Rotary Intl Dist DISCON Business Meeting (2004)
LANDBANK PRESIDENT AND CEO GARY B. TEVES
Rotary International District 3820 Conference Business Meeting
Albay Astrodome, Legazpi City
March 6, 2004; 2:30 pm
Good afternoon to the officers and members of the Rotary International District 3820 here in Legazpi, led by your District Governor, Mr. Henry Buban, Ms. Rosie Go, Chito Recto. Thank you for inviting me to be here. It's always a pleasure to attend the gatherings of your prestigious organization which is committed to implementing noteworthy socio-economic projects.
Your District Conference Chairman, Mr. Efren Novilla, has asked me to discuss how macro and microfinance can improve your communities.
For my presentation, I will give you some general information on macro and microfinance. I will explain how they work to strengthen our economy, particularly microfinance, which our national government has declared a crucial weapon in fighting poverty. Finally, I will try to suggest some measures that we can undertake together to bring about a more vibrant microfinance sector.
Macrofinance vs. Microfinance
Macrofinance aims to remove poverty indirectly while microfinance aims to remove it directly. The approaches may differ but the end goal, eradicating poverty, remains the same.
Macrofinance asserts that economic activity or growth is the result of the combined effects of private and public decisions and actions regarding local savings, investment, trade and consumption.
Microfinance, on the other hand, works on the belief that favorable economic conditions can be established by enhancing the ability of certain segments of our population --- specifically the poor --- to save, build up their assets and manage small but sustainable businesses.
According to the Bangko Sentral ng Pilipinas (BSP), the following are the core principles of microfinance:
- One, the poor and low-income households need sustained access to financial products and services;
- Two, the poor and low-income groups have the capacity to pay for their loans and to save; and
- Three, microfinance institutions or MFIs can be operationally and financially self-reliant.
Relationship of Macrofinance and Microfinance
There is a growing recognition of the significance of microfinance and its positive effects on the local economy because of its ability to reach the poor and low-income families traditionally overlooked by formal financial institutions.
Having declared microfinance a cornerstone of development, our government has now set and adopted a National Strategy for Microfinance.
The goal of this strategy is to create a viable and sustainable market for microfinance through the active involvement of the private sector in providing credit and guarantee programs. Thus, in recent years, the government has greatly encouraged investing funds in microfinance-related projects.
At the policy environment level, the National Strategy focuses on regulating the portfolio quality, outreach, efficient and sustainable operations and transparency of MFIs.
Our General Banking Act of 2000 recognizes microfinance as a banking activity and an important component of the Philippine financial system. The same Act mandates the BSP to craft the guidelines for microfinance operations within the banking sector.
The BSP now promotes the establishment of microfinance-oriented banks and the creation or integration of microfinance operations by existing banks.
The National Strategy aims to strengthen local economies by promoting sustainable development activities undertaken by the group we call the "enterprising poor". This is based on the belief that numerous small, local and viable economic activities will have a positive and significant impact on the macroeconomy.
LANDBANK and Microfinance
There are 110 financial institutions in the Philippines that specialize in microfinance. Rural banks, which have entered the sector on a commercial basis, account for 50 percent of them.
The People's Credit and Finance Corporation or PCFC, an attached agency of LANDBANK, is one of those tasked to provide loanable funds and technical assistance to these MFIs. PCFC also supports the development of innovative financial products and services for poor households and microenterprises.
As of end-2003, our cumulative loan releases through PCFC have reached P5.5 billion. Through its 200 active conduits, PCFC reached out to more than 600,000 new borrowers last year, twice our annual target of 300,000 new borrowers.
To date, PCFC, through its partner-MFIs, has served 1.4 million clients nationwide and has established an extensive national coverage, penetrating all 79 provinces of the Philippines.
As a government financial institution, LANDBANK is mandated by law to develop its own microfinance program. In September of last year, we conducted a survey of MFIs and countryside financial institutions to ascertain the demand for funds to support microfinance operations.
LANDBANK also underwent internal capability-building for microfinance, training and preparing our field unit officers for microfinance operations.
This year, we have prepared to launch our microfinance operation for a limited engagement. We will soon issue our microfinance operation manual and are currently in the process of selecting the MFIs that will make up our 10 pilot conduits. We plan to have our own microfinance program fully implemented by 2005.
Indeed, LANDBANK has been inspired by the many success stories in the Philippine microfinance experience. The impact on people's lives has been significant, despite the fact that the present microfinance sector has reportedly reached only 25 percent of its potential market.
Moreover, according to studies, the microfinance industry worldwide --- which consists of some 10,000 MFIs --- has served only 10 percent of its prospective clients.
By accelerating the growth and development of the microfinance sector, we can look forward to seeing more people successfully managing their finances and strengthening their assets, consequently reinforcing the growth and development of local economies.
The Rotary's Contribution
Considering that microfinance is a major tool in poverty alleviation, practitioners have been studying various ways to maximize its full potential. We, at LANDBANK call on you Rotarians to support our efforts to foster private sector-led growth.
The businesspeople among you can help promote productivity by investing in businesses that will generate more jobs and income for more families.
You can also help encourage our fellow Filipinos to become self-reliant by exploring linkages that will promote and develop more growth areas in the provinces.
Finally, we look forward to partnerships between LANDBANK and the Rotary that create or implement programs to support our priority sectors --- the small farmers and fisherfolk; micro, small and medium enterprises; agri-business; agri-related and environment-related projects.
As you undertake significant projects that reach out to our kababayans, I would like to invite you to take advantage of LANDBANK's extensive network and services. We will be very happy to help you lay the foundation for a more prosperous economy.
American author, physician and poet Oliver Wendell Holmes once said: "I find the great thing in this world is not so much where we stand, as in what direction we are moving."
Notable Rotarians, you are guided by your mission to help people. I urge you to continue developing and implementing programs and activities that will further strengthen our microfinance sector and assure you of LANDBANK's commitment to support your efforts. Let us go on working together to enable our fellow Filipinos to become self-reliant and our nation to prosper.
Thank you very much and good afternoon.