The Philippine Chamber of Commerce and Industry (PCCI) and the Arab Gulf Program for Development (AGFUND) have signed a memorandum of agreement to create the IBDAA Microfinance Bank, which is aimed at giving the poor access to financing for their small projects.
IBDAA serves as the conduit for AGFUND money for use in financial services to the poor in developing countries. In other developing countries, the bank is a collaboration among AGFUND, the private sector and the government. There was no official announcement of the initial fund, but an IBDAA source said the fund for institution in the Philippines is about $5 million.
Prince Talal bin Abdul Aziz Al-Saud of the Kingdom of Saudi Arabia signed for AGFUND and lawyer Miguel Varela signed in behalf of the PCCI. Vice President Jejomar Binay witnessed the formal signing. Also present during the signing of the agreement were Ambassador to Saudi Arabia Ezzedin Tago, Saudi Ambassador to the Philippines Abdullah Al Hassan, and other Middle East ambassadors.
AGFUND is a non-profit regional development institution. It was established in 1980 by the initiative of Prince Talal. Leaders of the Arab Gulf States constitute its membership and contribute to its budget. AGFUND is concerned with the support of sustainable human development efforts targeting the neediest in developing countries, particularly women and children.
For his part, Varela said that micro, small and medium enterprises (MSMEs) in the Philippines account for about 91 percent of companies, but their lack of access to financing have stunted their growth.
“As of last year, only 20 percent of small businesses had access to capital from local banks,” he said.
“Most banks are reluctant to lend because of the high-risks associated with MSMEs and their inability to comply with certain bank requirements such as loan collateral and financial records,” Varela said.
He added that the country’s “jobless growth” can be attributed to the MSME sector not gaining ground. The PCCI has set up an SME Center with the Department of Trade and Industry that serves as a one-stop shop to help MSMEs comply with bank borrowing requirements. The PCCI has been a leading proponent of MSME development. Its current president, Alfredo Yao, himself started business as a 12-year old cigarette vendor and progressed to become the owner of the country’s largest food-and-beverage companies, Varela said.
“The PCCI will provide the technical expertise to help our MSMEs access the financial services of [IBDAA],” he added.
Prince Talal, who initiated formation of IBDAA in 1997, said that the bank “will be a vital tributary to the opening of new business opportunities, integration of the poor in the financial process and [promotion of]the concept of savings.”
The AGFUND strategy in creating IBDAA banks, “is policies and principles of non-discrimination between communities in granting development aids, [will provide]the poor the keys to decent life’s door,” he added.
IBDAA operations in the Middle East have benefitted more than 1.5 million poor people since it started.