RRT 2010 - Recent BSP Regulations and Issuances

The Bangko Sentral ng Pilipinas
and Microfinance: Recent
Regulations and Issuances

Pia Bernadette Roman Tayag
Inclusive Finance Advocacy
Bangko Sentral ng Pilipinas

RBAP-MABS Regional Roundtable
Pan Pacific Hotel, Manila
23 November 2010

Outline of Presentation
 Microfinance and Financial Inclusion: Policy
Framework
 Summary of 2010 Regulations
  Microfinance Products
  Microfinance Industry/ Infrastructure
  Microfinance Delivery Channels
 Regulation in Focus: Establishment of Micro-Banking
Offices (MBOs)

Microfinance and
Financial Inclusion
 Microfinance has proven market-based solutions to
address financial access issues are feasible.
 Building on this success, the goal of financial inclusion
aims to expand a wide range of services to more people
who need them.
 Such financial services include savings, credit, insurance,
payment services, remittances.
 These products must be appropriately designed and
priced for the particular market and delivered by duly
authorized institutions.
 Bank and non-bank products and delivery channels can
combine to reach the financially excluded.

Microfinance and
Financial Inclusion
 Financial inclusion is a worthy policy objective,
alongside the promotion of stability and efficiency in
the financial system
 Financial inclusion and financial stability may be
mutually reinforcing
 Supervisory concerns and risks are real and valid but
can be adequately managed
 Policy approach is to promote an enabling
environment based on proportionate application of
sound and generally accepted regulatory and
supervisory principles

Recent BSP Issuances (2010)
 MICROFINANCE PRODUCTS – characterized by the
increasing appreciation that the microfinance market
need a wide range of products. Innovation in the delivery
of such services is important.
  Housing Microfinance
  Micro-Agri
  Microinsurance
  Micro-deposit Accounts

Circular 678 - HOUSING MICROFINANCE
  Purpose
  House construction
  House and/or lot acquisition
  Home improvements/repairs
  Loan Amount
  Up to P300T for house construction/house and lot acquisition
  Up to P150T for home improvements/repairs
  Loan Value
  Up to 90% of the appraised value of REM
  Acceptable valuation in cases of usufruct, leases, etc.
  Capacity to pay based on cash flow analysis

Circular 678 - HOUSING MICROFINANCE
  Loan Payment
  Loan payments not exceed reasonable percentage of clients
income
  Terms
  Up to 15 years – house construction/house and lot acquisition
  Up to 5 years – home improvement/repairs

Circular 680 – MICRO-AGRI LOANS
  Purpose
  For farming activities, agri business and agri-related fixed
assets, among others, utilizing microfinance principles and
methodologies in accordance with existing BSP regulations
  Eligibility
  Multiple income (farm and off-farm)
  Farm activity at least 2 years in operation
  Existing borrowers with good track record
  Loan Amount
  Up to PhP 150,000

Circular 680 – MICRO-AGRI LOANS
  Payment
  Frequent amortization
  Lump sum may be considered up to 40% of the loan amount
  Other requirements
  Loan product included in manual
  Criteria/characteristics of MF loans must be present

Circular 683 - MICROINSURANCE

  Definition
  activity providing specific insurance, insurance-like and other
similar products and services that meet the needs of the low-
income sector for risk protection and relief against distress,
misfortune and other contingent events

  Authority for banks
  Allows thrift, rural and cooperative banks to market, sell and
service microinsurance products to their microfinance clients
  These banks can now collect premiums and pay claims for
microinsurance products duly approved by the Insurance
Commission

Circular 683 - MICROINSURANCE

  Features of Microinsurance
  The amount of premiums, contributions, fees or charges,
computed on a daily basis, does not exceed five (5) percent of
the current daily minimum wage rate for non-agricultural
workers in Metro Manila; and
  The maximum sum of guaranteed benefits is not more than 500
times the daily minimum wage rate for non-agricultural workers
in Metro Manila.

Circular 694 – MICRO-DEPOSITS
  Definition
  Savings accounts that cater to the needs of the basic sectors,
low-income clients and those that are unserved or underserved
by the financial system. They are appropriately designed and
priced to fit the needs and capacity of this particular market.
  Features of a Micro-deposit
  Minimum maintaining balance not exceeding One Hundred
Pesos (P100.00)
  Not subject to dormancy charges
  Only for individual microfinance clients whose average daily
savings account balance does not exceed Fifteen Thousand
Pesos (P15,000.00)

 MICROFINANCE INDUSTRY INFRASTRUCTURE –
supports the development of a vibrant, robust and
professional microfinance industry

Circular 685 – MICROFINANCE INSTITUTION RATING
AGENCIES (MIRA)
  Create enabling environment for appropriate use of objective,
credible and competent third-party ratings of MFIs, particularly
those that provide ratings for banks with MF operations
  Rules include pre-qualification and minimum eligibility criteria
  Ensure that MIRAs:
  Demonstrate commitment to comply with relevant rules and
regulations
  Possess technical capability, experience and organizational
resources to provide objective and transparent ratings
  Use a rating framework that reflects all material facets of
microfinance operations, its attendant risks and operational
challenges.

 DELIVERY CHANNELS/ ACCESS POINTS – recognizes
the need to create a wide network of access points for
financial services

Circular 694 – OTHER BANKING OFFICES :
REGULATION IN FOCUS
  Highlights
  No longer need to be attached to a microfinance-oriented bank
or branch to perform microfinance operations
  Fully expanded the suite of services available for microfinance
clients and OF beneficiaries
  Can be applied in batches based on a specific strategy
presented by the banks

REGULATION IN FOCUS

  Recognizes two types of other banking offices (OBOs)
  Regular OBOs – non transactional services
  Microfinance OBOs or Micro-banking Offices (MBOs)

  Possible activities of an MBO
  Accept micro-deposits including initial deposit
  Accept check deposits of microfinance clients for collection and
credit to own deposit accounts
  Disburse/release proceeds of micro-loans and collect loan
amortization payments and related charges
  Present, market, sell and service microinsurance products

REGULATION IN FOCUS

  Possible activities of an MBO
  Receive/pay-out funds in connection with authorized remittance
transactions
  Act as a cash/money in and cash/money out for electronic
money (e-money) transactions
  Collect premiums/pay out benefits from/to members of social
security institutions such as the Government Service Insurance
System (GSIS) (GSIS), Social Security System (SSS), other
government authorized pension and benefit systems, Philippine
Health Insurance Corporation (PhilHealth) and Employees
Compensation Commission (ECC)

REGULATION IN FOCUS
  Possible activities of an MBO
  Pay out benefits under government-sponsored conditional cash
transfer schemes
  Accept utilities payments
  Purchase foreign currencies up to the maximum equivalent of
USD300 per client per day for credit to micro-deposit accounts

REGULATION IN FOCUS
  General Pre-Qualifying Requirements
  Safety and Soundness Considerations
  Capacity/ Capability Considerations
  Presence of a coherent strategy in utilizing MBOs

REGULATION IN FOCUS

  Additional Requirements for MBO
  At least fifty percent (50%)of total transactions generated are
with microfinance clients
  Maximum on-site cash limit not exceeding PhP 500,000 per
day, commensurate to its level of banking activities
  Adequate physical facilities and security arrangements as well
as information and transaction support systems appropriate to
the level of banking activities undertaken and services offered
  Managed by a responsible officer with adequate experience or
training in microfinancing activities
  Manual of operations

REGULATION IN FOCUS
  Transitory Provision
  The bank shall declare to the BSP the desired classification
(regular or MF-OBO/ MBO) of its existing OBOs within 30
calendar days from the effectivity of the revised Guidelines;
provided that all existing OBOs shall conform to the revised
Guidelines or phase out non-conforming activities within six
months from its effectivity; provided further that the president of
a bank with an existing OBO covered by this transitory provision
shall certify under oath to the BSP within 30 days from the end
of the transition period that all existing OBOs conform to the
revised Guidelines.

Thank you.

PRoman@bsp.gov.ph
www.bsp.gov.ph

RRT 2010 - Recent BSP Regulations and Issuances

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