Microfinance NGOs Act Implementation Quiz

Implementing Rules and Regulations of the Microfinance NGOs Act (Republic Act No. 10693)

• These rules are to implement Republic Act No. 10693, also known as the Microfinance NGOs Act.
• The act was promulgated under Section 22.

Rule 2: Definitions of Terms

• Act: Refers to the Microfinance NGOs Act (RA 10693).
• Accreditation: The official process of recognizing a registered Microfinance NGO, fulfilling minimum standards set by the NGO Regulatory Council; an accreditation certificate is issued by the council upon meeting standards.
• BSP: Bangko Sentral ng Pilipinas
• BIR: Bureau of Internal Revenue
• Charges on loans: Agreed-upon reasonable interest rates, fees, penalties, and other incidental charges to microfinance lending activity.
• Clients: Borrowers and savers of a Microfinance NGO.
• Compensating Balance: The proportion of a microfinance client's loan retained as capital buildup or microsavings to offset client defaults.
• DOF: Department of Finance.
• DSWD: Department of Social Welfare and Development.
• DTI: Department of Trade and Industry.
• Group Loan: Loan to a member of a microfinance group guaranteed by the group; creditors can collect from any group member.
• Gross Receipts: Total income from microfinance operations, including interest, penalties, surcharges, commissions, discounts, service fees, and other charges.
• Microcredit: Extension of microfinance loans to poor/low-income clients by a Microfinance NGO.
• Microfinance: Providing a wide range of financial services to low-income people (microentrepreneurs) using nontraditional methodologies such as small loans and other services.
• Microenterprise Development Strategy: (Inclusive growth focusing on poor); refers to programs empowering the poor, managing risks, and expanding access to microfinance (microcredit, microinsurance, microsavings, etc.) services and other development services.
• Microinsurance: Financial services for the poor that minimizes risk protection needs; must not exceed specific percentage limits based on determined daily minimum wages in Metro Manila.
• Microsavings: Program of a Microfinance NGO to collect small amounts from clients for compensating balance or capital buildup.
• Microfinance NGOs: Non-stock, non-profit organizations registered with SEC to implement microenterprises.
• Microfinance Operations: Programs and services listed in Rule 5, sections 1 and 2.
• NEDA: National Economic and Development Authority—defines the low-income threshold.
• Poor: Individuals/families below the poverty threshold.
• Social Performance: Effective translation of a Microfinance NGO's mission into practice.
• Social Welfare Promotion/Purposes: Activities designed to improve the living conditions of the poor, disadvantaged, vulnerable people.
• SEC: Securities and Exchange Commission.

Rule 3: Microfinance NGO Regulatory Council

• Comprised of 4 government sector and 3 NGO sector members as permanent members.
• Chairman of the SEC.
• Secretaries from DOF, DTI, and DSWD.
• Nominations from organizations/associations of Microfinance NGOs.
• Nominees must have 5 Microfinance NGO members involved.

Rule 4: Accreditation of Microfinance NGOs

• Microfinance NGOs must be accredited by the council to receive incentives.
• Accredited NGOs must have operated for 3 consecutive years.
• NGOs must be registered as non-stock, non-profit corporations with at least ₱1,000,000.
• Microfinance must be part of the corporation's name and bylaws.
• Bylaws must specify nonprofit/nonstock status, microfinance as primary purpose, and that assets go to similar NGO/State in case of dissolution with no member profit/income.
• Level of administrative expenses should not exceed 30% of total yearly costs.

Rule 5: Microfinance Programs and Services

• NGOs are expected to provide at least microcredit/financial literacy, and micro-credit/CBU/microsavings.

Rule 6: Taxation of Microfinance NGOs

• Microfinance NGOs can pay 2% tax on gross receipts from microfinance operations instead of all national taxes.
• This only applies if it's their main purpose; and they are accredited.
• Accreditation is essential to attain these tax benefits.

Rule 7: Maintenance of Books and Reportorial Requirements

• Microfinance NGOs must use a standard chart of accounts.
• NGOs must maintain required books of accounts from SEC and BIR.
• NGOs are to publish and disclose audited financial accounts within 120 days of their financial year.

Rule 8: Access to Government Programs, Projects, and Technical Assistance

• Accredited Microfinance NGOs receive access to related government programs/projects.
• This includes capacity building support & grants.
• NGOs must meet criteria from other relevant government agencies to avail of programs.

Rule 9: Administrative Sanctions

• Microfinance NGO violations lead to sanctions defined by the council (fines, penalties).

Rule 10: Initiative of the BSP and IC to Examine Microfinance NGOs

• BSP and IC can request the council to examine NGOs.
• Review if operating outside their authority, thus revoke their accreditation.

Rule 11: Transitory Provisions

• NGOs with no derogatory information are immediately accredited.
• NGOs undergoing accreditation undergo a transitional period of 1 year.

Rule 12: Amendatory Provisions

• SEC and the council can issue amendatory provisions or new rules for continuous improvement in NGO sustainability.

Rule 13: Separability and Effectivity

• Rules that are deemed unconstitutional/invalid will have no effect; the valid sections remain in effect.
• Rules and regulations come into effect 15 days after publication in a national newspaper.