Independent Evaluation

Share |

Printer-friendly Version

Give Feedback

Evaluation of the Rural Microenterprise Finance Project in Philippines
Completed: 2006

The Project demonstrated that the Grameen Bank approach could be implemented successfully nationwide. Notably, by facilitating the participation of rural banks, cooperative rural banks, and thrift banks that have emerged as major microfinance providers, the Project brought microfinance into the mainstream of the financial system.

The favorable policy and legal environment, catalytic role of the Project in expanding the supply of microfinance services, and flexibility of the Project to respond to changing market needs contributed greatly the Project's success.

Lessons Identified

• Covenants on regulation need to be more sensitive to the laws and standards practiced in the financial sector.



• Any effort to target the poor must
  • clearly define the target group;
  • identify the barriers to their market entry; and
  • include interventions and/or mechanisms to break these barriers in the project design to ensure the target group's participation.


• Microfinance institutions, especially banks, have cost-efficiency and sustainability objectives that cause them to screen applicants for creditworthiness. As such, they are likely to select those who are perceived to have the greater capacity to repay the loan. As the Project demonstrated, these clients are the enterprising or economically active poor. Thus, microfinance is not effective in reaching large numbers of the ultra poor on a sustainable basis.



• The Project brought microfinance into the mainstream of the formal financial system. The critical factors that contributed to this achievement were
  • the availability of project funds that catalyzed the expansion in the supply of microfinance services,
  • the favorable policy and legal environment provided by the Central Bank of the Philippines and the passage of the Social Reform and Poverty Alleviation Act, and
  • the flexibility of ADB and the Executing Agency (the People's Credit and Finance Corporation [PCFC]) to adjust and respond to changing market demand conditions.

  Recommendations

• Strengthen the Capital Base and Governance Structure of PCFC.
  PCFC's weak capital base threatens its ability to sustain this increasing role in the subsector, and to expand operations. The governance structure of PCFC needs to be strengthened to reduce the institution's vulnerabilities to political risks. Also, more structured supervision of PCFC is needed since it is not regulated by the Central Bank of the Philippines or supervised by the Securities and Exchange Commission under which it is registered.



• Develop an Effective Monitoring System to Oversee Savings Mobilization of Nongovernment Organizations (NGOs).
  Proper oversight of the savings operations of NGOs is lacking. To promote greater transparency and disclosure, an effective reporting system must be established that enables the Central Bank of the Philippines to oversee voluntary savings mobilization activities of NGOs.



• Enforce Performance Standards for Cooperatives and NGOs.
  Enforcement of performance standards will increase efficiencies of microfinance institutions and facilitate cost-effective delivery of services to the poor.



• Develop a Cost-Effective Monitoring and Evaluation System.
  The Project used periodic means tests to monitor the impact on clients. As the Project showed, the filing and encoding of individual forms with such large outreach could be cumbersome and costly. Additional personnel need to be hired to manage, encode, and analyze the gathered data. As a result, the costs involved for data maintenance and analysis precluded the use of a means test for benefit monitoring and evaluation.