Operational Practices Of Microfinance: Evidence From The Philippines

One of the principles of microfinance institutions (MFIs) is to eradicate poverty by providing financial services. MFIs allow people to take on reasonable small business loans safely and in a manner that is consistent with proper lending practices. Microfinance is important because it provides resources and access to capital. They offered different products such as checking accounts, lines of credit, or loans from traditional banks. However, the main problem of MFIs is the risk of financial losses. The purpose of the study is to determine the operational practices of MFIs. There are four factors affecting the MFIs operational practices: loan and data processing, marketing strategy, implementation of management techniques, and risk management strategy. The study used a descriptive research design with the use of survey questionnaires. Data were gathered from 100 employees of MFIs staff in San Pablo City, Laguna, Philippines. Results show that loan and data processing, marketing strategy, implementation of management techniques and risk management strategy greatly affect the Operational practices of MFI. The chance of financial loss when a borrower has either insufficient cash flows or insufficient assets to liquidate. Clients use loans to pay their other debts and not use it for their business or raise their standard of living. MFIs continue to develop and innovate different ways to adapt to modern changes. It gives clients a faster way to apply a loan and provides additional sources of capital.