In all parts of the country, microenterprises comprise the bulk of business enterprises in the country. The Department of Trade and Industry (DTI) estimates that, as of 2011, at least 99.6% of all businesses in the Philippines were classified as micro, small, and medium enterprises (MSMEs), while the remaining 0.4% were large enterprises. Of the total number of MSMEs, at least 91.0% were micro enterprises, with asset sizes not greater than Three Million Pesos (P3 million) and with up to 10 employees.

At their very core, micro enterprises enable poor families to undertake entrepreneurial activities to meet their minimum basic needs, including income generation. However, one major barrier for micro entrepreneurs is their lack of access to credit or capital. One way for them to access such funding is through micro finance.

“Microfinance”, as defined in this bill, “refers to the viable and sustainable provision of a broad range of financial services to poor/unbanked/financially underserved/low-income households engaged in livelihood and microenterprise activities. It uses nontraditional and innovative methodologies and approaches such as, but not limited to, the extension of small loans, simplified loan application procedures, group character loans, collateral-free arrangements, cash flow based lending, alternative loan repayments, minimum requirements for CBU/minimum balance retention, and small denominated savers’ instruments-aimed to improve their asset base and expand their access to capital and savings.”

However, the microfinance sector has yet to be acknowledged by government as an integral partner in poverty alleviation. Moreover, the unique structure and purpose of microfinance institutions (MFls) have yet to be recognized as different from those of purely commercial enterprises.

Therefore, we are proposing the Microfinance Code of the Philippines to develop the microfinance sector in the country. This measure seeks to define the rights and responsibilities, institute performance management and standards, and provide an accreditation process for MFls. It also seeks to provide an enabling policy environment for MFls through appropriate incentives and support. Finally, this measure will promote a social reform strategy that will empower the poor, aid them in managing financial risks, and, in doing so, expand access to micro finance services, such as: microcredit, microsavings, health care, and others. This Act also opens up access to a broad range of financial, business, and other human development services. The ultimate goal of the Microfinance Code of the Philippines is to lift people out of poverty and enable them to live more productive, self-sufficient lives.

In view of the foregoing, the approval of this bill is earnestly sought.

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