Governance of Microcredit as a Strategy for Poverty Reduction in the Philippines

14 Pages Posted: 25 Jan 2012 Last revised: 7 Jan 2014

See all articles by Frede Moreno

Frede Moreno

Alliance for International Education, Germany

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Date Written: December 11, 2011

Abstract

Microcredit can be an effective tool for tackling the global poverty problem. Making microcredit work better for the poor necessitates a framework that integrates the principles of good governance in the design and implementation of a microcredit program. The integration of good governance principles in microfinance is argued to have positive consequences in improving financial viability and increasing social outreach of microcredit programs as well as in widening the livelihood and economic options of Agrarian Reform Beneficiaries within Third World economic and poverty conditions. Governance principles can be applied as implementation strategies of Official Development Assistance (ODA)-assisted microfinance program as a tool for poverty reduction and development. In view of the Philippine government’s limitations, economic and fiscal challenges, the financial and technical support programs of the international donor community provide a big boost to the effectiveness and impact of microfinance in reducing the incidents of poverty in Third World countries such as the Philippines. As a tool for poverty reduction, microcredit is applicable only to the enterprising poor based on Joe Remenyi’s (1999) Poverty Pyramid which is a useful tool for the application of BRAC’s graduated strategy for helping the poor when they are grouped into: (1) micro-enterprise operators or the less poor, (2) enterprising or moderately poor, (3) laboring or very poor, and (4) poorest of the poor and most vulnerable or the ultra-poor. The use of microcredit to assist poverty groups is recommended to be based on existing livelihood activities and micro-entrepreneurial skills and capabilities. Furthermore, the program design of the Bangladesh Rural Advancement Committee (BRAC) is found to be appropriate for the agrarian reform beneficiaries in Zamboanga Peninsula (Region IX), Philippines.

Keywords: microcredit, microfinance, governance, government, Grameen, BRAC, ASA, Bank Rakyat, CARD, rural bank, NGO, development, poverty, rural finance, Zamboanga, Mindanao, Philippines

Suggested Citation

Moreno, Frede, Governance of Microcredit as a Strategy for Poverty Reduction in the Philippines (December 11, 2011). Available at SSRN: https://ssrn.com/abstract=1991497 or http://dx.doi.org/10.2139/ssrn.1991497

Frede Moreno (Contact Author)

Alliance for International Education, Germany ( email )

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