The Impact of Microfinance on the Development of Small Enterprises in the Municipality of Obando, Bulacan.

Introduction Poverty has always been a problem in any nation. Many steps and actions had been made to lessen, if not to eradicate poverty. One of the solutions proposed to rectify this is supporting of microenterprises through Microfinance. What is Microfinance? Microfinance is a provision of broad range financial services such as deposits, loans, payment services, money transfers and insurance products to the poor and low income households and their microenterprises. This aims to invigorate Microenterprises which cannot access “traditional” sources of financing. Microfinance is a system of providing credit, mobilizing deposits and generating investment at the micro-level. Anything below small and medium scale enterprise is micro-level, which means providing services in the area of one peso to 1.5 million pesos. Put simply, any credit, saings or investment that caters to the enterprising poor is microfinance. Microfinance is neither about charity nor throwing away money. It is about encouraging the poor to set up enterprises, not only to generate income and employment, but also to earn profit that can be reinvented into equity. Borrowers and lenders both earn money, but on the basis of mutual trust and respect. It is a two way relationship that benefits both. Impact studies indicate that the overall impact of Microfinance had been positive. Access to financial services had allowed poor households to diversify their sources of income through multiple economic activities. Respondents reported better incomes and assets, and higher household expenditures. Among borrowers there was evidence of movement out of poverty over several loan cycles. In the Philippines, the growth of Microfinancing is evidenced by the many success stories that demonstrate microfinance as an effective tool for economic development. Microfinance provides the necessary push for microenterprises to help them grow. This bears significance for the Philippines where micro, small and medium enterprises make up 99.6% of our total industries and employ 70% of our workforce. It becomes even more significant when we learn that around 4.1 million families belonging to the lowest income strata are engaged in microenterprise activities. Without access to financial services, these microenterprises are forced to rely on more expensive sources of credit such as informal money lenders which limits when we learn that around 4.1 million families belonging to the lowest income strata are engaged in microenterprise activities. Without access to financial services, these microenterprises are forced to rely on more expensive sources of credit such as informal money lenders which limits their capacity to grow their businesses. It is clear therefore that by invigorating these microenterprises, microfinance can have a direct contribution and impact for economic

In addition. Microfinance can then empower the many Filipinos living in poverty to increase their economic activity and income. the benefits go beyond the client’s household. These micro businesses generate the much needed employment and increase the economic activity in local economies.development and poverty alleviation. and housing thereby improving the overall quality of their lives. . prepare against emergencies and better invest in education. build up assets. health.