Bank Shot – A microfinance scoring guide

A microfinance scoring guide

Toron of Bacong!

DUMAGUETE CITY – AUTHOR is formerly with the World Bank based in Washington D.C. and is an expert on microfinance. He decided to retire for good here being “captivated” by Dumaguete’s rustic ambience. He is out to help improve the lot of marginalized poor who are over burdened by mounting debts from loan sharks.

Microfinance is a nontraditional credit delivery system that provides loan facility and other services to micro-entrepreneurs in order to augment their income. It is considered a poverty alleviation program as it offers small capital without any collateral with the agreement that the loan amount shall be used strictly for income generating activities. Because if not for that sole purpose, it will just be a matter of time that the borrower will not be able to pay the loan and will eventually close the business.

The first point of contact when you are dropped off from the bus upon arrival in one town, is the vendor on the side of the street. You get interested with the vendor either you are hungry or thirsty and you need to fill your stomach or quench the thirst by having a cold drink. Or, need to get some information to find your way around. The small vendor most of the time inter-acts and knows the people in the community.

This happened to us with my friend Rey when we landed in Bacong, Negros Oriental after a long bus ride from Bacolod via Hinobaan. While waiting for the guys who would pick us up, we crossed the street to buy toron ( a fried ripe banana fillet coated on flour ) and some drinks. After putting our heavy bags on the side with stuff from the US trip, we enjoyed our conversation with the couple who served us the native food.

As I am always interested to learn about microfinance and its impact, I asked the couple how much is their capital, where do they get the funds, what is the interest rate, the other services offered by the credit providers, how many microfinance institutions (MFIs) that offer the same services, how often is the loan being collected and most of all, I asked the couple if they have plans to expand their business. At first, they were hesitant. As we ordered a couple more, they became comfortable to share to us one sad story of a banana vendor who could no longer continue the livelihood activity because she didn’t have the funds anymore to buy the needed materials and pay the loans. She was over indebted to the loan providers.

Microfinance being a non-traditional credit delivery system provides loan facility and other services to microentrepreneurs in order to augment their income. It is considered a poverty alleviation program as it offers small capital without any collateral with the agreement that the loan amount shall be used strictly for income generating activities. Because if not for that sole purpose, it will just be a matter of time that the borrower will not be able to pay the loan and will eventually close the business.

FOCUS TO EXPAND

As microfinance developed in the mainstream banking industry with stakeholders and players growing rapidly with increased portfolio, it has to start improving their services not just efficient collection efforts. MFIs should provide capacity training, business networking and product enhancement for the small entrepreneurs to grow. With this in mind, the couple who sells toron with minimal sales and capital may be afforded opportunities to make the toron business flourish. Packed toron can be an additional product that will be available in the market. Instead of relying on the daily sales vending toron in the street which is impossible during rainy days, the business of the couple continues. Who knows, soon we will be exporting toron originated and packaged from Bacong. (By Boyito Quiroz)