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

Lamberte, Mario B.

Manlagnit, Ma. Chelo V.

English

Research Papers in Economics

Policy Notes
December 2003 No. 2003-16
PHILIPPINE INSTITUTE
FOR DEVELOPMENT STUDIES
Surian sa mga Pag-aaral
Pangkaunlaran ng Pilipinas
Efficiency and Gender
Concerns:
Issues Confronting the
Philippine Credit Cooperatives
Ma. Chelo V. Manlagñit and Mario B. Lamberte*
________________
*The authors are Research Associate and President, respectively,
Philippine Institute for Development Studies (PIDS).
T
he Philippine government has recently intensi-
fied its efforts to develop the microfinance
market in the country. For one, the Bangko
Sentral ng Pilipinas (BSP) has issued a series
of circulars to implement the provisions of the General
Banking Law of 2000 that aim to provide a regulatory
environment conducive to the growth and development
of the microfinance market. The government has also
secured financial and technical assistance from donor
agencies, i.e., Asian Development Bank (ADB), Interna-
tional Fund for Agriculture Development (IFAD), and the
United Nations Development Programme (UNDP), among
others, to further boost the development of the micro-
finance market.
Microfinance institutions (MFIs) in the country may take
different organizational forms such as rural banks, in-
cluding cooperative rural banks, credit-granting nongov-
ernment organizations (NGOs), credit cooperatives and
a few thrift banks. This Policy Notes focuses on the credit
cooperative system as a subset of the MFI system and
presents an analysis of the efficiency of its system through
various factors, including the incorporation of the gender
dimension. Hopefully, the results of the analysis can pro-
vide valuable information to policymakers and other stake-
holders on the performance of the credit cooperative
system given its potential contribution to the develop-
ment of low-income communities.
Integrating a gender perspective
in microfinance analysis
To determine if participation in microfinance programs
has significantly changed household behavior, studies that
dealt with group-based lending programs have examined
the issue of whether having greater access to finance
have empowered women.
The common finding of these studies is that the multi-
plier effect of women’s access to capital and training
programs mobilizes their productive capacity to alleviate
poverty and maximize economic output. This thus implies
that well-designed microfinance policies and programs
can make an important contribution to women empowerment.
PIDS Policy Notes are observations/analyses written by PIDS research-
ers on certain policy issues. The treatise is holistic in approach and
aims to provide useful inputs for decisionmaking.
This Notes is based on PIDS Discussion Paper Series No. 2003-06
entitled “Integrating gender perspectives in evaluating the efficiency of
COFI: the case of credit cooperatives in the Philippines” by the same
authors. The views expressed are those of the authors and do not
necessarily reflect those of PIDS or any of the study's sponsors.December 2003 2
Policy Notes
However, none of the existing studies has ever tackled
the implications of women participation on the perfor-
mance of  credit cooperatives. And this is what this Policy
Notes focuses on. It points out that the incorporation of
gender issues in microfinance does not always neces-
sarily mean directing a program towards women as cli-
ents, like most of the existing microfinance programs
do. Rather, it stresses the need to take a look instead at
the crucial role of women as policymakers and managers
of MFIs, and assess its contribution to the development
of MFIs.
Credit cooperatives: a backgrounder
Considered a watershed in the development of the
country’s cooperative movement was the creation of the
Cooperative Development Authority (CDA) through Repub-
lic Act (RA) No. 6939 in the 1990s. The CDA’s mandate
was to promote the viability and growth of cooperatives
as instruments of equity, social justice and economic
development. Along with its 14 regional extension offices
distributed nationwide, the CDA takes care of the regis-
tration and supervision of cooperatives, including sav-
ings and credit cooperatives or credit unions.
The Cooperative Code classifies cooperatives into: (a)
credit, (b) consumers, (c) producers, (d) marketing, (e)
service, and (f) multipurpose. Despite their highly differ-
entiated functions, there is no specific regulatory frame-
work for each type of cooperative.
The credit cooperative system is the most significant and
most organized subset in the entire cooperative move-
ment, with assets totaling PhP23.2 billion as of Decem-
ber 2000. This is equivalent to 0.7 percent and 35.6
percent of the entire banking system’s and of the rural
banking system’s assets, respectively.1 It is interesting
to note that some credit cooperatives even exceeded the
assets of the largest rural bank and some thrift banks in
the country. Unlike banks, though, credit cooperatives
are unit institutions which means that they do not have
branches.
Efficiency concerns: looking at cost and profit
efficiencies
With such huge assets in its hands, it is important to de-
termine how efficient these institutions manage them since
this would have an impact on the system’s sustainability
and contribution to the development of MFIs as instruments
of financing for the poorer sectors of society.
Using balance sheets and income statements of the 134
member-credit cooperatives of the National Confedera-
tion of Cooperatives (NATCCO)2 for the period 1990-1999,
therefore, these authors set to evaluate the efficiency of
the cooperative credit system by looking at both the
system’s cost and profit efficiencies. These measures
of efficiencies were based on two points of reference,
namely, from the best-practice perspective and asset-size
reference.
Figure 1 shows the efficiency estimates for 1990-1999
on the basis of the best-practice perspective. It shows
that the average cost efficiency of the credit coopera-
tives was 1.09, which means that nine percent of the
cooperative’s costs were wasted. Meanwhile, the aver-
age profit efficiency estimate of the credit cooperative
system was 0.86, implying that on the average, the credit
cooperatives were using only 86 percent of their resources
efficiently.
In general, the average cost inefficiency score of coop-
eratives has been moving erratically during the indicated
period and tended to decline up to 1994. This implied
that there was an improvement in cost efficiency but this
trend was reversed afterwards. In contrast, the profit ef-
ficiency of credit cooperatives has consistently deterio-
rated from 96 percent in 1990 to 67 percent in 1999.
________________
1This figure does not include delinquent cooperatives that failed
to submit their financial statements.
2NATCCO is one of the federations/unions of cooperatives in
the country. It is the largest national federation in terms of geographi-
cal reach, membership, financial capacity and array of services. The
share of female members in NATCCO’s credit unions rose from
39.8 percent in 1993 to 57.2 percent in 1999 while the proportion
of women-employees had been consistently more than 60 percent
during the same period.No. 2003-16 3
Policy Notes
In terms of asset size groups,3 in the meantime, Figure 2
shows that the average cost inefficiency increases as
the asset size of credit cooperatives increases then de-
clines as asset size further increases. On the other hand,
profit efficiency improves as asset size increases and
then deteriorates as asset size further increases. This
indicates that larger credit cooperatives appear to be more
cost efficient than smaller ones. However, they also ap-
pear to be less profit efficient than smaller ones. It could
be that credit cooperatives pay more attention to cost
efficiency than to profit efficiency.
Dissecting the efficiency correlates for analysis
In order to determine the factors affecting these cost
and profit efficiencies, three sets of correlates were ex-
amined. The first set deals with measures of market char-
acteristics consisting of: (a) population density; (b) real
gross regional domestic product; and (c) type of mem-
bership of credit cooperatives.
Among these indicators, the results show that only popu-
lation density has a significant effect on both cost ineffi-
ciency and profit efficiency of credit cooperatives. This
means that credit cooperatives operating in an
area where there are fewer banks that serve
the population feel less competitive pressure
and therefore tend to be more cost inefficient
and less profit efficient (this finding is similar
to that pertaining to cooperative rural banks
as discussed in PIDS Policy Notes 2002-16
dated December 2002).
The second set of factors consists of corre-
lates of agency costs. These include the fol-
lowing: (a) quantity of assets; (b) fixed assets
to total assets ratio; (c) sufficiency of financial
margin; and (d) ratio of deposits to loans. In
this set, only the quantity of assets and fixed
assets to total assets ratio have significant
effects on the profit and cost efficiencies, re-
spectively. This set of correlates shows that
agency costs do not have a clear-cut effect on
the efficiency of credit cooperatives which, in
turn, implies that most credit cooperatives have
not yet reached a certain size that can give
rise to agency problems.
The final set of correlates refers to women and
governance participation that includes the (a)
proportion of women in the cooperative’s total
________________
3The credit cooperatives were categorized into four
asset size groups: below PhP1.5 million; PhP1.5 mil-
lion – PhP3.5 million; PhP3.5 million – PhP10 mil-
lion; and above PhP10 million.
1.05
1.06
1.06
1.07
1.07
1.08
1.08
1.09
1.09
1.10
1.10
1.11
Cost Inefficiency
-
0.20
0.40
0.60
0.80
1.00
1.20
Profit Efficiency
Cost  1.10   1.10   1.08   1.09   1.07   1.09   1.07   1.09   1.09   1.08 
Profit  0.96   0.94   0.90   0.89   0.88   0.85   0.83   0.81   0.82   0.67 
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Figure 1. Efficiency estimates by best practice reference,
1990-1999
Notes:
The left-hand scale is for cost efficiency which indicates that the higher the value of the estimate,
the less cost efficient the cooperative is relative to the best practice cooperative. The cost
efficiency takes the value of 1 or higher.
The right-hand scale is for profit efficiency which indicates that the higher the value of the
estimate, the more profit efficient the cooperative is relative to the best practice cooperative. The
profit efficiency takes the value of between 0 and 1.
Figure 2. Efficiency estimates by asset group, 1990-1999
1.06
1.07
1.07
1.08
1.08
1.09
1.09
1.10
1.10
1.11
Cost Inefficiency
0.76
0.78
0.80
0.82
0.84
0.86
0.88
0.90
0.92
Profit Efficiency
Cost   1.09   1.10   1.08   1.07 
Profit   0.89   0.90   0.85   0.81 
Below P1.5M P1.5M - P3.5M P3.5M - P10M Above P10MDecember 2003 4
Policy Notes
membership; and (b) ratio of the number of women to the
total number of employees or staff of a cooperative. The
specific hypotheses tested here were:
X A credit cooperative with a higher proportion of
women as members tends to exhibit lower expense pref-
erence and, thus, incur lower costs and higher profitabil-
ity; and
X A credit cooperative with a higher proportion of
women as employees tends to exhibit lower expense pref-
erence and, thus, incur lower costs and higher profitability.
The results show that the first indicator has no signifi-
cant effect on the cost inefficiency measure but it has a
significant positive effect on the profit efficiency mea-
sure. The second indicator, on the other hand, is nega-
tively correlated with cost inefficiency but exerts a nega-
tive influence on profit efficiency, which is contrary to
what is expected. This suggests that credit cooperatives
that are managed predominantly by women would likely
concentrate on having greater cost efficiency than profit
efficiency.
Conclusion and implications
What do all these results indicate?
The results suggest that in general, credit cooperatives
are inefficient. Their cost and profit inefficiencies, how-
ever, are, on average, not too far from those of the coop-
erative rural banks in the Philippines.
In terms of the correlates, what was shown by the re-
sults as more significant is the effect on efficiency of
women participation in the governance of credit coop-
eratives, especially in terms of cost efficiency. Given the
preoccupation of credit cooperatives on cost efficiency,
the dominance of women in the staff of credit coopera-
tives can help achieve that objective. However, in view of
the need to shift emphasis to profit efficiency for long-
run sustainability of credit cooperatives, new manage-
ment skills would be required. In this regard, the training
of the staff of credit cooperatives, including women, is in
order.
It is worth emphasizing the role of women as employees
and members of credit cooperatives since they create a
significant impact on the performance of the organiza-
tion. The most essential in terms of equal partnership
within the credit cooperative system is the involvement
of women, not just as beneficiaries of the lending pro-
grams, but more important, as partners in all aspects of
decisionmaking at all levels—from policymaking to pro-
gram planning to implementation and down to the evalu-
ation process—in order to better appreciate their roles
and contribution to the credit cooperative system.
At present, the CDA still lacks the capability to efficiently
regulate the cooperatives in the country. Although it is
performing well in its developmental role of encouraging
the registration of cooperatives, a more pressing con-
cern dwells on its efficiency in performing its regulatory
function, which appears to run in conflict to its develop-
mental responsibility. This therefore calls for an urgent
resolution to said conflict that hinders the CDA’s perfor-
mance. It is either a choice between retaining its devel-
opmental function and transferring its supervisory and
regulatory functions to another or new regulatory entity.
The functioning of the microfinance market depends on
how effective the policy—legal, supervisory and regula-
tory framework—operates in the country.  The other fac-
tor lies on the capabilities of the financial infrastructure,
e.g., credit bureau, payment system, and others, present
in the country which can help improve the efficiency of
the microfinance market. Though microfinance is hardly
a cure-all to poverty, it is nonetheless clear that it can
contribute to poverty reduction.      
For further information, please contact
The Research Information Staff
Philippine Institute for Development Studies
NEDA sa Makati Building, 106 Amorsolo Street
Legaspi Village, 1229 Makati City
Telephone Nos: 892-4059 and 893-5705
Fax Nos: 893-9589 and 816-1091
E-mail: mchelo@pidsnet.pids.gov.ph; mlamberte@pidsnet.pids.gov.ph
jliguton@pidsnet.pids.gov.ph
The Policy Notes series is available online at
http://www.pids.gov.ph

Efficiency and Gender Concerns: Issues Confronting the Philippine Credit Cooperatives

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Efficiency and Gender Concerns: Issues Confronting the Philippine Credit Cooperatives

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