Moneyshops in the Philippines

A phenomenon that has developed in the urban areas of the Philippines is the extension of banking services by a few formal financial intermediaries through "moneyshops". More specifically, the Philippine Commercial and Industrial Bank (PCIB) has launched a "bridge-building" banking mechanism since 1973. The PCIB moneyshop occupies one of the many market stalls in public markets and offers working capital to the market vendors. Similar to the Grameen Bank in Bangladesh, a positive feature of the moneyshop is the easy access to established on-site banking facilities where money can be borrowed easily and conveniently. The convenience is reflected in the fact that the moneyshop has adjusted its operations to the business patterns in the market place. For example, unlike ordinary banks, moneyshops open in the early hours of the morning. Also, daily collections restrain the market vendor from diverting repayment funds to other needs. Collectors go to the borrower instead of awaiting payment at the moneyshop window.

Moneyshops charge an interest rate of about three per cent a month. While this is above the usual bank lending rates, PCIB argues that this is a low rate considering that usurers charged market vendors several hundred percent a month under the "five-six" scheme.

Despite the daily collection system adopted by the moneyshops, the latter carry a significant percentage of loans in arrears or in litigation, considerably higher, at any rate, than the levels usually tolerated by banking institutions. Moreover, the moneyshops have not been as successful as the credit unions in attracting savings. Despite these difficulties, the moneyshop scheme has become a major activity of PCIB and has grown significantly since its inception in 1973.

Hari Srinivas - hsrinivas@gdrc.org

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