Gender Issues in SME Finance: Philippines

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1 2011/GFPN/WKSP/023 Session 7 Gender Issues in SME Finance: Philippines Submitted by: Philippines Workshop on Microfinance Best Practices Ha Noi, Viet Nam 7-8 April 2011

2 Gender Issues in SME Finance: Philippines Session 7: Gender Equity by Ms. Luzviminda A. Villanueva Philippine Commission on Women (PCW) APEC Workshop on Microfinance April 7-8, 2011, Hanoi Outline of Presentation Country Profile: Philippines Profile of Philippine i Enterprises Entrepreneurship in the Philippines Microfinance in the Philippines Gaps/Issues in Philippine Microfinance Gender Issues in Philippine Microfinance How MFIs can empower women 1

3 Country Profile: Philippines Economy Population (2010): 92.2 million GNI per capita (2008): USD 1,886 Poverty threshold income: USD162/month per family of five One out of every five Filipino families is poor. Gender Ranking Ranked 11 of 134 in Economic Participation and Opportunity 2009 Global Gender Gap Index, World Economic Forum (WEF) Ranked 87 of 133 economies in Global l Competitiveness Index (2009) - WEF s Global Competitiveness Index Ranked 144 of 183 countries in Doing Business Report (2010) - World Bank s Doing Business Report Country Profile: Philippines Labor, Education and Politics: Filipino women attain higher educational levels than men. Women are represented in politics and decision making positions at a reasonable higher rate than other countries. Women s labor participation rate is 49%, below the average of the region (East Asia is 67%, Southeast Asia is 59%) in Female employment rate was 93%, slightly higher than men. While women are in almost all professional categories, including high level government service, a majority of women like men are employed as laborers, unskilled workers. 2

4 Country Profile: Philippines Self employment (31%) and unpaid family work (19%) accounted for almost half of all employed women. Women s Economic Opportunity Index (2010): Philippines ranks 64 of 113 countries; Overall score of 50.4 major concern is the legal, institutional business environment not conducive to private sector development. Profile of Philippine Enterprises Republic Act 9501: Magna Carta for MSMEs any business activity or enterprise in industry, agribusiness and/or services Type of Enterprise micro: not more than Php 3 million assets small: Php 3 million to Php 15 million assets medium: Php 15 million - Php 100 million assets Number (2008) % to Total Large 2, % Medium 3, % Small 58, % Micro 697, % TOTAL 761, % 3

5 Philippine MSMEs: 2008 MSMEs are: 99.6% of total registered firms 61% of employment 32% of value added 60% of all exporting firms Source: Dept. of Trade and Industry Classification of enterprises by industry: 49.9% in wholesale and retail trade 14.7% in manufacturing 12.3% in hotel and restaurant services 5.9% in real estate, renting and business activities 5.7% in community, social and personal services 11.5% others Entrepreneurship in the Philippines 6 out of 10 businesses in the Philippines are started or owned by women, 2 nd highest in % of entrepreneurially active females in 42 countries, Most of these are micro and small enterprises consisting only of the owner/manager, Founded with little capital (below USD250) in activities with low entry barriers; low productivity, it Preference of women (25-34 years of age) is to combine family responsibility with income generating activities, close to their home. 4

6 Global Entrepreneurship Monitor (GEM) Findings of a Survey in 2007 Major reasons for discontinuation of women s businesses: a) priority given to family b) husband takes over after it gained sustainability levels and profits c) other issues with husband, gender discrimination d) intense competition, lack of technology, lack of capital Microfinance in the Philippines Definition. Microfinance is the viable and sustainable provision of a broad range of financial services, generally, by the private sector to poor and low-income households engaged in livelihood and microenterprise activities. Loans: maximum of Php 150,000 (USD3,218) microenterprise loans, housing microfinance loans, micro-agri-loans, micro-deposits Target clients: Target clients: entrepreneurial low-income households and individuals with stable economic activity 5

7 Microfinance in the Philippines available through the formal and informal financial systems MF services offered by: rural banks thrift banks credit cooperatives MF NGOs Total (2010) MF-Engaged Universal/commercial banks 4,577 Rural banks 1, Cooperative banks 119 Source: Bangko Sentral ng Pilipinas 1,400 MFIs including NGO MFIs (about 2,000 when branches are included) ref. National Credit Council Microfinance in the Philippines MFI Reach: Type of MFI No. of Facilitated Loans Borrowers Rural/Thrift/Cooperative 930,967 Php Billion Banks (ref. BSP, 2010) (USD159 Million) Various MFIs including 5.2 Million n.d. NGO-MFIs (NCC, 2008) PCFC s various conduits (banks & NGO- MFIs) Million Php Billion (USD82.24 Million) Clients are mostly women - NCC Adopts a market based interest rate policy, allows cash-flow based lending, collateral free loans Recorded the highest repayment rate of 98% - NCC 6

Gaps/Issues in Philippine Microfinance 1. MFIs are concentrated in highly urban areas of: Metro Manila, Central Luzon and Southern Tagalog 2.

GFIs provide wholesale loans to MFIs unserved by private commercial banks, c) commercial and private banks provide wholesale funds and financial

8 Gaps/Issues in Philippine Microfinance 1. MFIs are concentrated in highly urban areas of: Metro Manila, Central Luzon and Southern Tagalog 2. MFI reach only 1 out of 3 poor households Reach of MFIs: 1/3 Target Client: Poor Household Households in the Philippines Gaps/Issues in Philippine Microfinance 3. Institutional framework of MFI lead to a confusion of various institutional roles: a) PCFC provides wholesale loans & technical assistance to MFIs, b) GFIs provide wholesale loans to MFIs unserved by private commercial banks, c) commercial and private banks provide wholesale funds and financial services to MFIs, d) NGOs provide technical assistance and facilitate linkages between HH, enterprises and MFIs e) Central bank supervises thrift and rural banks, Cooperative Development Authority supervises credit cooperatives, SEC registers microfinance NGOs which do not report to any regulatory agency 7

9 Gender Issues in Philippine Microfinance Microfinance supports the strategy for women s economic empowerment (WEE). Increased economic activity for women facilitates increased social and political well-being It has been reported that majority of borrowers are women and repayment rate remained to be very very high. 1.Women can either benefit or be further burdened with access to MFI services. MFIs should invest in impact studies of loans vis-à-vis the growth of enterprises of women, her decision-making options over income and loan proceeds, etc. 2.The need for a policy among MFIs that recognizes women s multiple roles and the range of products should be designed to address a clear gender equality and WEE agenda. Gender Issues in Philippine Microfinance 3. MFIs focus should not only be on cost efficiencies and other finance metrics, the proposed impact studies should lead to approaches/ options to address needs of enterprises at different growth stages. Hence, MF products could be improved in terms of new credit products, micro insurance and social protection products, implementing credit plus to assist women. 4. Risks of unregulated MFIs on women clients this may subject women entrepreneurs to forced savings, high lending rates and service charges, impact of possible closures. 5. High costs of MFI services Philippines reported a 38.8% operating expense ratio; benchmark is below 20%. 8

10 Gender Issues in Philippine Microfinance High costs of MF services: MFI Rural Banks Cooperatives NGOs Lending Rates and Service Fees per annum SF: to 4% 18 24% per annum SF: 2 5% 24 percent to 40% per annum SF: 2 5% Source: Consolidated Data from the Philippine Country Profile, 6. Market segments not adequately reached by MFIs: farmers and agri-workers, microenterprise start-ups, entrepreneurial poor in areas without MFIs (15%). Need to build MFI capacities to enable them to move down-market to poorer markets, up-market to larger/ growing enterprises, new market segments Gender Issues in Philippine Microfinance 7. Need to address credit pollution borrowing from multiple MFIs. maintaining sex disaggregated database improving monitoring systems implementing the Credit Information Systems Act of Emerging issues in micro-lending have to be examined with a gender lens. MFIs will benefit from awareness raising and building capacities on gender analysis that can facilitate more responsive planning/program designing for officials and personnel. Shift to individual to group lending which will require adjustments in credit standards 9

11 Gender Issues in Philippine Microfinance 9. Need amend related policy/laws on obtaining micro credit: RA 7192 Women in Nation Building Act a) husband s consent in big loans needed, b) Filipino women using maiden names have difficulty obtaining loans RA 7882 Women engaging in Micro & Cottage Business have certain provisions that are limiting for women borrowers 10.Rural-urban differences in types of loans affect women borrowers a) Higher rate of default on loans and interest among rural loans, b) delayed loan repayment of micro-agri loans compared to their urban counterparts How MFIs can empower women? PCW recommends these gender responsive interventions: Level of Empowerm t Welfare Access Possible MFI Interventions Craft efficient lending and savings programs Provide small loans, savings and capital build up Increase market relevance of MFI services through participatory assessment Supplement credit services with value adding social products Network/link with Local Gov t Units, NGOs, POs in the communities to render social assistance Provide social protection services to women clients 10

12 How MFIs can empower women? Conscientization Participation Control Raise awareness of MFI staff and client levels gender related issues of microfinance Have more enabling participatory mechanisms for women to have womenfriendly MFI client response Build organizing and community development strategies processes in introducing microfinance in communities Offer larger loans to women to scale up enterprises Encourage savings to avoid loan dependence THANK YOU! 11

The Bangko Sentral ng Pilipinas and Financial Inclusion

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