Efficiency and Gender Concerns: Issues Confronting the Philippine Credit Cooperatives

This Policy Notes looks at the issue of gender concerns in credit cooperatives from a different perspective. Specifically, it looks at the implications of women participation on the performance of credit cooperatives. It points out that the incorporation of gender issues in microfinance should not necessarily just limit to directing a program towards women as clients but rather and more importantly to involving women as policymakers and managers of MFIs and assessing their contribution to the development of MFIs.microfinance, credit cooperative, women's participation, gender governance, cost efficiency, profit efficiency

Household Poverty: Addressing the Core of Microfinance

Few studies on microfinance have delved on its development from the household perspective as it relates to poverty alleviation. This Policy Notes focuses on this aspect and comes up with the revealing observation that there is virtually no difference in the extent of poverty between male- and female-headed households. This finding has a strong implication on the current thrust of mainly targeting poverty alleviation programs for female-headed households and should lead planners to explore other indicators that may improve the effectiveness of poverty alleviation programs.microfinance, poverty alleviation, gender, poverty measures, households, community-oriented financial intermediary (COFI)

In-depth Analysis on the Access to and Suitability of the Loans

This paper examines the borrowing behavior of the households and the suitability of the loans obtained from the community oriented financial intermediary (COFI) and reinforces the significance of using a household approach in evaluating the effects of microfinance. Using descriptive and statistical analyses, results show that the effects of credit in household income and expenses are positive and statistically significant with client households experiencing greater positive effects than nonclient households. Moreover, nonclient households, unlike client households, allot a greater percentage of their loans in proportion to their income on food and nonfood consumptions suggesting that they are more engaged in borrowing for smoothing their consumptions. It has also been shown that the access to COFI loans is relatively easy for the client household members since the requirements and processing are fast and reasonable. This indicates that credit cooperatives rarely disapprove loan applications and if there are numbers of pending loan applications, they usually reduce the amount of loan approved instead of disapproving the application. In general, COFI loans reasonably suit the needs of the COFI clients. Given that both household types obtained their credits from various lenders, those who have access to the COFI system have a reliable source of loans indicating that the COFI performs a particularly important role in providing services, especially credit lines.microfinance, households, loans, credit

The Role of other Economically Active Household Members in Poverty Alleviation

This paper extends the analysis on microfinance and poverty from the household perspective by focusing on the role of other economically active household members in alleviating household poverty. Results show that additional other economically active household members expand the pool of income earners in the households and this points to the significance of mobilizing additional household labor in the reduction of dependence on a single source of income in the household. Specifically, results from the earnings regression analysis and logit analysis indicate congruence with generally accepted theory on poverty, that is, the number of other economically active household members, their education, age (as proxy to experience) and employment status contribute to the income generation of a household and therefore, have a positive effect in reducing the probability of a household being poor. This implies that a household is more likely to be nonpoor if it has a greater number of other economically active household members because the effects of these explanatory variables to the households’ total income are interpreted as having the opposite effects on poverty.microfinance, poverty, other economically active household members

Evaluating the Impacts of Competition Policy Reforms on the Efficiency of Philippine Commercial Banks

This paper has attempted to examine the impacts of competition policy reforms on the efficiency of the Philippine commercial banking system. It uses the stochastic frontier approach to come up with estimates of profit efficiency and cost inefficiency measures. The results are quite interesting. First, the average measured profit efficiency is 0.85, implying that on the average the commercial banks are using only 85 percent of their resources efficiently compared to the best practice commercial bank in the system producing the same output and facing the same conditions. On the other hand, the average measured cost inefficiency of the commercial banks is 1.39, suggesting that, on average, 39 percent of the commercial bank’s costs are wasted relative to the best-practice commercial bank in the system producing the same output and facing the same conditions. Second, some improvements in banks’ profit and cost efficiency can be observed after the liberalization of the entry of foreign banks in 1994, but these improvements were halted when the East Asian financial crisis occurred. Some improvements in profit and cost efficiency can again be observed after the passage of the General Banking Law in 2000 that liberalized further the entry of foreign banks. Third, small banks are found to be more profit and cost efficient than large banks. Fourth, foreign banks are generally more profit and cost efficient than domestic banks. However, these differences widen during crisis period and narrow during stable economic conditions. Fifth, profit efficiency of merged banks dropped more sharply than nonmerged banks after 1998, but eventually recovered and approximated that of nonmerged banks in 2002. Also, merged banks’ cost inefficiency dropped sharply in 2000 and since then has remained much lower than that of nonmerged banks. Sixth, some factors, such as agency problem, governance and market characteristics appear to be significantly correlated with measured efficiencies of banks. These results have important policy implications. First, the liberalization of the banking system has generally produced positive results in terms of improving profit and cost efficiencies of banks. Second, improvement in profit and cost efficiencies of domestic banks brought about by greater competition cannot be sustained unless it is accompanied by improvement in prudential regulations and supervision. Third, M&A policy pursued by the Bangko Sentral ng Pilipinas appears to be complementary policy for improving profit and cost efficiencies of banks. Fourth, understanding the nature and extent of the impact of some correlates of measured efficiencies can help authorities in designing appropriate regulatory and supervisory framework for banks.competition, banking system, cost efficiency, profit efficiency, merger and acquisition

Integrating Gender Perspectives in Evaluating the Efficiency of COFI: The Case of Credit Cooperatives in the Philippines

This paper first examines the extent of cost and profit inefficiencies of the Philippine credit cooperative system using stochastic frontier analysis (SFA). Then, it looks into the effects of certain variables on the cost and profit efficiencies of credit cooperatives. Three groups of correlates of inefficiency were used: market characteristics, agency costs and gender governance. Results suggest that market conditions can explain to a certain extent the differences in the efficiency among credit cooperatives. However, the correlates of agency costs do not have a clear-cut effect on the efficiency of credit cooperatives. What is more significant though in this study is the effect on efficiency of women participation in the governance of credit cooperatives. The correlates of gender governance indicate that empowering women not only through enhancing their access to credit but also through increasing their participation in shaping policies can improve the efficiency of credit cooperatives. Results seem to suggest that credit cooperatives that are managed predominantly by women would likely pursue greater cost efficiency than profit efficiency.agency costs, efficiency, gender governance, stochastic frontier

Poverty and Access to Microfinance with Gender Dimension

This paper examines the development of microfinance market from the household perspective as it relates to poverty alleviation. It employs poverty decomposition and dominance analysis. The analysis was divided into four components: comparison between beneficiaries of community-oriented financial institutions (COFIs) and nonbeneficiaries; comparison between male-headed and female-headed households; comparison between male-headed and female-headed beneficiary households; and comparison between male-headed and female-headed nonbeneficiary households. Results show that there is a large disparity in poverty incidence between COFI beneficiaries and nonbeneficiaries while the results on the comparison between male-headed and female-headed households reveal that there is hardly any difference between these two groups. Among COFI beneficiaries, female-headed households appear to be poorer than male-headed households while among nonbeneficiaries, male-headed households appear to be poorer than female-headed households.microfinance, gender, poverty measures