Microfinance Institutions in Southeast Asia

1. Microfinance Institutions in Southeast Asia Group Presentation by: Joanna Josephs and Glenn Hughes HUSO2067 Microfinance & Development, Semester 1 2014

2. MFI’s in Southeast Asia – Contents • PART 1 (by Glenn Hughes) • Regional MFI Background Overview • MFI Models for Service Provision • PART 2 (by Joanna Josephs) • Case Study on Philippines MFI’s • Presentation Sources & References

3. MFI’s in Southeast Asia – Background Overview • The provision of financial services via MFI’s is recognized as an important tool contributing to the alleviation of poverty and empowerment of the poor across many countries in Southeast Asia • A diverse range of MFI’s have adopted various operating models across the Region • Up to the 1970’s formal State-controlled institutions were the main providers of financial services to the poor • From the 1980’s to late 1990’s semi-formal financial institutions emerged (eg NGOs and Banks with special charters) to focus particularly on provision of services to women micro entrepreneurs with limited collateral • Since the 1990’s a wider variety of formal and informal MFI’s have been delivering innovative services to a growing client base • The general performance and financial sustainability of MFI’s in Southeast Asia is considered solid in contrast to many other regions

4. MFI’s in Southeast Asia – Models for Service Provision (I) • State-controlled or regulated MFI’s are important suppliers of microfinance services in countries like Indonesia, Malaysia, Vietnam and Laos PDR • Many of these State MFI’s are dependent on large subsidies for operations, although Indonesia’s Bank Rakyat (BRI) has adopted a localized village bank model (without group lending) that is financially self-sufficient • Malaysia’s State MFI sector essentially operates as part of the State’s redistributive social policy apparatus, in areas where access to conventional financial institutions is limited • In 2013 the International Finance Corp/World Bank made its first investment in Myanmar (Burma), supporting Cambodia’s largest bank (ACLEDA) to establish a new major regulated MFI in Burma • MFI’s operated by NGO’s are generally the most dominant providers of financial services to the poor in countries like the Philippines, Thailand and Cambodia • In Thailand’s rural areas there is a pattern of market segmentation between larger/less poor clients (served by regulated banks) and poorer clients (served by other MFI’s) • In Cambodia, the original introduction of MFI’s was strongly lead by International NGO’s but responsibility for provision of financial services to the poor is increasingly being transferred to independent local organisations

5. MFI’s in Southeast Asia – Models for Service Provision (II) • NGO MFI’s in Southeast Asia have been instrumental in introducing innovative approaches to the provision of financial services, such as Group Lending, Progressive Lending and Collateral substitution. • The Group Lending model championed by the Grameen Bank has been replicated widely in Malaysia, Philippines, Thailand and Vietnam • The Self Help Group Lending model developed by NGO’s in India is promoted by many MFI’s in Indonesia • Thrift and Credit Cooperatives are also major providers of microfinance services in many local communities across in the Philippines, Thailand and Vietnam • Increasingly Private Sector (for-profit) financial institutions (such as the People’s Credit Banks in Indonesia) are assuming significant roles in the delivery of microfinance services.

6. MFI’s in Southeast Asia – Philippines Country Case Study: CARD Bank (I) • The Government of the Philippines has actively fostered a policy environment conducive to the commercialization of microfinance • In 1994 the National Credit Council was created to develop a national credit delivery system to focus on small enterprise and microcredit. Private sector partnerships were also encouraged. • The Centre for Agricultural Development (CARD) Bank is one of 786 rural banks in the Philippines • Rural banks supply 4.7 million deposit accounts, which covers 1/3 households in the Philippines and contributes 20% of deposit accounts in the Philippines • CARD Bank was founded in 1986 as a Social Development Organisation for landless women, based on Grameen system of microcredit • CARD Bank is now a MFI with dual goals of outreach and sustainability

7. MFI’s in Southeast Asia – Philippines Country Case Study: CARD Bank (III ) • CARD Bank Centre 247 was established in Baguio City in July 2012 with 15 local women • Members meet weekly to make contributions to personal savings (50Php), insurance (15Php) and retirement plans (5Php) • Members can access micro-loans of 5000-7000Php initially to be payed back over 6 months to 1 year • CARD Bank representative are present at all meetings and offer seminars on relevant community issues such as disaster preparedness • Leadership is encouraged among members and meetings are run by elected officers

8. MFI’s in Southeast Asia – Presentation Sources & References • Conroy, D (2003) The Challenges of Microfinance in Southeast Asia, The Foundation for Development Cooperation, Brisbane • Thapa, G. (2007) ‘Sustainability and Governance of Microfinance Institutions: Recent Experiences and Some Lessons for Southeast Asia’, Paper presented at the Regional Experts’ Consultation Meeting on “Overcoming Obstacles to Agricultural Microfinance in South East Asia”, which was organized jointly by SEARCA and CARD-MRI, and held 1–2 March 2007 in Manila, Philippines. • Barry, J.J (2012) ‘Microfinance, the Market and Political Development in the Internet Age’, Third World Quarterly, Vol. 33, No. 1, pp125–141 • Charitonenko, S. Campion, A. & Fernando, F. N. 2004 'Commercialization of microfinance: perspectives from south east asia,' Asia Development Bank, Viewed March 30th 2014 [http://www.adb.org/publications/commercialization-microfinance-perspectives-south-and-southeast-asia]