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CASHPOR Inc. is about to sign a $837,000 agreement with the Finnish Government to strengthen Grameen Bank replicators (GBRs) in the Philippines. CASHPOR will work jointly with PHILNET, its sister network in the Philippines, so that by 2002 the national network will take over the full range of training and technical assistance required by its members.
Ample funds now exist for scaling up of microcredit programs in the Philippines. The second leg is to upgrade PHILNET GBRs to use it.
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Since 1995, increasing amounts of money have been earmarked for micro-finance in the Philippines. The CASHPOR-PHILNET technical assistance program, which will run from 1999 until the end of 2000, aims to boost the capacity of the Filipino GBRs to use these funds effectively.
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"This Finnish initiative is very timely," Dr. Cecilia del Castillo, who is president of' both networks, said. "Philippine GBRs are already well established and this technical assistance is about expansion; it is to help prepare mature programs to scale up to very large numbers. PHILNET members are now reaching more than 50,000 poor women clients. We have committed ourselves to reach 450,000 in the next five years.”
PCFC was set up in 1994 and charged by government to raise funds and to serve as the vehicle for the delivery of micro-financial services exclusively to the poor. It has $27 million from government and a $35 million loan from the Asian Development Bank-IFAD, which it began on lending to MFIs in 1997. It will also get more funds under a loan agreement signed recently with the World Bank.
President Estrada's intervention and the large new fund, called appropriately the ERAP Trust Fund, ups the ante for both PCFC and the micro-finance practitioners to produce fast results. The President has doubled PCFC's target from one million poor families to two million ¾ to be reached by 2000. As of December 1998, PCFC was on-leading to only 100,000 clients, through 96 "conduits".
PCFC's current outreach is through Just four PHILNET members
PHILNET is already a major actor in the micro-finance scene in the Philippines. Its four older members have been around for a decade and have already overcome the teething problems of start up and institutionalization. CARD is a rural bank, while Project Dungganon, TSPI and ASHI are professionally run NGOs. Of the 100,000 clients currently reached by PCFC, these four PHILNET programs are responsible for nearly half of them. In addition, PHILNET has run the "Basic Series" management training workshops several times. Its members have their own in-house training capacity used by PCFC and donors to train start-up MFIs in the Grameen methodology.
President Estrada has put his new administration behind the micro-credit effort started under President Ramos. In December, he boosted the pot of funds available to micro-finance institutions significantly by closing down a moribund subsidiary of the Land Bank and transferring its assets worth Peso 2.2 billion (US$60 million) to the government's main lender to micro finance institutions, the Peoples' Credit and Finance Corporation (PCFC).
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The Finnish Government for its part sees this technical assistance package as a strategic input to ensure that the ADB-IFAD loan works to produce “a self-sustaining financial system for the rural poor” as planned. “We have a keen interest that this money is well used. Although this TA is a separate agreement, ADB will have a role in monitoring it. The failures are admitted,” said the Finnish ambassador to the Philippines, Mr. Pertti Majanen.
The core of the institutional strengthening program will be eight intermediate workshops, three scheduled for 1999: Cost-effective Impact Evaluation in May, Computerizing Financial Services for Management Information Systems in August, and Strategic and Business Planning in December. The three year program will also include:
- an immediate cash injection for the four older CASHPOR members, Dungganon, CARD, TSPI and ASHI, to hire and train a total of 80 new field staff, so that they can start scaling up operations directly.
- the training of PHILNET's existing administrator to edit a Philippine edition of Credit for the Poor, and the hiring of an auditor and monitoring manager, to conduct quarterly monitoring of PHILNET members and conduct surprise audits of their performance.
The CASHPOR members will get funds to train 80 field staff to scale up immediately
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- the development of a management information system for GBRs by three experts under contract to CASHPOR (this, will be done in the CASHPOR India program in Mirzapur initially, funded by CGAP) and its transfer/adaptation to the Philippines in a workshop in August, with subsequent technical assistance to PHILNET members to follow-up on implementation
- technical assistance visits on request to solve problems discovered during surprise audits, using the resources of the CASHPOR network as well as PHILNET members. Jennifer Meehan, CASHPOR's financial advisor will disseminate financial management tools and MIS and will train the PHILNET to take this over. The beneficiaries of this program will be the original four PHILNET MFIs and four newer members. MFIs who want to join PHILNET must have micro-finance as their focus; deal exclusively with the poor, particularly women; follow methods which allow illiterate women to participate; produce financial statements and have the will to reach large numbers and become financially sustainable.
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The ERAP Vision
New funding transferred to PCFC in December has changed its role from one of microcredit delivery to that of the development of the microfinance sector. To this end, PCFC will become a credit retailer – lending directly to the poor in areas not covered by existing MFIs. As the document points out: "Wholesaling of funds [provides] the narrowest of margins to PCFC ... Direct lending will allow PCFC to enjoy a high effective interest rate.
PCFC will set up an apex bank, the Kabuhayan Bank, which will continue PCFC's role of wholesaling to MFIs as well as conducting direct lending. It will try to strengthen and increase the number of "conduits" from the current 96, through staff and management training. This bank will also be the apex institution for credit cooperatives, holding their surplus funds and providing financing.
PCFC will invest from an equity fund in profitable MFIs, to encourage their transformation into banks, and to earn a return for the fund. A particular focus will be to invest in the most successful cooperative banks and to encourage new cooperative banks in the 26 provinces where they do not yet exist.
A major thrust of the new PCFC vision, is to revive and expand the existing 52 cooperative banks in the Philippines. A national stabilisation fund will restructure these banks by buying up their bad loans and injecting fresh liquidity. Management training will be offered to upgrade the cooperative sector. When the restructured banks return to profitability, they will be sold to the equity fund.
Each of these activities of PCFC, the Kabuhayan Bank, the Equity Fund and the National Stabilisation Fund - will be profit centers and will be privatised by selling shares to NGOs and cooperatives.
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Source: Extracted from Credit for the Poor, January, 1999
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