The Large Payoffs of Microfinance: Building Financial Inclusion in the Philippines

For the micro and small-sized enterprises that make up 99% of the Philippines’ businesses and generate 65% of the country’s total employment (DTI), having access to small loans is a lifeline – enabling them to start or expand their businesses, and uplifting not only the nation’s income and consumption levels, but further unlocking gains across health, education and social empowerment.

On the other hand, not having a savings account or access to credit has a strong knock-on effect on the livelihoods – and quality of life – of the country’s 39 million unbanked adults (Kantar). For the Bank of the Philippines Islands (BPI), Southeast Asia’s longest-standing lender, the Philippine government’s National Strategy for Financial Inclusion 2022–2028 is wholly aligned with the bank’s goal of promoting inclusive economic growth.

“Banking the unbanked through initiatives that push for financial wellness, as well as infrastructure and sustainable development, is an important priority. We aspire for a better Philippines that is inclusive and sustainable,” says Jose Teodoro K. Limcaoco, President and CEO of BPI.

“From launching the country’s first through-the-wall ATMs in 1983 to our mobile-first microfinance initiatives today, our longstanding focus on financial inclusion reinforces our commitment to help our country grow by providing relevant, innovative and accessible financial solutions for all Filipinos.”

BPI Direct Banko Inc., A Savings Bank (BanKo), the microfinance arm of BPI, was established in 2016 with the goal of serving the Filipino masses and connecting the country’s 168 million cellular mobile connections (Data Reportal) – equivalent to an internet penetration rate of 145% – with essential financial services.

BanKo’s digital-first approach to reaching the unbanked aims to make banking more convenient and less intimidating for consumers across every stage of the consumer banking journey: from opening a savings account (PondoKo) directly within the BanKo app instead of setting foot in a bank, to transferring money, paying loans and bills, and earning rebates – all through mobile.

BanKo’s vision of inclusive finance extends to supporting microentrepreneurs, the backbone of the Philippine economy. Since its inception, BanKo has disbursed more than PHP52 billion in microfinance loans to more than 360,000 self-employed microentrepreneurs, helping them meet day-to-day business needs, from funding stock to paying salaries.

Another digital initiative by BanKo is the e’Nay app, which aims to change the way sari-sari (sundry) store owners run their businesses. The app connects micro-retailers to distributors and wholesalers, giving store owners easier access to inventory stocking. Aside from digital channels, BanKo has gone the extra mile in in-person banking since 2017, deploying employees known as “BanKoPare” and “BanKoMare” to serve clients at their homes and preferred locations.

Among BanKo’s beneficiaries is Manelyn Dela Cruz Rabulan, owner of small business Manelyn Ice Cream. With BanKo’s NegosyoKo loan, Manelyn Ice Cream grew from six carts in 2010 to 12 carts by 2019 – enabling Manelyn to expand her once-small business from Biñan, Laguna, to Greater Manila and Cavite.

“Microentrepreneurs are fueling our economy through their creativity, hard work, and innovation. We recognize the expanding requirements of these business owners in growing their business, and we match them to relevant BanKo solutions” says Rod Mabiasen, Jr., President of BanKo.

In 2023, BanKo announced that through NegosyoKo Loan, clients can now borrow up to P500,000 without collateral, providing them the opportunity to undertake more significant business ventures and expand their operations. This follows the launch of InstaCashKo Credit Line, which provides business owners fast access to cash anytime.

“Through BanKo’s easy, convenient, and affordable microfinance solutions, it has become easier for Filipinos to achieve their aspirations as business owners and improve the quality of their lives,” Mabiasen added.

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In this series:

- Powering the Philippines’ Energy Transition

- Brick by Brick: Building a Sustainable Future for the Philippines

- The New Due Diligence: Helping the Philippines Prepare for Environmental Risks

- Turning on the Tap: Ensuring Water and Wealth Flow Together in the Philippines

- Waste Not: How Southeast Asia's Longest-Standing Bank Is Cleaning Up the Philippines’ Sachet Economy