Philippines jumps up to Rank 2 in microfinance worldwide, still #1 in Asia

The Philippines ranked second in the world and first in Asia in terms of “Overall Microfinance Business Environment” in the 2010 study conducted by the Economist Intelligence Unit (EIU), the business information arm of The Economist Group that publishes the Economist.  Climbing up from third place last year, the Philippines overtook Bolivia, becoming the only country after Peru.
The study conducted by the EIU reviewed 54 countries and evaluated each country’s microfinance business environment in terms of its regulatory framework, investment climate and level of institutional development.  Interviews with microfinance industry leaders and stakeholders along with secondary information were analyzed to come up with the rankings.
According to the study, the Philippines is currently the global leader in regulatory framework.  It is also the top Asian country in terms of institutional development, and second behind India in investment climate.
According to the EIU, one of the key factors that brought about the rise in ranking was the recent approval of the Bangko Sentral ng Pilipinas (BSP) for rural and thrift banks to sell authorized micro-insurance products. In addition, the BSP also issued a circular that sets the rules for accrediting microfinance rating agencies, which, according to the EIU, is a move to encourage local microfinance institutions to be externally rated.  Also in 2010, the BSP issued rules on the extension of housing microfinance and eased requirements for agricultural microfinance. The entry of major commercial banks and telecommunications companies into microfinance is also seen as a contributory factor towards the advancement of the sector. Furthermore, the signing of the Credit Information Systems Act (CISA) and the approval of its Implementing Rules and Regulations are also positive developments.
However, rural banks, which are among the key proponents of microfinance in the Philippines, believe that the Credit Bureau system in the country still has a long way to go. “We believe that the slow implementation of the Credit Information System Act (CISA) is among the key factors hindering the Philippines from having the best microfinance business environment in the world,” Rural Bankers Association of the Philippines (RBAP) President Ma. Corazon Llamzon-Miller said.
The CISA, which mandates all lending institutions to submit both positive and negative credit data, allows for better and easier credit information sharing among financial institutions for more secure and credible lending. Realizing its importance to rural banks, RBAP, along with its USAID-supported Microenterprise Access to Banking Services (MABS) program, has been advocating access to credit bureaus for rural banks even before the passage of the Credit Information System Act in 2008.
According to Ms. Miller, “RBAP will continue push for a faster implementation of the CISA through its representation at the credit information corporation board. We believe that with the full implementation of the CISA, the Philippines will indeed rank number #1 in microfinance business environment in the world.” Meanwhile, the rural banks are using the Bankers Association of the Philippines (BAP) Credit Bureau for each credit investigation needs.
The EIU study was financed by the Multilateral Investment Fund – Inter-American Development Bank Group, CAF (the Andean Development Corporation) and the International Finance Corporation (IFC).

The Philippines ranked second in the world and first in Asia in terms of “Overall Microfinance Business Environment” in the 2010 study conducted by the Economist Intelligence Unit (EIU), the business information arm of The Economist Group that publishes the Economist.  Climbing up from third place last year, the Philippines overtook Bolivia, becoming the only country after Peru.

The study conducted by the EIU reviewed 54 countries and evaluated each country’s microfinance business environment in terms of its regulatory framework, investment climate and level of institutional development.  Interviews with microfinance industry leaders and stakeholders along with secondary information were analyzed to come up with the rankings.

According to the study, the Philippines is currently the global leader in regulatory framework.  It is also the top Asian country in terms of institutional development, and second behind India in investment climate.

According to the EIU, one of the key factors that brought about the rise in ranking was the recent approval of the Bangko Sentral ng Pilipinas (BSP) for rural and thrift banks to sell authorized micro-insurance products. In addition, the BSP also issued a circular that sets the rules for accrediting microfinance rating agencies, which, according to the EIU, is a move to encourage local microfinance institutions to be externally rated.  Also in 2010, the BSP issued rules on the extension of housing microfinance and eased requirements for agricultural microfinance. The entry of major commercial banks and telecommunications companies into microfinance is also seen as a contributory factor towards the advancement of the sector. Furthermore, the signing of the Credit Information Systems Act (CISA) and the approval of its Implementing Rules and Regulations are also positive developments.

However, rural banks, which are among the key proponents of microfinance in the Philippines, believe that the Credit Bureau system in the country still has a long way to go. “We believe that the slow implementation of the Credit Information System Act (CISA) is among the key factors hindering the Philippines from having the best microfinance business environment in the world,” Rural Bankers Association of the Philippines (RBAP) President Ma. Corazon Llamzon-Miller said.

The CISA, which mandates all lending institutions to submit both positive and negative credit data, allows for better and easier credit information sharing among financial institutions for more secure and credible lending. Realizing its importance to rural banks, RBAP, along with its USAID-supported Microenterprise Access to Banking Services (MABS) program, has been advocating access to credit bureaus for rural banks even before the passage of the Credit Information System Act in 2008.

According to Ms. Miller, “RBAP will continue push for a faster implementation of the CISA through its representation at the credit information corporation board. We believe that with the full implementation of the CISA, the Philippines will indeed rank number #1 in microfinance business environment in the world.” Meanwhile, the rural banks are using the Bankers Association of the Philippines (BAP) Credit Bureau for each credit investigation needs.

The EIU study was financed by the Multilateral Investment Fund – Inter-American Development Bank Group, CAF (the Andean Development Corporation) and the International Finance Corporation (IFC).