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The Growth of the Micro Enterprise Lending in the Philippines

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Research Topic/Title: The Growth of the Micro Enterprise Lending in the Philippines Introduction Micro enterprise financing, or the provision of access to micro entrepreneurs of small-scale loans and other financing-related services has been widely credited as a sustainable tool for reducing poverty. The microfinance movement, which the Grameen Bank started and pioneered in Bangladesh during the 1980s, has been replicated in other parts of the world, including the Philippines.

However, while many studies indicate that the impact of micro enterprise financing has been positive as it allowed poor households access to financial services, there may still be not enough concrete evidence to prove the movement or graduation of the poor households out of poverty even after several loan cycles.

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Project Description Background Brief History of Philippine Micro Enterprise Development

The Philippine government’s efforts to develop albeit the small industry sector including micro enterprises started to intensify in the 1960s with the creation of the Institute for Small Scale Industries within the University of the Philippines (UP-ISSI) in 1966.

It was also during the same period when rural banks and cooperatives started the concept and practice of servicing small loans. However, this was not sustained due to low repayment rates and initial structural problems faced by the new concept of credit provision.

During the 1970s until early the 1980s, the government launched various directed credit programs (DCPs) which it hoped will bring down the cost of credit and help reduce poverty. However, similar to the earlier initiatives by the rural banks and cooperatives, the DCPs also failed due to, among others, corruption, repayment problems, huge fiscal costs to the government and inability to reach the targeted clientele/beneficiaries.

During the late 1980s, non-government organizations (NGOs) became an active government partner in the provision of small, non-collateralized loans to the entrepreneurial poor. Microfinance NGOs devised and implemented various credit schemes to improve the provision and repayment of small loans, similar to what the Grameen Bank has done in Bangladesh. Today, the micro enterprise sector comprises about 92% (720,191) of all business enterprises in the Philippines and employs around 34% of the labour force.

However, in terms of output, micro enterprises account for only 2-4% of manufacturing output. Aims/Objectives The study aims, in general: (1) To review the current state of the Philippine micro enterprise sector, with particular focus on the effect of an improved access to financing/credit of small-scale loans and other financing-related services in selected rural areas; and (2) To evaluate how an improved policy, regulatory and financial framework.

The questions that the research will try to address are: “Are recent strides in improving access to financing significant enough to transform the micro enterprise sector and micro enterprises in particular as more profitable and sustainable enterprises? Or are these supposed strides just a product of unreliable and grossly overstated figures, thus the seemingly low contribution of the sector to national accounts? ” Are the supposed economic benefits of micro enterprise financing trickling down to regional areas in the Philippines where the poorest of the poor can be found? ” “How does increased micro enterprise activity affect poverty in the Philippines, both at the national and regional levels? ” Expected Outcome/Significance of the Study The study extends in reducing poverty in the Philippines through micro enterprise financing. It is hoped that the study results may provide readers innovative ideas on the matter. Methodology

Cite this The Growth of the Micro Enterprise Lending in the Philippines

The Growth of the Micro Enterprise Lending in the Philippines. (2018, Aug 01). Retrieved from https://graduateway.com/the-growth-of-the-micro-enterprise-lending-in-the-philippines/

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