Reaching the Poor with Effective Microcredit: Evaluation of a Grameen Bank Replication in the Philippines

The Grameen Bank in Bangladesh has developed a succesful model of reaching credit to resource poor households that are generally bypassed by Government financial institutions.

This paper evaluates the experience of the replication of the model in the Philippines by the Center for Agriculture and Rural Development (CARD), an NGO which has disbursed P82 million to 8000 borrowers since 1990, and has succeeded in recovering the entire amount. Analysis of the data collected from 133 sample household borrowers suggests that:

• For the enterprises financed with credit, the productivity of labor was higher than the wage rate;
• The rate of return was higher than the interest charged on the loan;
• The credit contributed to 25 percent increase in household incomes.

The institution however is not yet financially viable, as the cost of operation is about 54 percent of the amount of outstanding loan. The paper concludes that without high rates of interest, the microcredit operations will not be able to expand their operations on a large enough scale to have a significant impact on poverty alleviation.