Republic of the Philippines
National Strategy for Microfinance

Prepared by the National Credit Council

The Vision

The vision is to have a viable and sustainable private micro (financial) market, with the government providing a supportive and appropriate policy environment and institutional framework to that market.

The Objective

The objective is to provide access to financial services to the majority of poor households and microenterprises by the year 2005.

This will be achieved in a liberalized and market-oriented economy where the private sector plays a major role and the government provides the enabling environment for the efficient functioning of markets and the participation of the private sector.


The Policy Framework

The government’s microfinance policy is built on the following principles:

    1. greater role of the private sector/MFIs in the provision of financial services;
    2. an enabling policy environment that will facilitate the increased participation of the private sector in microfinance;
    3. market-oriented financial and credit policies, e.g. market-oriented interest rates on loan and deposits;
    4. non-participation of government line agencies in implementation of credit/guarantee programs.

The government will pursue market-oriented financial and credit policies that create incentives for greater private sector participation in the financial markets. It will avoid costly, unsustainable and distorting credit subsidies that in the past failed to reach their intended beneficiaries, led to the weakening of the rural banking system, and saddled the government with a huge fiscal burden.

A distinction is made between credit and welfare policy. In the past, there has been a confusion between the need for welfare assistance by really poor households and legitimate credit demand by poor households/microenterprises. Those needing welfare will be provided assistance through the appropriate government departments. Welfare will never be provided through concessional credit, loan quotas and other financially repressive measures and never through government or private financial institutions.

On the other hand, the credit demand by poor households/microenterprises will be met through a variety of innovative financial products provided by the private microfinancial market. The government will be ready to provide assistance to build the institutional capacity of microfinance institutions and the appropriate supervisory and regulatory framework to make markets more efficient and institutions, more viable.

The Institutional Framework

The respective roles of various players in microfinance are determined by the policy framework and their relative comparative advantages in providing financial services to the poor. Thus, their respective roles are as follows:

The Strategies to be pursued

To realize the objective of providing poor households/microenterprises greater access to microfinancial services, the following strategies will be pursued:

  1. Provision of a policy environment which is conducive to the effective and efficient functioning of the financial market. This will be carried out by doing the following:

  1. Establishment of a market-oriented financial and credit policy environment which is conducive for the broadening and deepening of microfinancial services. Broadening and deepening mean the development of new product lines and services, the design and implementation of new microfinance technologies and practices which will result to increased microfinance intermediation between the target clientele and MFIs. This will be accomplished through the following:

  1. Implementation of a capacity-building program for MFIs. The program will be implemented through the following:

The following areas of capacity building will be given emphasis in the provision of technical assistance: (1) local deposit mobilization, (2) financial and project management, (3) use of information technology, (4) development and establishment of microfinance technology, innovative product/service lines.

Hari Srinivas -
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