SMARTowns: Bringing MSME Finance to Islands, Uplands, Hinterlands

Sept. 22, 2010 - PRLog -- Manila, Philippines --- Micro-, Small-, and Medium- Enterprise  (MSME ) finance is getting an unexpected, long-overdue attention. From the government trade and industry agencies to the regulators like the Securities and Exchange Commission and the Bangko Sentral ng Pilipinas, the Magna Carta for MSMEs is making its presence and impact felt now more than ever, since the charter’s issuance in October 2008.

Banks, NGOs, cooperatives, even private lenders and the omni-present pawnshops are now doing some sort of micro- or SME financing support. This is the environment where microfinance institutions are now operating: an environment replete with competition, innovation, and need-for-speed implementation.

In the BSP 2009 year-end report on microfinance, it cited a global study which declared the Philippines as the best country in the world in terms of microfinance regulations. Implementation and industry reach are also very encouraging. In the banking industry, more than 210 banks with microfinance operations have lent a total of PhP6.4 Billion to nearly 900,000 households. While no hard statistics on the cooperatives and NGOs that are also into micro- and SME finance exist, at least a thousand cooperatives and no less than a hundred Microfinance Institutions (MFI)-NGOs would have delivered an equally substantial outreach.

Innovations in the delivery of MSME finance products and services could be credited with the improving outreach statistics. While for the longest time, MSME had limited reach, it is encouraging that already, a total of 52 rural banks are reportedly doing mobile banking to expand and fast-track the delivery of their microfinance services. Outside of banks, MFI-NGOs and cooperatives are doing their share. In its own little way, SEEDFINANCE Corporation, a wholesale MFI, is working closely with about 40 MFIs in its 75-strong MFI network in the realm of mobile banking, using mobile phones, ATM machines, and POS (point-of-sale) machines to deliver MSME finance to farmers, fisher-folks, petty traders, and other seemingly insignificant local economic players in hard-to-reach island and upland communities.

The Opportunity

Over the past decades, a lot of hard to reach, underserved island communities have switched to and are limited to using commercial and rural banks in nearby islands since most small savings-and-credit cooperatives are not meeting their financial needs.  

One example is the Bantayan Island which is primarily a fishing community. Municipalities in the island encouraged commercial fishing to the peoples’ hearts’ content, unmindful of the dangers posed not only to the environment but to the precarious local island economy as well. Much of the catch is exported to mainland Cebu and Mindanao, and middlemen and large importers benefit more.

Farming and poultry-raising provided alternative livelihood sources for the islanders. While backyard and small-scale farming, including mango- and corn-planting, copra-making and tuba-gathering, are slowly being relegated to the background, poultry farms have proliferated and Bantayan eggs are regularly exported to Cebu, Manila, and Mindanao.


This SMARTown Project  hopes to complement the municipal fisheries management development plan, if not the overall island development of the local government units through a relevant stake in various socio-economic initiatives that will optimize the use of the agricultural and fisheries resources.


The Promise

Mobile banking aims to deliver the promise of accessible, reliable, and affordable development finance initiatives to hard-to-reach areas that are either un-served or under-served. Having realized this early on, the BSP’s Monetary Board has laid down the regulatory groundwork to guide electronic money (e-money) issuances and operations. Such guidelines ensure not only consumer protection and risks mitigation but also efficient and convenient retail payments and fund transfer mechanisms.

A network of ATM machines, mobile/e-money, POS machines, and other mobile banking channels thru the cooperation of telecommunications companies, banks, ATM solutions providers, systems technicians, and BDS (Business Development Services) experts augur well for the boosting of the island’s economic activities. Imagine the FCCT Coop (First Consolidated Cooperative Along Tanon Seaboard, a multi-purpose coop based in Madridejos) and its membership being linked to electronic cash platforms, transacting and realizing transactions at their own time, their most convenient place, not needing to travel far or even leave their site of business. An MSMEntrepreneur can now pay loans, withdraw money, make a deposit, or even simply buy a kilo of rice, a gallon of gasoline, or motor-boat fan-belt, using e-money stored in a mobile phone, an ATM card, a debit card, or any other electronic tool. Person-to-Person, Point-to-Point (P2P) transfers, purchases, bills payments, are affected real-time, at the client’s convenience.

The policy and regulatory environment for these have been set in place. Stakeholders – including technical, financial, and social – have been assembled. The playing field has been scanned.

In addition, a Mobile BEAT (Mobile Banking Education And Training) Program is even now underway to deliver essential technical capacity building initiatives to FCCT and its constituents. The coop shall be supported by its major partner, SEEDFINANCE Corporation, with a series of training programs on mobile banking MIS (management information systems), liquidity management, product planning and development, and marketing. The clients shall also receive reinforcing education and training on the use of mobile banking channels, and the business opportunities that go with them.


The Stakeholders

To deliver the promise of the SMARTown Project, a number of stakeholders are being brought to the fore.

First Consolidated Cooperative Along Tanon Seaboards, SMART Communications, Banco De Oro, ENCASH ATM Solutions, PLDT KaAsenso,  LACCAS,  Business Fair Trade Consultancy, Ennovent for Renewable Energy and Seedfinance Corporation.

SEEDFINANCE Corporation plays the lead role in leveraging the varied expertise of its network of strategic partners to support the various aspects of the SMARTown Project. Aside from the networking, the Corporation will also provide financial support to FCCT and its clients in terms of wholesale micro- and SME finance capital, ATM-POS-IAP liquidity management facilities, institutional loans, and soft loans for innovations. To protect these financial investments, SEEDFINANCE shall provide close monitoring, and reinforcing education to both the MFI and its clients through the former’s SEEDFINANCE MAX (Microfinance Assistance eXtras) Advanced Consultancy Program and the MOBILE BEAT (Mobile Banking Education And Training) Program.

SMARTowns will definitely expand the reach of banking services beyond the traditional reach of brick-and-mortar branches. Where the client is, that is where the banking service is supposed to be done and realized, all within sound, prudent, and safe banking environments.

For more information about The SMARTown Project, please contact Seedfinance Corporation or visit http://seedfinance.net .

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SEEDFINANCE is registered as a microfinance-oriented financing company in April 2007 with the Securities and Exchange Commission of the Philippines. Its two founding organizations are CARE Philippines and Sustainable Economic Activity Development (SEAD) Incorporated. SEEDFINANCE provides high quality microfinancial services to millions of poor and low-income people in the Philippines through a strong network of 73 partner organizations. SEEDFINANCE also delivers loans, working capital and asset acquisition means to small businesses. To date, the company has reached more than 1.2 million people through its partner-organizations across the whole country.