MICROCAPITAL STORY: Producers Rural Banking Corporation (PRBC) Receives $34m Credit Line for Microfinance Activities in the Philippines

Producers Rural Banking Corporation (PRBC), a Manila-based microfinance institution (MFI) serving the countryside of the island of Luzon, has received a line of credit worth Philippine Peso (PHP) 1.4 billion, or USD 34 million, from both public and private institutions, according to the Philippine Daily Inquirer. These funds will be onlent to individual clients of PRBC. The bank does not report to the MIX Market, the microfinance information clearinghouse, nor do they maintain a Web presence.

This is the latest manifestation of a nascent, sustainable Philippine microfinance market being supported through government lending institutions (in addition to various private and international banks). Another initiative which PRBC is involved with, the Rural Micro-enterprise Finance Project (MRFP), provided USD 65 million of credit beginning in 1996, mostly to MFIs utilizing the Grameen Bank Approach (GBA), a process which lends to small groups rather than to individuals to take advantage of the security of joint liability within the group, yet reach poverty-stricken, rural peoples. According to an interim evaluation conducted in 2002 by one of MRFP’s main financiers, the International Fund for Agricultural Development (IFAD), PRBC was experiencing returns on assets of 5.3 percent and on equity of 105.6 percent. Overall, the project has been deemed successful reaching 436,000 clients, 98 percent of which are women, and experiencing an average loan repayment rate of over 96 percent (figures are the average of all participating lending institutions).

IFAD is a United Nations (UN) agency working since 1977 to eradicate rural poverty in developing countries and has contributed over USD 10 billion to nearly 800 projects since its inception. The People’s Credit and Finance Corporation (PCFC) implemented the MRFP, provided USD 9.3 million towards the project, and is also a current lender to PRBC as detailed later in this story. MicroCapital reported in the past on other Philippine government efforts to support microfinance lending.

The various creditors and the amount of credit each gave to PRBC are listed below.

The Land Bank of the Philippines (LBP), a government institution dually promoting rural development and providing financial services, gave PRBC the largest credit line of PHP 550 million (USD 13.6 million) in addition to an unspecified amount of shares of LBP’s preferred stocks. LBP was created in 1963 by the Agricultural Land Reform Code and reports 2007 total assets of PHP 382 billion (USD 9.5 billion) including a loan portfolio of PHP 178.5 billion (USD 4.4 billion).

A PHP 450 million (USD 11.2 million) rediscounting line was also extended to PRBC by Bangko Sentral ng Pilipinas (BSP), the Philippine central bank. Rediscounting is the selling, or discounting, of a security for the second time in order to refinance and free up cash. The BSP was created by the 1993 New Central Bank Act. A recent press release on MicroCapital.org announces approval of a BSP housing microfinance product.

The Rizal Commercial Banking Corporation (RCBC), the Philippine’s fifth largest private, domestic commercial bank with 2005 total assets of USD 3.6 billion, gave a credit line to PRBC of PHP 140 million, or USD 3.5 million.

The government-run PCFC contributed to PRBC with a PHP 100 million credit line (USD 2.5 million). The PCFC’s expressed mission is to “assist in the development of MFIs and the microfinance industry” and the decade-old institution is active in every province of the country partnering with 201 MFIs to provide financial services to nearly 1.8 million clients. In 2006, the PCFC reported total assets of over PHP 3.2 billion (USD 80.2 million) and a loan portfolio of PHP 2.9 billion, or USD 70.9 million. MicroCapital recently reported on the PCFC in “Philippine Government Advocates Lowering Interest Rates for Microenterprises.”

A credit line of PHP 50 million (USD 1.2 million) from the National Livelihood Support Fund (NLSF), a subsidiary of the LBP has worked to empower the poor by providing credit since 1981, was given to PBRC. Financial information was not available.

The Philippine Business for Social Progress (PBSP), a private, non-profit foundation organized in 1970 by prominent business leaders, gave PRBC a credit line of PHP 35 million (USD 866,000). PBSP has been promoting corporate social responsibility and corporate citizenship since 1970. Financial information was not available, but the Web site states that a significant portion of their funds comes from membership dues and contributions.

The PRBC received a credit line of PHP 30 million (USD 743,000) from the Development Bank of the Philippines (DBP), whose majority shareholder is The Republic of Philippines. Financial information can be downloaded from the Web site.

The Small Business Corporation (SBC), the Philippine government’s third largest lender to small and medium enterprises (SMEs), gave a credit line to PRBC of PHP 20 million, equal to USD 495,000. The SBC operates with a loan portfolio of over PHP 3 billion, or USD 74.3 million, and was established in November 2001.

By Anthony Busch, Research Assistant

Additional Resources:

Bangko Sentral ng Pilipinas: Home, History

Development Bank of the Philippines: Home, Financials

International Fund for Agricultural Development: Home, About, Rural Micro-enterprise Finance Project, Interim Evaluation

Land Bank of the Philippines: Home, History, Financial Highlights

MicroCapital article, August, 23, 2007: “The Allied Bank of the Philippines in Conjunction with the Department of Agriculture and Agricultural Credit Policy Council Launches Agri-Microfinance Program”

MicroCapital article, February 22, 2008: “BSP Approves Housing Microfinance Product to Address Shelter Needs of the Economically Active Poor”

MicroCapital article, February 14, 2008: “Philippine Government Advocates Lowering Interest Rates for Microenterprises”

MIX Market: Home

National Livelihood Support Fund: Home

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