Giving Hope through Financial Inclusion

PHOTO CAPTION: During the Citi Microentrepreneurship Awards Media Launch 2015. (In photo: Go Negosyo Executive Director Mon Lopez, Commission on Filipino Overseas Sec. Imelda Nicolas, Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr., and Citi Philippines CEO Batara Sianturi).

In our 10 years of implementing various empowering summits, seminars and mentoring fora to push for an entrepreneurial culture, we have encountered many aspiring entrepreneurs who are discouraged when they face the difficulty of how to finance their dream business, or at least simply not knowing how and where to get financing. Many believe that one has to start with capital or one has to be rich to start a business.  After going thru our sessions and seminars, they would realize that the bigger challenge is not financing but in developing a very good idea-based business concept, one that is differentiated with unique selling proposition, which is relevant and serving a need of the market.  Any good concept would draw in support and funds even from families, friends and interested business partners. 

And yes, financing is available.  At the grassroots level, we have commonly seen the presence of the informal financiers and the so-called 5-6 who charge at usurious interest rates. Any business will have to earn more than 20% in 3 months to be able to pay back the interest and not deplete one’s resources. It is not a healthy cycle as majority of one’s profits would simply leak to interest cost payment.  

It then becomes imperative to make financing at reasonable rates available to all the microentrepreneurs to increase their chances of becoming more successful.  Our Bangko Sentral Governor Amando Tetangco has taken this as his personal mission.  We are fortunate to have a central banker who personally advocates microfinancing and banking the unbankable. To me, widening the base with access to financing is what real financial inclusion is.

Gov. Tetangco and his team have led the push towards increasing the base of micro finance institutions or MFIs, as well as saving and thrift banks, cooperatives and NGO’s who provide collateral-free lending to microentrepreneurs.  

To help increase the awareness on microfinancing and generate inspiration from more role models, Go Negosyo participates in the annual Citi Microentrepreneurs Awards (CMA), led by the Bangko Sentral ng Pilipinas (BSP), Microfinance Council of the Philippines, Inc. (MCPI) and Citibank Foundation. The CMA aims to recognize the outstanding microentrepreneurs in the country. Last year, 7 micro business owners from Luzon, Visayas and Mindanao were recognized. Teresita Valdez, a bagoong-maker from Bulacan, was hailed the national winner. Valdez gave her testimony of success in the recent launch activity for the 2015 CMA. 

We got a very good impression on the development of micro-financing as presented by Governor Tetangco.  He elaborated on how far the microfinancing sector in the Philippines has come. According to him, when BSP issued microfinance-related regulations in the year 2000, there was hardly any bank in micro financing. Today, we have 176 thrift and rural banks serving over 1.2 million microfinance clients with loans of P11.4 Billion or an average of P9, 500 per borrower. The micro finance banks have also opened 2 milion microdeposit accounts with nearly P4 Billion in deposits.  In addition, 39 banks licensed as microinsurance agents are now serving 1.4 million clients. A survey also indicated that “16 microfinance NGOs with a combined network of 2,190 branches have P11.6 billion in outstanding loans served to 2.5 million borrowers.” Aside from that, there are reports from the Cooperative Development Authority (CDA) that indicate that almost 70% of the reporting coops in the country are providing financial services to 6.5 million members.

Aside from these quantifiable progresses, the BSP issued the e-money regulations in 2009. These regulations give microfinance clients access to more convenient ways of doing financial transactions such as money transfer, bills and loans payment and even goods purchasing. Gov. Tetangco shared that the e-money ecosystem has already 24,000 agents which complement over 10,000 banking offices and 15,000 ATMs as financial service access points.

Indeed, the microfinance sector has come a long way. But more than these figures and data, I am more encouraged by the significance of these developments to our society, particularly those who belong to the lower income segment group. It is providing greater opportunities for them to succeed. With these opportunities, we will see more and more entrepreneurs spending more time on how they can level-up their business models than on how they can get the capital they need. 

Financial inclusion gives hope. Citing a quote from a Vietnamese spiritual leader, “Hope is important because it can make the present moment less difficult to bear. If we believe that tomorrow will be better, we can bear a hardship today.” Financial inclusion is a major enabler for many microentrepreneurs to start and grow a business. But more importantly, it empowers the grassroots, the bottom-of-the-pyramid.  It promotes more equitable socio-economic growth. 

Financial inclusion leads to a more inclusive growth. As we help build an entrepreneurial culture and competency, the dream of many Filipinos to move forward is getting closer to reality.