Institutions
Despite a long history of state-intervention in Asia and the operations of non-regulated organisations, regulated and supervised institutions, whether they are banks or NBFIs, dominate the microfinance market in terms of reach in an ever greater number of countries. This growth is developing along several paths:
- Upgrading of NGOs:
The process of upgrading NGOs began around the mid 90s. The phenomenon has become widespread throughout almost the entire continent, albeit with varying intensity depending on the level of sustainability of the NGOs and each country’s legal requirements. There is a gradual process of upgrading NGOs into NBFIs and, in a second stage, of NBFIs into commercial banks, such as ACLEDA Bank in Cambodia, Xac Bank in Mongolia, Nirdhan Utthan Bank in Nepal, and Opportunity Microfinance Bank in the Philippines, amongst others. Regarding this upgrading process, Philippine institutions such as CARD, NWTF, and TSKI have opted for a “dual institution” structure; that is, continuing with their operations as an NGO and creating regulated commercial institutions, rural banks and thrift banks to extend their offer of products and their reach. - Deepening of commercial banking:
This process is not such a common phenomenon in this region as in Latin America. Indeed, although the first entries date back to the end of the 80s with the Hatton National Bank in Sri Lanka and its programme “Gami Pubuduwa”, this practice continues to be an incipient phenomenon today. Certain banks have accessed the sector with incentives from donors or from the state, as in Jordan, the Philippines or Afghanistan; or for business reasons, such as the financial leasing institution LOLC in Sri Lanka.
Two models of direct entry can be singled out, with the most usual ones being those that use the same brand creating an internal department within the institution, such as the Jordan National Bank, or creating a new subsidiary trading company, such as the LOLC in Sri Lanka. Other banks enter indirectly through partnership agreements with NGOs, such as India’s ICICI Bank, which works with the NGO CASHPOR, which acts as the bank’s agent, lends its name and shares the risk, whilst the bank provides the NGO with funds.
