India's Microfinance Crisis: What Lessons Does It Hold for the Philippines?

> Posted by Center Staff
The Rural Bankers Association of the Philippines Microenterprise Access to Banking Services (RBAP-MABS) with support from USAID/Philippines and the Microfinance Council of the Philippines (MCPI) jointly held a pre-summit seminar on April 4 discussing “How to Avoid an India-type Microfinance Crisis in the Philippines.”
The seminar served as a prologue to the Bangko Sentral ng Pilipinas (BSP)’s National Microfinance Stakeholders Summit held on April 5.
Led by CFI Managing Director Beth Rhyne and organized for the microfinance stakeholders in the Philippines, particularly rural banks, NGOs, credit cooperatives and others, the seminar mapped out some of the issues that led to the microfinance crisis in India.
Rhyne listed the most important factors that have led to the crisis in India as follows:
– Extreme rapid growth with the loss of portfolio quality
–  The entry of commercial investors with high valuation expectations
–  Location of branches in already saturated markets
–  Harsh collection practices
–  Weak industry associations
–  Lack of action by microfinance institutions
She noted that the trend in the Philippines has also taken the microfinance providers away from mono-product and group liability lending as they offer more diversified products and services to their clients. Such products and services have included credit for agriculture, housing, microinsurance, and remittance, as well as microinsurance services. There has also been an increasing use of technology, such as mobile phone banking services, to improve delivery and bring down costs.