not mobilized. In addition,
PNG banking regulation only permit deposit taking by institution that hold
a full banking license and micro credit schemes are not in the position to
fulfill the relevant requirements.
this connection, a draft micro finance poling was drawn up by major
stakeholder to provide a conducive framework for existing and future
institutions either upgrade existing credit schemes or downscale financial
products. The objective of the proposal micro finance policy is to
establish a framework that leads MFI’s towards enhanced institutional
capacity, and better access to refinances mechanism in order to support
the development of formal and informal enterprises and the population
currently excluded from mainstream financial services
Objectives & Scope
Project our all objective is to contribute to economic growth through
private sector development and employment creation and the further
development of the financial system. The specific objective of the project
in to provide sustainable microfinance services to viable formal and
informal enterprises and saving service to the population at large.
comprises three broad components/output:
Capacity building of MFI’s through a micro finance competence (centre)
or seeking BRI micro credit technical assistance in training
Development, testing and implementation of new saving and loan
product and delivery methods
Provision of a revolving refinance facility
The project will operate nation – wide. My institutions objectives attached (refer appendix #1)
There are some NGO’s operating some micro credit programmes which
are uncoordinated, and monitored so there is so lack of available
The proposed Micro Credit Project in consultation with SBDC and BRI
NAM to provide technical assistance and further training
in proposed action plan and implementation programme
Background of (my) Institution Small Business Development
small business development cooperation became operational in 1992 and is
mandated, through the SBDC Act. 1990 to assist Papua New Guinea no start
and improve small – scale business for employment creation and to
improve the standard of living in the country.
Improvement and Life Quality Foundation of Archipelago, Indonesia
ACTION PLAN ENCOMPASSES
Pengembangan Keterampilan dan Mutu Kehidupan Nusantara (Skill Improvement
and Life Quality Foundation of Archipelago), is a Jakarta based NGO whics
was established in May 27, 1986. its mission is active in improving the
quality of life of poor people in Indonesia.
obtain or reach the mission. Yayasan Pengembangan Keterampilan dan Mutu
Kehidupan Nusantara (PKMK Archipelago foundation) provide two main
Archipelago foundation also provides micro credit for women who want to
take a course or training at PKMK Archipelago foundation.
II. The Objective of
To Increase women’s income through their skills an micro credit
that they received
Preparing skilled and trained workers
micro credit is distributed to the participants of the course who have
full field the requirements needed. The repayment after having a job
needed is monthly.
IV. The proposed
activities and time framework/implementation
proposed micro credit scheme which will be enhanced are as follows:
35 million inhabitant, East Java province still holds poverty problems of
5 million people and 600.000 unemployment (2001 statistics). In Surabaya
the capital city of East Java with 3.5 million people, there are 100,000
poor people and 57,000 unemployed people.
level of skill of the poor community is still in existence
is no access to
presence of money lender which charge 10-20% interest permonth.
provide sustainable financial services for the poor in order to enable
them to enhance their welfare through a self-help approach
SPEKTRA has been running Micro Finance programme since 1995
for the poor on how to get access to capital from the banks
the poor on organizing their community
fund up to the amount of Rp150 million for saving and credit
of sustainable micro finance programme to the staff as well as
programme for field staff by applying business approach method covering
the subjects of credit analysis and micro finance financial analysis.
on organization management and financial management for people community.
the community in getting access to banks
for other financial resources in order to improve micro finance services.
Bank of Cambodia, Cambodia
I m working in The National Bank of Cambodia (Central Bank) as the
authorized to the Micro finance in Cambodia. I just would like to inform
you about the micro finance in Cambodia
micro finance in Cambodia just start from 1993 at the end of the year
2001. there are over one hundred rural financial institutions, but most of
them are very small. It have a few institution that cover for 84% of loan
(36 musd) and 81% of saving (3 musd) like:
Acleda Specialized Bank
Two License Microfinance Institution
A few registration institution
structure of microfinance
rural financial institutions have adopted different outreach structure,
but they mostly fall into one of following three model:
is only one in Cambodia that it have the most extension network,
including commercial bank Acleda operates in 15 province, and have
model usually consists in setting up by local structure at the village
level with the support and sometimes
direct participation of local authorities
the model that combines a limited branch network with some form of village
the Asian Development Bank research, Cambodia need about 200 MUSD
for micro credit, but at the end of year 2001, it have only 36 MUSD
outreach to the rural area (about 400,000 families and 22% of total
National bank also issue some regulation for supervised te microfinance
institution such as:
Credit Co Operative Ltd, Singapore
finance is an attractive tool to help low income households since it is
widely seen as improving livelihoods, reducing vulnerability and
processing social as well as economic empowerment.
and International organization in many developing countries are now
carrying out microfinance operation.
According to the Micro Credit
Summit campaign Report (2001)
it was mentioned that of the estimated 1.2 billion people living in
absolute poverty around the world, more than two – third are in Asia.
There are 3500 member institutions in the Micro Credit Summit Campaign, of
which nearly 1000 members are in the Asia Pacific Region. Of the 10-4
million poorest clients reported by the Asian Micro Credit Practitioner in
1999, 8.3 mio are women.
four core themes of the summit campaign were reaching the poorest,
reaching and empowering women, building financially self – sufficient
institutions and ensuring a positive, measurable impact on the lives of
clients and their families.
finance was therefore evolved as an economic development approach intended
to benefit the poor people and self employed activities. Micro financing
has emerged as one of the strategies for income generation in Asian
countries as well as worldwide AACCU (Association of Asian Confederation
of Credit Union) is an example, using flexible guidelines and
NGO, Credit Unions and Co-operative are the major forms of microfinance
encompass the following features:
unlike many other countries in the Asia – Pacific region is an urbanized
island with no agriculture. Co-operatives in Singapore do not have to deal
with outgoing issues such as political patronage, member manipulation,
collusion, etc. In order to sustain and continue the growth and people’s
environment in the co-operative and the micro finance scheme’s, there
will be greater competition amongst providers.
Competitive interest rates and better financial/social service would
ultimately benefit client/members.
Credit Co-operative Ltd.
on 23 July 1981 with only 19 members as DEW (development of Economy of
Women) Co-operative Credit Union. It was the vision of the late Mrs. Julie
Pan who saw the need to introduce the concept of credit union to the
Singapore women. Women in the late 70’s were making significant impact
and contribution to the economy of the nation but had limited places to
turn to for financial assistance as banks/finance companies do not
consider women as viable economic entities. Hence, they had to borrow from
tontines, club fund and unscrupulous loan sharks. Having attended the
United Nations Mid decade for women in Copenhagen in 1980 and having heard
about the marvelous work of credit unions in other parts of the free
world. She set her mind to establish a co-operative with the purpose of
helping women to Develop Themselves into Economically Independent Persons.
with a capital sum of S$ 190, a donation of S$ 300 from a generous member,
a S$ 20 manual typewriter, DEW was inaugurated. From that small start, DEW
has leapt into the 21st century to become a multi-million
dollar concerns. More importantly, it has assisted many women in their
studies, careers, businesses, family crises emergencies and even life
threatening moment. In 1995 its name was changed to DEW Credit
co-operative Ltd. to reflect the uniqueness of its organization. It is
first a co-operative operating under the co-operatives principles and
philosophy and then a financial organization offering credit to members.
women of DEW see financial independence and continual personal self
development as a springboard to total emancipation of women. In August
2000 women member decide to provide similar opportunities to the men
associate members. As such, men can now avail themselves to the credit
facilities and social activities offered by DEW. To date DEW has assisted
more then 1,500 women and 30 associate members.
of DEW have benefited socially, economically, financially and spiritually.
The professionals, homemakers and self employed account for 7% each whilst
the rest are juniors or middle management position in the administrative
sales, marketing, teaching and business professionals. Hence it can be
seen that Micro financing in Singapore have been serving the following
Objective of DEW
To continue to play an important role to improve the economic and
social well being of all member by encouraging thrift by helping
themselves to save regular
To build the financial strength, including adequate reserves and
internal control that will ensure continued service to members
To promote education of the member along with the public in general
in the economic, social, democratic and mutual self help principles.
To co-operate with other co-operative and their associations at
national, regional and international levels in order to best serve the
interests of their members and their communities.
To create a source for credit for the benefit of member at a fair
and seasonable rate of interest for income generating project, housing
improvements, education and consumption purposes.
To promote welfare and social active to society
To train members especially women to become entrepreneurs
To provide networking to these women to enable them to have access
to micro financing and access to free business advisory services.
Target Costumers: members both men/women from all walks of life,
age above 18, not a bankrupt, must be Singaporean or PR and through
recommendation. Orientation for before being approved as members.
Approach: - Individual lending only
Credit handling look: - loan interviews, assessment on repayment
capacity through financials, financial counseling, quotation, loan
training, education, home visits and telephone conversations
Collaterals: - Personal guarantees from friends, family members,
relatives, guarantee to open savings account with DEW or be members of
DEW, deposits/savings NTWC default insurance policy.
Repayment periods :
1. From 1years to a max 4 years
2. 5 years – Board approval required
: 1. First time – up
to max of 3-month salary
Repeat loans 6 months – max 8 months salary for excellent performers
Approval Authority :
1. Delegate Authority as set by the Board of Directors
2. Any amount about S$ 22,000
committee (majority) approval
Loan Monitoring :
1. Daily follow up by reminder
2. Follow up with house visits
3. Interviews/counseling before disbursement of loan
4. At credit committee level
5. Supervisory audit
6. Annual audit by external auditors
7. Training of staff
8. Credit manual policy
Committees in Co-operative :
1.Education Committee – orientation meeting
2. Investment Committee
3. Credit Committee - monthly
4. Board meeting – monthly
or extradionary meeting for urgent matters
5. Supervisory Committee
: 1. Good savings customer
2. Good Borrowers
Schemes/Activities in DEW to member
Financial Counseling/loan training
Budgeting for individuals/business & finance management
Special Loans: education, renovation, debt settlements, working
capital, equipment, purchase of assets, start up business, upgrading, and
Ordinary loans: schemed by cash, deposit or saving
500 at time of joining as a member. Dividend paying etc. only allowed to withdraw upon registration
- Can be used as a loan for emergency/urgent cases
Any amount, anytime
- Savings of at least S$ 1.00 included in the installment
amount – act as cushion, and for emergencies
- Interest earning. Have been payging at least 3% usually
higher than the Banks.
Time deposits - Term of 1 year
– Amount minimum S$ 1,000 max S$
100,000. international rate is higher than bank.
Training, workshops & seminars to the economic/social well
being of members/public
Loans to lower income group without credit access
- hawkers, loans to housewives and small business
collaborated with lady trainer provider 3R holidays for
entrepreneurship training. How to start and run your own business
assist members who are retrenched/displaced to look for jobs.
Proposed Schemes (PS)/Projects in the Pipeline/Existing Project
To work with interested countries in starting a pilot project on
“how to start and run your own business” workshop and simulation
course description of proposed scheme.
is in collaboration with 3R holidays. Lady
training provides. 2 days workshop for a class of 30
project is currently funded by our gout
Unemployed, housewife – 100% subsidized
– Employed – 80% subsidized
– Registration for S$20
Enhance training an Micro financing/schemes from other countries
coming to Singapore
Further develop training and skills, loan management and control
A follow up of this regional training
Web-based credit co-operation system
7 credits co-operations – sharing the NMC system
Better networking and monitoring loans
Interface of accounts in organization
Business Advisory Committee/Group
– Member from the
co-operation as consultancy to new and existing business
Succession Planning for Credit Committee
– New ideas, from younger members
– Better control and good for members to understand credit
– As observers in credit committee meetings
Women’s Union, Vietnam
In the Vietnam : the financial services are provided by 2 sector
the formal sector (banking system)
the informal sector (mass – organizations)
The informal sector provide small loan size for the poor people,
particularly in the rural areas, where the outreach of the formal sector
The objective of the micro finance program in Vietnam
Vietnam Women’s Union (VWU) is the biggest women’s organization
in Vietnam, has undertaken a range of programs to mainstream women in the
development process and empower them in various areas. Of which, economic
empowerment is on a top priorities.
early 1990s, the operation of micro credit bye VWU has been widely
across Vietnam outreached many poor women in the rural.
The target groups
: Poor women in the rural area
: Agriculture, services, small enterprise
Size of loan
: Small, fixed amount for every borrowers
Non – collateral
: 1%/month (…)
Monthly Repayment (Principal + Interest)
Transaction of loan disbursement and collection: excute in the
The software system manages these transactions in the base of each
Skills on mobilization of savings (need the training)
Knowledge on loan investigation and analysis (need the training)
Internal Audit (need the training)
MICRO CREDIT SCHEME PROPOSAL
The target group : Poor
women in the rural areas
Economic sector :
Agriculture, services, small enterprise
Size of loan
: Depends on the purpose of loan are the ability of the borrower
to repay the loan (learned from BRI) concentrate on the small size
Non – collateral
: 1%/month (…)
Monthly installment (as current scheme)
Group lending (as current)
Individual lending (learned from BRI)
Test the effect – evaluate – make recommendation – change the
Computerized the micro credit management system (as current)
The organization structure (learned from BRI and combined with the current
(Manager: Marketing, Operational, Business
Micro Manager Assistant manager…..Micro Banker Users)
Manager, Credit Officers, Deskman)
Po Po Ky
National Committee for Women’s Affairs (MNCWA), Myanmar
would like to mention briefly about the Action Plan.
forward I would like to present you about Myanmar National Committee for
Women’s Affairs (MNCWA). I am one of the members of MNCWA. It was established
on 3rd July 1990, to systematically carry out the activities for the
advancement of women. The main objective of this committee is to promote the
advancement of women especially for those at the grass-root level.
played a major role in enhancing women’s development by giving loan for micro
enterprise activities. The sub – committee give small loans to women in rural
areas without collateral.
are given small loan to small business for fruit preservation and tailoring.
other words, loan are given for various micro enterprises to meet local needs.
main objectives of micro credit scheme are to alleviate poverty, to empower and
strengthen women in small business.
our Action Plan is this. Hence, the Action Plan will enhance the development of
small enterprises in our country.
Micro Credit Scheme which will are enhanced
Business loans for industry
Gerry T. Lab-oyan, Philippines
Background of Micro Finance Program
Cooperative Bank of Benguet (CBB) is a rural bank financial institution
organized by cooperative societies in Benguet, Philippines, in 1992
CBB offers savings and small loans: small agriculture loans, small
industrial loans, small commercial loans, petty traders/vendors loans,
fixed salaried employees loan
In 1995, CBB offered micro finance service targeting indigenous poor
The microfinance program is called Highland Micro Finance Program
Objective of micro finance program
mobilize small savings from poor households
contribute to the establishment of family based micro enterprises
support the development or expansion of existing family based micro
Brief description of existing micro credit scheme
Highland Micro Finance Program of Cooperative Bank of Benguet has two
Center for Women Development Program
developed from Grameen Bank Model
group loan approach, women clients only
minimum 3 groups and maximum 6 groups at 5 members per group (15
members to 30 members)
7 days compulsory training
weekly meetings, weekly amortization o no collateral
loan amount range from US$60-$160, 6-12 months term o
24% interest rate (flat) per annum
Self-Help Group Development Program
targeted to existing informal self-help groups in the villages or
members per informal group usually ranges from 7 to 20 individuals,
mostly dominated by women
group loan approach
basic requirement for loan access: started or with existing savings
weekly, bi-weekly or monthly meeting and amortization o
I day orientation seminar
loan amount ranges from US$100-$200 per borrower, 4-6 months term
24% interest rate (flat) per annum
Proposed Enhancement of Micro Finance Program
Gerry T. Lab-oyan, Philippines
People's Credit and Finance
CSSTC REGIONAL TRAINING ON MICRO CREDIT SCHEME ACTION PLANS
The People's Credit and Finance
Corporation (PCFC) is a state owned and controlled corporation mandated
by law to be the lead entity for the development of the microfinance
industry in the Philippines.
Created in September 1995 under an
executive order of President Fidel V. Ramos, the PCFC was tasked to
provide credit to the poor. In 1997, the Social Reform and Poverty
Alleviation Act was passed by the Philippine Congress that mandated PCFC
as the lead entity for microfinance.
The PCFC is basically a wholesaler of
funds to microfinance institutions (MFIS) for relending to
micro-entrepreneurs. It provides both investment credit (used for
re-lending) and institutional credit (used for capability building) to
Non-Government Organizations (NGOs), Cooperatives and Cooperative Bank,
Rural Banks, Thrift Banks, and People's Organizations (POs).
As of July 2002, PCFC has a total of
199 active conduits (65 cooperatives, 31 NGOS, 2 lending investors, 23
cooperative banks, 73 rural banks, and 3 thrift banks) covering the
three major islands of the Philippines (Luzon, Visayas, and Mindanao).
Each MFI has an extensive network of branches and operation units
covering around 90% of all towns in the Philippines
The PCFC has two major lending
programs, the HIRAM (Helping Individuals Reach their Aspirations through
Microcredit) Lending Program (HLP) and the Rural Micro Finance Project (RMFP)
funded by the Asian Development Bank (ADB) and the International Fund
for Agricultural Development (IFAD).
PCFC's target end-clients are
Filipino families earning less than US $100 a month in rural areas and
US $150 in urban areas. These families are granted a scaled up loans
starting from $20 to $500.
Soon, PCFC shall begin granting loans
to MFIs that shall be used to finance end-clients who have graduated
from US $500 loans. Maximum amount of loans to be granted to individual
borrowers shall be US $3,000. This shall be funded through loans
obtained from the World Bank (WB) and the Spanish government.
Aside from lending to MFIS, PCFC also
leads in the development of the microfinance industry in the
Philippines. Aside from granting loans to MFIs for capability building,
PCFC also provides technical assistance and trainings.
Technical assistance is given
directly to MFIs through PCFC's Account Officers. While special
trainings are conducted for MFIs either through PCFC Account Management
Teams or through accredited training institutions. PCFC, with a grant
from the Spanish government, also provides free trainings to MFIs to
develop management capabilities and to enhance human resource programs
and organizational systems.
MICROFINANCE PROGRAM OBJECTIVES:
PCFC's objective is to provide credit
to poor Filipinos and to alleviate them from poverty. Its immediate
objective is to serve a total of I million poor families by the end of
As of July 2002, PCFC has served a
total of 659,140 poor families all over the Philippines.
MICRO CREDIT SCHEMES:
Majority of PCFC conduit MFIs follow
a modified Grameen Bank Approach (GBA), which is proven to be more
suitable under the Philippine setting. GBA is most commonly implemented
in the rural areas while individual lending is implemented in urban
areas and centers of commerce of rural towns.
There is a clear segregation of
market for both individual and group lending methodologies. Group
lending using GBA is concentrated in serving rural folks in barangays
(sub-districts). Loans start from as low as $20 - $120 and gradually
increasing in each loan cycle depending on the borrower's repayment
capacity. The loan is used to finance livelihood projects and micro
businesses which may also include start-up businesses.
As for individual lending, the target
market are the urban poor entrepreneurs and micro- enterprises found in
the commercial districts of rural towns. Those who graduate from $500
loans and those who have transformed their livelihood projects into
sustainable micro-enterprises may start borrowing individually from the
The KUPEDES and SIN4PEDES/SIMASKOT
schemes are interesting case studies for Philippine MFI'S. The loan and
business evaluation procedures of KUPEDES and the savings generation
schemes of Bank BRI may prove to be beneficial to Philippine MFIS. The
schemes would complement PCFC's program that would finance individual
borrowers and group loan graduates.
The following are therefore
Regular regional micro credit trainings and exposure to Bank BRI
to allow the participation of key Philippine MFIs and to give them the
opportunity to see first hand the best practices of Bank BRI.
2. Regular regional
forums for the exchange of ideas and best practices in microfinance as
well as a forum to discuss regional development concerns.
programs wherein MFIs and their regulating agencies may be able to study
and see first hand the microfinance best practices of other countries.
As for PCFC, such regional exposure shall enhance technical assistance
provision to Philippine MFIS.
4. Training grants
to PCFC Account Officers (AO) who are directly involved in the direction
setting and provision of technical assistance to MFIs in the
It will be beneficial for PCFC's AOs
to review first hand the operating systems of Bank BRI and other
successful MFIS. The review should focus on internal control systems,
staff training and development programs, monitoring and management
information systems aside from the lending and savings methodology.
Exposure to other successful MFIs in
Asia and in Africa / Latin America (such as FIE/PRODEM/Banco Sol of
Bolivia) and other similar organizations as PCFC servicing MFIs (such as
NABARD or PTKF) would be beneficial as well.
study grants for microfinance in Boulder, Colorado, USA would be highly
Capability building is important for
the success of any microfinance program. However, funding for such
purpose is limited. Should NAM CSSTC consider these recommendations and
sponsor such trainings/study and exposure, it would contribute greatly
to the' development of microfinance in the Philippines and in the Asian
region and other NAM member countries as well.
* Should there be future regional
trainings / forums sponsored by NAM CSSTC, the NAM CSSTC may coordinate
such events through PCFC who can provide a list of recommended
Thai Bank (Public) Limited, as one of state-owned commercial banks, has
an important role in taking part in supporting and promoting the
development of community potential. KTB coordinates its efforts with
cooperation of it’s business alliances. including state, private, non-government organizations (NGOs), and other independent
organizations in building economic strength and capability of all
community, which is an essential foundation of our national economic
system. KTB has not only customers in both state and private sectors,
but also skills and specialty in providing financial services for
business sector. KTB, thus, has an ability to develop the coordinating
system extending the revenue production process of comm4Tl!y to a
complete circle that w effectively strengthen community foundation
continuously from production through export. This is an important strong
point of KTB that is different from other organizations working with
a result,, KTB established its Community Banking in February 2002. This
unit will support community financial services, especially funding, and
also coordinate a development of knowledge in production,. management
and marketing, etc., for community from various sources with cooperation
from its business alliance organizations.
Community Bank will give credit to
community using following approaches.
target customers are community groups or community networks that are
formed to make products or to conduct activities that produce benefits
and revenue, and also that are sufficiently strong to prevent risk to
business of customers and the bank.
There are two channels of approach, including;
Mobile Unit Teams from KTB Community Bank that will travel to provide
financial services in the fields.
Credit Teams from KTB branches across the country that will provide
financial services to customers in their areas. There will be an
assessment of community needs to insure that credit is appropriately
provided to meet the needs of community groups.
Lending Tools. Community Bank has developed the Community Credit Scoring
model to be used to analyze and assess community groups. The credit will
be given to
groups with lending interest as according to risk. Factors to be used
for assessment include organization facts, management, production,
marketing, and financial status of the community groups.
Authority. In order to prudently and efficiently provide lending to
successfully achieve the bank's policy, KTB has established the
Community Credit Committee responsible for setting lending criteria, and
controlling and screening loan according to those set criteria. The
Committee has authority to approve lending credit of 50 Million Bahts.
The Committee is also responsible for overseeing management of
non-performing loans resulted from the lending.