Microfinance guarantee fund corporation: Why not?

For more than three decades, the Philippine microfinance industry has been a source of financial innovation and social transformation.

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From microinsurance and banking services to digital finance and social enterprises, microfinance institutions (MFIs) have continually sought new ways to empower low-income Filipinos and support inclusive growth.

Today, a new and ambitious idea is taking shape — the Microfinance Guarantee Fund Corporation (MGEC), a private-led initiative that aims to strengthen MFIs’ resilience and unlock greater opportunities for microentrepreneurs aspiring to grow into small-and-medium enterprises (SMEs).

Learning from Japan’s success

The concept took shape following a study visit to Japan in May 2023, where representatives from Philippine MFIs joined the Bangko Sentral ng Pilipinas (BSP) delegation. The team engaged with key Japanese institutions — including the Credit Risk Database (CRD), Japan International Cooperation Agency (JICA), Small and Medium Enterprise Agency (SMEA), Financial Services Agency (FSA), Bank of Japan, and the Credit Guarantee Corporation of Tokyo — to learn from their best practices in financial inclusion and risk management.

The visit provided valuable insights into how Japan’s credit guarantee system has helped its SMEs thrive, balancing access to finance with prudent risk management. A followup internship from Feb. 19 to March 1, 2024 enabled MFI representatives to learn directly from institutions like CRD-Japan, Mizuho Bank, and Tokyo Credit Guarantee Corporation — hands-on engagements that explored governance models, sustainability mechanisms, and client servicing systems that sustain the robustness and credibility of Japan’s credit guarantee framework.

From these engagements, a simple but powerful question emerged: If Japan could build such a system for its entrepreneurs — why not the Philippines?

A shared vision