According to several surveys, approximately 20% of all households in the Philippines depend on income from microenterprises. The microenterprise sector, clearly, is a crucially important component of the Philippine economy.
Microenterprises, like all enterprises, need access to quality financial services if they are to prosper and grow. Yet, for all intents and purposes, microenterprises are shut out of the formal financial sector. Because of outdated beliefs that the small size of loans demanded by the microenterprise sector makes it impossible to make money providing those loans, most banks have not been willing to provide loans to microenterprises.
As microenterprises essentially do not have access to bank loans, they are forced to rely on much more expensive sources of credit – e.g., moneylenders, pawn shops – for their credit needs. The very high cost of this credit makes it almost impossible for microenterprises to grow their businesses.
MABS believes that, contrary to “common knowledge,” banks can make money providing loan and deposit services to microenterprises if they “do it right.” MABS’ objective is to teach as many banks as possible to “do it right.” MABS’ hope and expectation is that, once banks realize that they can make a reasonable profit providing services to microenterprises, they will make providing services to the microenterprise sector a permanent and significant part of their business.”