BRIGHTER FUTURE FOR MICROFINANCE INSTITUTIONS

After six long years of waiting, the microfinance institutions’ outcry for capacity building grant funds from the government can now be addressed.

With the signing of the Memorandum of Agreement (MOA) between and among the National Anti-Poverty Commission (NAPC), National Livelihood Support Fund (NLSF) and the Land Bank of the Philippines on the initial funding for the People’s Development Trust Fund (PDTF), in a ceremony held at the Office of the Vice President on 16 August 2004, the microfinance practitioners and micro-enterprise service providers can now be assured of the government’s assistance in strengthening their institutional capacities. With the approved MOA, the NLSF transfers one hundred million pesos (Php 100,000,000) to NAPC as seed capital for the PDTF. Only the interest earnings of the trust fund can be used to finance the institutional strengthening needs of the microfinance institutions and micro-enterprise service providers.

Majority of the MFIs are confronted with the limited capacity to expand operations in hard-to-reach areas because of the lack of resources in starting up a branch office. The highly specialized microfinance technologies adopted by most MFIs in the country corresponds high start-up costs, while maintaining viability and ensuring financial and operational sustainabilities. Likewise, the lack of technical support for microfinance clients to expand their livelihood and micro-enterprises slows the potential for growth to transform into small and medium enterprises, which are the backbone of the country’s economy.

Stipulated in the Social Reform and Poverty Alleviation Act (R.A. 8425), the PDTF would be used to fund consultancy and training services for MFIs, scholarship/training grants for microfinance staff and clients, livelihood and micro enterprise training services, and research studies, savings mobilization and incentive programs, development of monitoring and evaluation systems, legal/management support services and information dissemination of microfinance technology. The NAPC monitors and oversees the investment and utilization of the PDTF while the People’s Credit and Finance Corporation (PCFC) serves as its administrator. As NAPC’s Co-Chair, Vice-President Noli “Kabayan” de Castro, provides supervisory functions over the PDTF.

The establishment of the PDTF supports the 10-point agenda and the 5-point strategic thrusts of the President in creating jobs and reaching a tripled target of three million micro-entrepreneurs for the next six years.