As prologue to the BSP’s (Bangko Sentral ng Pilipinas) National Microfinance Stakeholders Summit held on April 5, the Rural Bankers Association of the Philippines Microenterprise Access to Banking Services (RBAP-MABS) with support from USAID/Philippines and the Microfinance Council of the Philippines (MCPI) jointly held a pre-summit seminar on April 4 discussing “How to Avoid an India-type Microfinance Crisis in the Philippines”.

Opening the forum, RBAP President Corazon Miller described the India microfinance crisis as “a wake-up call for microfinance practitioners in the Philippines to begin the proactive process of strengthening transparency, following consumer protection practices, improving governance, and becoming better at communicating the value of Microfinance services.”

Led by Ms. Elisabeth Rhyne, Managing Director of ACCION International’s Center for Financial Inclusion and organized for the microfinance stakeholders in the Philippines particularly rural banks, NGOs, credit cooperatives and others, the seminar provided interesting discussions on some of the issues that led to the microfinance crisis in the India.

Ms. Rhyne outlined the developments leading up to the crisis in India, particularly in the southern state of Andra Pradesh, where the largest microfinance institutions are located. Some historical notes provided context to the build up of the crisis there, as she traced how the banking industry in India had risen from years of operating only state owned banks to the time of privatization after the financial sector was liberalized. She also pointed out that the microfinance industry in India is an “orphaned” sector because the regulators did not pay attention to the industry.  Even after some of the institutions did become regulated as formal financial institutions, the regulations kept them in a tight leash allowing them to offer only group loans and prevented them from offering deposit services.

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