Microfinance as a Vital Tool for Micro-Enterprise

Abstract

The study assessed the economic impact of MFI program to the growth of micro-enterprises in Isabela. The selected MFIs were ASKI and TSPI with 162 respondents. Descriptive research was used. Results showed that majority were engaged in marketing and had less than 5-year membership. All acknowledged that MFI had high contributions towards their economic growth in terms of Size of Capital, Return of Investment, Net Profit, Net Worth, and Total Assets. They agreed to have encountered problems with MFI in its operation in terms of high risk in operating microfinance; very slow business growth probability; voluminous number of small transactions; very volatile market; high costs of monitoring and evaluation; very poor loan repayment rate; loan proceeds were utilized in other purposes; very slow processing of loan that caused loss of business opportunity; very short term of loan and frequent repayment schedule hampered micro-enterprises’ cash flow; and very small amount of loan offered. They recommended solutions to MFI: reduction of documents needed to fast track loan processing; replacement of collateral based-lending to cash-flow-based lending; increase on amount of loan; giving reasonable grace period for repayment; strict monitoring of MFI to ME in the use of loan; strict collection drive to improve repayment rate. Keywords - Microfinance, micro-enterprise