BPI makes micro lending easy
BY AMADO P. MACASAET
At present the name "mobile micro-finance," a project of the Bank of the Philippine Islands, is a misnomer. The lending remains wholesale.
But BPI president Aurelio "Gigi" Montinola III said the lending will soon become truly micro.
The implementation of the project will be made easier by the bank’s tie-up with Globe Telecoms, a sister company of the bank in the sense that both are substantially owned by the family of Don Jaime Zobel de Ayala.
According to Montinola, the bank has crafted a system where the borrowers under its micro-finance program will fill up only one page of an application form.
Looking at the horizon, Montinola said that only 20 per cent of the population of around 95 million have dealings in one way or another with the banking system.
The bulk of them, he said, keep small deposits representing savings account and operating expenses for small businesses.
That means, he said, that 72 million people never knew what it is to do business with banks. But he pointed out that not all of them are potential clients or borrowers. The country has a very young population dominated by teenagers who are either in school or do not have incomes because they cannot find jobs.
Therefore, he said, there is an absolute necessity to provide micro finance to young and old people who do not make much of a living.
He calculated half of the 72 million who may be employed or jobless is a huge potential market for micro finance. Again recognizing the young age of the population and the high rate of unemployment, Montinola said a 15 million additional potential
micro-finance borrowers is large enough to keep the project going.
The BPI project expands the micro lending program of the Development Bank of the Philippines. The latter’s program is limited to members of accredited cooperatives.
In the DBP program, the borrowings of small scale businessmen are guaranteed to the extent of 80 per cent by the Security Trust Fund created by the Bangko Sentral.
Montinola explained in an interview that the banking system must find a way of eliminating the red tape that attends borrowing from a bank.
He pointed out that the only reason the Indians dominate micro lending specially in public markets is their simplified process.
All they do is write down the name of the borrower, and the amount after his name. The client gets the money. If the loan is P5, the Indian comes back in the afternoon and collects P6.
The rate of default is negligible. The trick of the Indian usurers is rather simple. They know their clients are uneducated. They know they work hard for a living. They know they do not want their reputation ruined by a continuing default.
There is a huge mass of borrowers who can help the economy but they are stymied by the red tape and high interest rates charge by banks.
"The simple solution," Montinola said, "is make it easy for them to borrow."
That’s how the Indians do it. And they are extremely successful in spite of Shylock interest rates.
According to Montinola, BPI has extensive experience dealing with ordinary Filipinos working abroad.
He explained that the bank has 500 remittance outlets for overseas Filipino workers. He said the bank has tied up with three large institutions in three continents. One is with Bank of China in Beijing, another is Wells Fargo in the United States. The third is with United Arab Exchange, one of the largest remittance centers in the world.
According to Montinola, BPI accounts for about 25 per cent of total remittances of OFWs. Based on the present size of remittances amounting to $17 billion, that’s almost $4.5 billion remitted by just one institution through its extensive network abroad.
Montinola said that last year alone, United Arab Exchange based in Dubai, remitted $17 billion from overseas workers from different countries, including the Philippines.
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