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Paeng’s Continuing Presence

(Article published in the Nov 24, 2010 issue of Manila Standard Today)   

           It is supposedly a Chinese saying that to attain immortality, one must either write a book, or plant a tree, or sire a son.  Rafael B. Buenaventura, who four years to the day this coming Tuesday, Nov. 30 was lifted to immortality, wrote the book on microfinance that sowed its seeds on fertile soil nourished by the son that bears his name.

Microfinance entered mainstream banking with the enactment on 23 May 2000 of R.A. No. 8791, known as The General Banking Law of 2000.  Section 40 tells the Monetary Board (MB) to recognize, in formulating its rules and regulations relating to bank loans and other credit accommodations, the peculiar characteristics of microfinancing, such as cash flow based lending to the basic sectors that are not covered by traditional collateral.  Section 43, by way of departure from the general regime of interest rate liberalization, empowers the MB to regulate the interest imposed on microfinance borrowers by lending investors and similar lenders, such as, but not limited to, the unconscionable interest collected on salary loans and similar credit accommodations.  And Section 44 provides that incase of loans and other credit accommodations to microfinance sectors, the schedule of loan amortization shall take into consideration the projected cash flow of the borrower and adopt this into the terms and conductions formulated by banks. 

But Paeng Buenaventura’s support of microfinance antedated the General Banking Law of 2000.  As I reported in my column which appeared under the title of “Trusts and Estates” with the business paper TODAY, Paeng, when he was President of PCIBank, granted the Bukas Palad Foundation Inc, a Php 500,000 loan when its five-year funding from Inter Aide France expired in 1989 when funding microfinance institutions was not yet in fashion.  With the loan, Bukas Palad was able to continue its microfinance lending in Tramo, Pasay City, enabling mothers and young women to supplement their family earnings from their home-based enterprises and the men the ability to develop their brains and brawn to feed their kith and kin.


Later, in 1994, as President of the Bankers Association of the Philippines, he convinced his colleagues to launch its initiative called “Banking with the Informal Sector” as part of the organization’s broader social pact on credit. It was a call to the banks to humbly admit the limitations of commercial banking and be open to building bridges to NGOs and cooperatives in credit delivery.

    When he became the Governor of the Bangko Sentral, Paeng pursued to the max his microfinance advocacy. Iris Celia Gonzales, a Manila-based journalist and blogger in her heartfelt eulogy the day Paeng passed on, wrote:

“Mr. Buenaventura considered his biggest achievement as laying down the foundation for microfinance banking.
I like to think that microfinance is my most important contribution," he said in an interview back in 2004.
He has become so passionate with Bangko Sentral's microfinance initiatives that reporters covering the beat during his time have become so used to the topic. In fact, reporters would jokingly close their notebooks when the amiable governor started talking about his latest microfinance incentives.”

With Paeng as Governor, the Bangko Sentral  issues the first ten circulars that laid the foundations of institutionalized microfinance lending.  Circular 272 issued on 30 January 2001 laid out the operating guidelines that cash-flow based lending as a peculiar feature of microfinance, defined precisely the meaning of  “microfinance loans” and provided for the exemption of microfinance loans from rules and regulations issued with regard to unsecured loans.  To encourage the setting up of microlenders, Circular 273, one month later, partially lifted the general moratorium on the licensing of new thrift and rural banks to allow the entry of microfinance-oriented banks.  And since, liquidity was necessary for microfinance lending, rediscounting facilities were opened for rural banks, rural bank cooperatives, and thrift banks engaged in microfinance lending with the issuance of Circular No. 282 on 19 April 2001 and Circular No. 324 about a year later.  Other circulars of similar thrusts followed.

By the time the baton at the Bangko Sentral was passed on to his successor, microfinance was an established mission of the institution.  Paeng’s worthy successor devoted a special section of his inaugural speech to recognizing its value

“We shall also intensify,” he said, “the social dimensions of BSP policy. Foremost in this is our advocacy for microfinance. This program is the most effective tool for democratizing the access of the public to a portion of the nation’s wealth, for empowering the poor and the economically- challenged group of small entrepreneurs and for scoring a dent on poverty alleviation.”

Paeng’s enthusiasm for microfinance was contagious.  After his passing, his close associates and friends formed the RBB Microfinance Foundation which was intended to operate as a resource center for microfinance institutions.  It was then Paeng’s belief that microfinance operations will not run out of funders for as long as microfinance institutions show the right amount of strength and the exhibit the required capability. 

Following Paeng’s modo de proceder, which is to find the gaps in the system and locate the resource that could fill them, the RBB Microfinance Foundation started its vocation with providing banking training for the personnel of the microfinance institutions, a perfect fit for Paeng’s apostles who were mostly successful ex-bankers.

At present, they have identified a gap that more urgently required filling, i.e. the need for an atmosphere of information sharing among the players in the industry.  Information sharing is essential in order to avoid the rigors of multi-borrowing, credit standards deterioration due to competition among funding providers, personnel pirating and interinstitutional migration, and similar ills that now beset other jurisdictions. When the RBB Microfinance Foundation board meets next month, that direction would be fully ventilated and, most likely, formally pursued by Paeng’s sons.