Paper

Small Enterprises' Access to Formal Financial Services: Review and Assessment

Increasing access to formal credit for the poor: Study from the Philippines

This discussion paper studies the financial and banking system of the Philippines with particular reference to the extent of financial intermediation provision to the different socioeconomic categories. The study examines:

  • Services provided by the formal financial system;
  • Access of credit from formal credit markets to socioeconomic groups;
  • Government banking and credit policies and programs.

The paper uses were published statistics, other existing studies and interviews with key informants as data sources. The paper initially discusses the supply side of the Philippine financial system. It also narrates the different attributes such as authorized functions, total resources, geographical distribution of financial offices and types of loans and borrowers for each of the major financial sub-systems. Discussing the demand side of the financial system, the paper elaborates the extent to which various socio-economic sectors, particularly small farmers and micro, cottage and small enterprises (MCSEs) have access to credit from the formal financial system. Factors that affect such access are:

  • Imperfect information;
  • Credit rationing;
  • Loan contract enforcement problems.

The author states that various policy instruments and measures are being taken by the government, private banks and NGOs to ensure the flow of credit to the small borrowers. These range from making regulations, direct participation, using NGOs and special credit programs of private banks.

About this Publication

By Lamberte, M.
Published