SHADED from the searing sun by a tarpaulin, 74 women in a Manila slum patiently wait their turns to hand in loan repayments to a young man making entries into a ledger.

At first glance, this looks little different from the microfinance projects found in many impoverished communities in the Philippines - or the developing world, for that matter.

But the loan books of these small entrepreneurs tell a different story.

Many credits are way above the amounts - typically under 9,383 pesos (S$300) - usually made to the poor to help them out of poverty by starting small businesses.

Mrs Gemma Manalo, for instance, borrowed $4,800 to expand her tiny grocery store.

Another borrower, Mrs Rosario Monter, got a $930 loan to renovate her roadside canteen and buy a used motorcycle, which she rents for $6 a day.

Microfinancing became famous worldwide through the work of Bangladesh-based microcredit bank Grameen, whose inspirational founder, Mr Muhammad Yunus, won the 2006 Nobel Peace Prize.

But in the Philippines, Dr Eduardo Morato, head of the Bayan Foundation run by the ABS-CBN television network, calls the effort 'democratising entrepreneurship'.

'We're not focusing on the poorest of the poor like Grameen, but the entrepreneurial poor,' he said.

He was at Manila's Asian Institute of Management and developing a course on entrepreneurship when he was fired by the idea of moving microfinance into a higher level while studying the impact of these loans on the lives of poor borrowers.

The former World Bank official saw that tiny loans brought only limited benefits to the poor, and were invariably used for simple buy-and- sell enterprises.

'Many of our clients have businesses, but at a very small level. Our objective is to raise the level of livelihoods,' he said.

When he was appointed head of the Bayan Foundation's microlending operations just over a year ago, he decided on a new tack: bigger loans for larger ventures.

The approach is different from Grameen Bank, which makes relatively tiny loans - enough to buy a sewing machine or cow, for instance - to poor villagers. As of March, it had over seven million borrowers, 97 per cent of them women.

But both ways recognise that business can be good for the poor - and that loan default rates among micro borrowers are lower than among well-heeled borrowers from high-street banks.

Every Wednesday morning, loans payments to the Bayan Foundation's 15 borrowing groups in a shanty called FTI PNR Site in Manila's Taguig City are made.

The meeting starts with a roll call, then a short prayer. Practically all the clients are women, but the husbands of a third of them help run their businesses.

Following the model pioneered by Grameen, borrowers are formed into groups of five or six, comprising neighbours and friends - but never family or strangers.

'Groups put peer pressure on each member to pay their individual loans and share responsibility for the debts of defaulters,' said Taguig manager Roderick Ramos.

Bayan Foundation now has 28 branches, mainly on Luzon island, and outstanding loans of $9.6 million. These have been ploughed into the businesses of 50,000 borrowers running enter- prises like small bakeries, shoe repair, grocery stores and those dealing in scrap.

Lending larger amounts has not resulted in higher default rates. Its repayment rate is 97 per cent.

But some borrowers, inevitably, struggle to repay loans, though usually because of bad luck rather than bad management.

PAYBACK TIME: Borrowers making repayments to the Bayan Foundation in Manila's Taguig City. Though some struggle, the loan repayment rate to the foundation stands at 97 per cent. Photo/ ALASTAIR MCINDOE

Taguig resident Vilmenda Biasong is one of the them. She looks distracted as the four other members of her borrowing group chat while waiting to hand in their bank deposit slips (cold cash is not transacted at these meetings).

A few months ago, she borrowed $930 to expand her sari-sari store, one of the rudimentary grocery shops found in practically every corner of the country. Her business opened two years ago, bankrolled by a small starter loan.

'One of my sons got sick with meningitis and I had to close the business to stay with him in hospital,' said Mrs Biasong, who has eight children.

She has paid the $54 due every week on her six- month loan from the wages her husband makes as a construction worker.

But that has decimated the family's budget. To make matters worse, another of her children recently contracted pneumonia.

'We are still willing to continue with the loan,' Mrs Biasong told The Straits Times. Happily, it looks as if she will be able to re-open her shop soon.

For development economists, microfinance will be a significant driver in the efforts of individual countries to meet the global poverty reduction targets set by the United Nations under its Millennium Development Goals.

The Philippines aims to cut the proportion of its population mired in poverty to 22.7 per cent by 2015. According to 2003 figures - the latest available - the figure is 30.4 per cent.

Initially slow to grasp the business potential of lending to the poor, rural and thrift banks are now active in this market, though usually only to borrowers with collateral.

Close to 200 banks are now doing microfinance, compared with only 55 in 2000.

There are also around 500 non-governmental organisations, and over 4,500 savings and credit cooperatives, in the sector. Several are operating at the FTI PNR Site, a sprawling warren of 30,000 households.

Philippine President Gloria Arroyo, a United States-trained economist, has strongly endorsed microfinance to spur entrepreneurship among the poor.

State financial institutions are now big lenders to rural banks and other microfinancers, who re-lend to the poor.

But despite the sharp rise in microlending, many poor Filipinos remain 'unbanked'.

Philippine Central Bank Governor Amando Tetangco, a keen advocate of banking for the poor, said the 1.7 million borrowers from the main providers of microfinancing represent only a third of the demand for these loans.

For Filipinos without access to banking services, pawnshops and moneylenders are still a major source of credit.

But the terms of the latter are invariably usurious.

Bayan Foundation's microfinance system works like a ladder of credit. Starting with a small loan, borrowers move up to bigger ones as they prove their creditworthiness.

The bulk of Bayan Foundation loans are between $3,200 and $4,800, though a few have topped $48,000.

Interest rates, fixed at 4 per cent a month, are steep compared with bank lending rates, which are now at around 1 per cent.

But they are far cheaper than the 20 per cent charged by moneylenders.

Borrowers must attend courses on basic accounting and business management, and the success of a venture is not measured solely in terms of revenue and profit. Loan officers track the health, education and living indices in the households of borrowers.

But for the borrowers, it is clear that this form of supercharged microfinance has had a transforming effect on the lives of their families.

A six-month loan of $4,800 recently helped Mrs Shirley Delos Santos expand her 'buying station' for scrap paper and metal, which she sells to a recycling plant.

'We're making about 40,000 pesos a month and thinking of increasing our loan to buy a truck to collect more scrap,' she said, proudly noting that she can now afford to send all seven of her children to school.

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