When her daughter entered college, Josefina Albiza knew her family would need to earn more money to finance the cost of her education. The small convenience store that she ran was doing well, but Josefina needed to diversify her inventory to earn enough to support her daughter while she was in school. That’s when she turned to Rural Bank of Santo Tomas, which was just beginning a micro-lending program for local entrepreneurs.
In 1998, Josefina’s 5,000-peso loan (about $100) was the first microloan provided with the assistance of the USAID-funded Microenterprise Access to Banking Services (MABS) project. Nearly 10 years later, another of the project’s partner banks, Rural Bank of Mabitac, issued the 1 millionth microloan provided through MABS’ assistance.
Microenterprises, or small-scale businesses, are an important part of the Philippines’ economy, representing more than 90 percent of all businesses in the Philippines. These small businesses also are the primary sources of income for more than 40 percent of Filipino households. Most microentrepreneurs, however, cannot expand their businesses because they cannot access additional capital through traditional banks. Often, their only option is to borrow from informal money lenders at very high interest rates. MABS offers technical assistance and microfinance training to rural banks in the Philippines, helping them to increase the financial services they provide to microentrepreneurs. Trained banks then offer services specially tailored to microentrepreneurs such as Josefina.
Providing microentrepreneurs with greater access to financial services strengthens the private sector and promotes economic growth and individual income generation. For example, over the past nine years Josefina has taken out and repaid 25 loans. She now is a wholesaler, supplying other stores with their inventory, and she has been able to expand her own store to offer other services to the community.
Erlinda Quinones and her husband, Lamberto, received the 1 millionth loan provided through the assistance of the MABS project. Their microloan is helping them to finance Erlinda’s slipper distribution business as well as Lamberto’s rice field and fish pen. Erlinda says that in addition from Mabitac’s flexible loan policies, she also likes the savings program that gives her the opportunity to set aside money for emergency purposes.
To date, MABS has directly assisted more than 335 rural bank branches in the Philippines. Together, these banks have disbursed more than 1 million loans worth more than 13 billion pesos ($250 million). In addition to spurring the growth of small businesses, the loans have helped Filipinos throughout the country raise their families’ standard of living. As Josefina noted, “I was able to put up an extension to our house, we were able to acquire and purchase appliances and furniture, and more importantly my daughter was able to graduate from college.”