Developing the Policy and Regulatory Architecture for Microfinance in the Philippines

These policy notes discuss the progress made so far in developing the policy and regulatory architecture for microfinance. The author states that the government's microfinance policy:

• Provides a policy environment that is conducive to the involvement of the private sector;
• Offers private MFIs a greater role;
• Realizes that market oriented policies are necessary for the viability and sustainability of MFIs and the continued access of poor people to microfinance services.

The paper discusses the different organizations that deal with regulation on microfinance and also provides recommendations for the improvement of these.

• The BSP supervises the thrift banks and rural banks;
• The Cooperative development authority (CDA) supervises the credit cooperatives and credit unions.

The paper lists the current initiatives:

• Coming up with a repository of information for credit granting NGOs in the Microfinance Council in the Philippines;
• Setting up a specialized regulatory unit in the CDA;
• Formulating a special set of performance standards for all types of MFIs.

The paper concludes with the following recommendations:

• Regulators should make the MFIs conscious of the greater portfolio and liquidity risks that new and innovative products entail;
• The financial markets should be made more efficient through a stable and favorable policy environment, transparent and appropriate legal and regulatory framework, and an efficient information infrastructure.