Poor Filipino families are still unable to borrow money from small lending firms, the Asian Development Bank said, even as it noted progress in the policy environment needed for microfinance to grow.
The Philippines had 3 million borrowers from ADB-supported microfinance institutions (MFIs) as of end-2010, the multilateral institution said in an evaluation of its MFI support in 21 Asian countries.
This means that only 3.2 percent of the total population of 94.1 million, or 14.1 percent of the 21.3 million poor Filipinos, were able to tap loans from firms supported by ADB.
The country's penetration rate was among the lowest in the Asian countries evaluated along with Cambodia at 32 percent, ADB said.
ADB data also showed that most clients served in the Philippines, as well as other ASEAN countries, may not be considered poor.
Only 3.7 percent of sample microfinance clients in the Philippines lived below the $1.25 a day poverty line and only 10.2 percent were below the $2 a day line.
This, despite the fact that the Philippines is one of the countries that had the most number of microfinance institutions aimed towards the poor.
Of the MFIs assessed in the Philippines, 90 percent said they hope to reach poor and low-income households, ADB said.
In addition, small lending firms in the Philippines "were better at measuring entering poverty levels but less attentive in following up poverty changes," ADB said.
As high as 70 percent of small local lenders surveyed said they measure poverty levels before releasing funds but only 30 percent of MFIs track changes in poverty levels.
Microfinance is also "inefficient" in the Philippines, ADB said, citing high "average operating expense" of 44 percent.
This means that every P100 lent entails operating costs of P44.
Despite these figures, however, the ADB claims success in its technical assistance for microfinance in the Philippines.
In the Philippines, "ADB support enhanced the policy and regulatory environment by removing regulatory impediments and policy distortions, which in turn contributed to the growth of the sector," the report said.
The country also posted a strong performance in terms of financial sustainability at project completion, ADB added.
Development of products for the poor beyond traditional credit was also supported in the Philippines, as well as Cambodia, Sri Lanka, and Tajikistan.
"The support laid the groundwork for the expansion of savings and micro insurance products and services..." ADB said.
Between 2000 and 2010, ADB support for microfinance firms in the Philippines totaled $173 million, of which $150 million was a sector development program loan approved in 2005.
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