Automating the work of the ‘Bumbay’

MY helper, Ate Tes, couldn’t get to my house to start her job because she didn’t have enough money for transportation. She said there was no Bumbay, a common cultural loan provider for Filipinos who have no access to credit. I gave her the money she needed. Other Filipinos are not so lucky.

To put it in perspective, P100 stood in the way of her livelihood and poverty.

In the Philippines, many still live below the poverty line. Many also have no or little access to credit. Meanwhile, major microfinance operators have expanded their loan portfolios into the billions of pesos. There is a need to bridge the gap between those needing access and those that have the wherewithal to provide credit.

There are apps and web sites nowadays that help the regular employee get by until the next payday. There are also apps that allow banks to provide to those outside the radar, like farmers and contractual workers, with access to loans to fulfill their needs like irrigation, home loans, medical care, university education, car loan and store supplies.

There’s also a free mobile app that links the majority of the population without access to credit to banks. Other web sites will connect borrowers to lenders that, unfortunately, are not banks.

At a much smaller level, individuals need credit. From home and vehicle loans to funds that can pay for medical care or university education, there are only a few who doesn’t need credit. Still, also few are those able to get homes for their children or get that capital boost for their business that will spell the difference between failure and success.

Despite economic growth, the Philippines’s formal banking sector simply cannot accommodate and process the millions of Filipinos who desire credit. The costs versus benefits and revenue of opening branches and catering to the financial demands of large sections of the population are simply not justified from the perspective of a large bank.   In the past only non-governmental organizations, local cooperatives and smaller lenders provide loans. I read somewhere that an estimated 5 million people have taken microloans in the country. Typically, these loans are under P100,000 and unsecured.

My research has also shown that those accessing microcredit tend to show considerably higher income growth and lower poverty rates over the long term than those not accessing these facilities. Given the success of microcredit, the central government has moved swiftly to regulate and promote the growth of the industry. Research from the Asian Development Bank indicates that the Philippines policy framework in relation to microlending is among the best in the world.

One key bottle neck is physical access. Given a large and remote rural population, as well as an abundance of small towns, many operators simply have difficulty reaching large segments of the population.

Today these logistical challenges can be overcome.

The government of Kazakhstan began using the free mobile app Turnkey Lender to build a national credit bureau. A custom option allows peer-to-peer lenders to track debits and credits. The app also allows banks to issue loans remotely. A range of software systems allows microlenders to transparently allocate risks, assess a potential borrower’s credit rating and track loan payments and performance. The app also allows microfinance lenders to assess credit worthiness, track repayments and assess risk and future borrowing opportunities. Loans are tracked via mobile phone and one can chat with loan officers within the cloud-based app.

Perhaps, apps like these are the automated Bumbays who can provide not just enough to get by today but for a more financially secure future for Ate Tes and the thousands of people like her who just need to be given not only to pay for a fare but, more important, a break in life.

For questions, comments and suggestions, contact Maxine Mamba at [email protected]. The comments and views expressed in Mamba’s column do not necessarily reflect those of the BusinessMirror’s.

Turning Points 2018
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