In the Philippines, they use the honorific ma'am before a name, such as Ma'am Garcia or Ma'am Karen. I think this is incorrect use of the word ma'am, but I was told it is acceptable.
Is this usage correct?
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Yes, that usage is correct in the Philippines. Do note, however, that in Filipino English "ma'am" is not pronounced the same way as in American English, which can lead to some confusion: it's pronounced just like "Mom" or "Mum" (more akin to British or Canadian English, though the Filipino pronunciation does not originate there—it's just a coincidence that it sounds the same).
When you hear it the first few times you might be tempted to think it's a maternal reference, but it isn't. Instead, it's used as an honorific for an older woman worthy of respect because of her professional or community position of prominence (for instance, a pastor's wife).
In typical English Missus, abbreviated Mrs., or Miss, abbreviated Ms., are used as honorifics. As StoneyB says, if using Ma'am as an honorific is the convention in the Philippines, then such is correct in the Philippines. However, it is not correct in any other English-speaking country as far as I am aware.
I find no fault with the Filipino usage: Ma'am is a dialectal form of Madam.