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Continued innovation within the microfinance Week 10 The Way in Which Microfinance Deals with industry is a necessity, in order to keep pace with Sustainability Issues...

Continued innovation within the microfinance Week 10 The Way in Which Microfinance Deals with industry is a necessity, in order to keep pace with Sustainability Issues the changing needs of poor and low-income clients. Promoting Microfinance Microfinance, including Islamic IMPORTANCE ∙ The competitive advantage and the microfinance, can alleviate poverty in Indonesia. Innovation in microfinance is important for distinctive feature relative to conventional However, it faces a trade-off between profitability improving the quality, scale, and efficiency of lending and saving institutions. and reaching the poorest. While microfinance financial services for poor and low-income people. ∙ Based on the idea of inclusion and on the institutions offer valuable funding, they must Innovations involve changes to products, service belief that increasing access to financial balance social impact with financial sustainability, delivery, and/or processes that open up new services should encourage adhering to sound banking practices. opportunities for increasing the productivity of both entrepreneurial activity, generate growth microfinance institutions (MFIs) and the clients and contribute to the alleviation of Economic Uncertainty whom they serve. poverty. ∙ Global Financial Crisis ∙ Generally accepted that providing the ∙ Social Unrest In the area of product development, innovation unbankable with access to financial involves: services should contribute to the Hermes et al. (2011) empowerment of weaker populations and - Discovered another instance of that trade-off, ∙ Moving beyond access to working capital help them to build individual and social which stated that the outreach of microfinances loans to providing a diverse range of capital. negatively correlated with the efficiency. It means financial products (e.g., savings, ∙ that improving efficiency can be achieved if only insurance, remittances, money transfers) microfinances focus less on poor clients. ∙ A commitment to fair commercial Challenges and Innovations in promoting Social improvements attributed to microfinance practices that protect consumer rights by Microfinance include women’s empowerment, individual or avoiding over indebtedness and hyper- family improvements in health and education, collateralization, inadequate disclosure of Challenges: greater social stature or social mobility due to interest rates and terms, and abusive ∙ Gender Issues increased income, networking benefits, and debt collection practices ∙ Financial Stress increased trust and feelings of community (social ∙ Trade off capital construction). Microfinance Appreciation for Supervisors of Examination Divisions Gender Issues Some have suggested that these benefits Gender discrimination in the provision of may lead to broader social or political change, as 2000’s microfinance services. (Mayoux 2002; Fletchsner, microfinance clients feel empowered to run for ∙ BSP was mandated by the General 2009) political office, or organize to improve their Banking Law (Thru sections 40, 43 and communities and nations 44) Financial Stress ∙ Recognize microfinance as a legitimate Commonly believed to reduce default Why Innovate? banking activity and to set the rules and rates, actually increased the financial stress of ∙ Reduced Operational Cost regulations for its practice within the borrowers in Bangladesh. (Howson 2012) ∙ Manage Risks banking sector. ∙ Increase Profability Trade Off ∙ Increase Client Outreach ∙ Banko Sentral ng Pilipinas Other MFIs and many stakeholders ∙ Reach New Market Segment Institutionalized microfinance within the believed that there is an inherent trade-off between ∙ Increase Social Impact BSP and has proactively taken significant outreach and financial results. initiatives to enable the development of sustainable microfinance.  ∙ In the past five years, the BSP has DAY TWO: Challenges and Successes in "Scaling Participants will delve into some of the most issued twelve Circulars/ Issuances and Up" Training advanced and successful examples of public- undertaken major activities and initiatives private partnerships (PPP) in the microfinance field. for microfinance. Topics discussed on Day Two included challenges to delivering training; what has worked and what The Campaign has chosen the Philippines as the has not worked. host country for its excellent performance in l - Enabling Policy and Regulatory Environment microfinance ∙ 2006 - Characterized BSP’s DAY THREE: Creative Problem Solving for responsiveness to the developments of Reaching Scale and Getting a Return on Our The Philippines has been recognized as one of the the microfinance practice within the Investment countries with the best microfinance regulatory banking sector. framework and has many innovations in ∙ BSP focused on reviewing the Topics discussed on Day Three included how microfinance and poverty alleviation to share. implementation of the existing practitioners work together to achieve significant regulations (rediscounting, branching and scale with training for microfinance staff. The Impact of Microcredit in the Philippines licensing) Welcomed innovations in service delivery WEEK 11 Microcredit (i.e. mobile banking) and product designs - It is an increasingly common tool (i.e. Micro-Agri Product). Significance of Philippine intended to fight poverty and promote ∙ BSP - Recognizing the other important Participation in the Micro credit Summit economic growth. services in microfinance apart from microcredit, such as remittances and Microcredit Summit Campaign First Macro Bank (FMB) savings. ∙ It is a for-profit lender that operates in the ∙ It is an american non-profit organization, outskirts of Manila. ll - Training and Capacity Building started as an effort to bring together ∙ Offers small, short-term, uncollateralized The BSP remains committed to increasing microcredit and others involved with credit with fixed repayment schedules to the skills, capacity, understanding and microcredit around the goal of alleviating micro entrepreneurs. appreciation of the Bangko Sentral and the world poverty through microfinance. banking sector insofar as microfinance is BSP’s Microfinance Initiatives Flagship concerned. Toward this end, several initiatives Microcredit Summit Campaign Program for Poverty Alleviation and Inclusive were undertaken. A project of RESULTS Educational Fund, Financial System in partnership with the Microfinance Council of the lll - Promoting and Advocating for Sustainable Philippines, Inc. (MCPI), announced that the 2013 One of the government’s strategies to Microfinance Institutions and Programs Partnerships against Poverty Summit will be held alleviate poverty is to develop the microfinance October 9 – 11, 2013, in the Philippines. sector in order to provide viable and sustainable In 2006, the BSP focused its advocacy on financial services to the poor. developing linkages that will help the scaling up of ∙ 16th year summit organized microfinance. ∙ Some 1,100 participants from around the This was clearly articulated in the National world will Strategy for Microfinance that was launched in Special Training on Computer Assisted ∙ Convene at the Philippine International 1997 by the National Credit Council (NCC). 2 The Examination Techniques for Microfinance Convention Center (PICC) in Manila. NCC is an inter-agency credit policy-making body of which the BSP is a member. DAY ONE: Gathering Baseline Data The 2013 Microcredit Summit : focus on “Partnerships against Poverty: Finance, Topics discussed on Day One included the four Government, Business, and Civil Society.” levels of training evaluation; reaction, learning, behavior, and results. Microfinance in the Philippines Importance of Financial inclusion refers to The Objective The National Strategy for Microfinance is anchored the provision of equally available and affordable To provide access to financial services to on the following key policy principles: access to financial services for everyone, the majority of poor households and ∙ Greater role of the private sector in the regardless of their level of income. It applies to microenterprises by the year 2005. provision of financial services to the poor. providing services to both individuals and ∙ Establishment of an enabling businesses. This will be achieved in a liberalized and market- environment that will facilitate increased oriented economy where the private sector plays a participation of the private sector in the ∙ Financial inclusion refers to providing greater major role and the government provides the provision of financial services to the poor. access to financial services for poor and low- enabling environment for the efficient functioning ∙ Adoption of market-oriented financial and income individuals, as well as businesses with of markets and the participation of the private credit policies limited resources. sector. ∙ Non-participation of government non- ∙ Financial inclusion initiatives help boost the financial agencies in the implementation economy of poorer regions and countries. The Policy Framework of credit and guarantee programs the ∙ The rise of fintech is considered a major The government’s microfinance policy is strategy is to enable the delivery of contributor to increased financial inclusion. built on the following principles: commercially sustainable microfinance ∙ where the government.  Greater role of the private sector/MFIs in the provision of financial services; WEEK 12 & 13  An enabling policy environment that will Micro-insurance facilitate the increased participation of the Insurance, insurance-like and other similar Laws in Support of the National Strategy for private sector in microfinance; products and services for risk protection and relief MicrofinanceNational Strategy for Microfinance  Market-oriented financial and credit against distress, misfortune and other contingent policies, e.g. market-oriented interest rates on events of the low income sector National Strategy for microfinance loan and deposits; Recognizing the importance of appropriate  Non-participation of government line Premium computed on a daily basis and does not risk protection for the poor , the agencies in implementation of exceed 5% of the current daily minimum wage for government through the Department of credit/guarantee programs. non-agricultural workers in Metro Manila Finance, National Credit Council, and coordination with the Insurance Implementing Rules and Regulations of the ∙ Coverage is not more than 500 times the Commission. And other regulatory Microfinance (REPUBLIC ACT NO. 10693) daily minimum wage for non-agricultural authorities such as the Central Bank of the workers in Metro Manila Philippines, Securities and exchange Rule 1 : Title ∙ The typical clients of microfinance are commission and the Cooperative Shall be known as the Implementing Rules the economically-active, entrepreneurial Development Authority. and Regulations of Republic Act No. poor. These include household-based 10693, otherwise known as the entrepreneurs, farmers, rural artisans, The Vision "Microfinance NGOs Act" and individuals in the informal sector. To have a viable and sustainable private ∙ These people will be able to sustain and micro (financial) market, with the government Rule 2 : Definition of Terms enhance their livelihood if they are providing a supportive and appropriate policy As used in these Implementing Rules and provided with effective access to a wide environment and institutional framework to that Regulations, the following definitions shall range of financial products and services. market. apply: Reaching the Poorest: recognize the a) Act shall refer to the Microfinance NGOs Act importance of financial inclusion for all or Republic Act No. 10693 (R.A. 10693); overlooked by the traditional banking sector b) III. The majority of the permanent members of (d) Low-income – income of individuals or Accreditation shall refer to the process of the Council shall within thirty (30) days from families that fall below the low-income giving official recognition to a duly registered submission of the list of nominees, choose threshold to be defined by the National Microfinance NGO, after meeting the the private sector representatives from the Economic and Development Authority minimum standards set by the Microfinance submitted list. (NEDA); NGO Regulatory Council (or "Council"). A Microfinance NGO is deemed accredited (e) Microenterprise development when it is duly issued an accreditation REPUBLIC ACT NO. 10693 strategy – a social reform program to certificate by the Council; empower the poor, manage risks and c) BSP shall refer to the Bangko Sentral ng SECTION 1: Short Title. – This Act shall be vulnerabilities and thereby improve their Pilipinas; known as the “Microfinance NGOs Act”. asset base and expand access to d) BIR shall refer to the Bureau of Internal microfinance services, such as microcredit, Revenue; SEC. 2. Declaration of Policies. microinsurance, microsavings, health care – The Philippine government aims to and microhousing through a broad Rule 3 : Microfinance NGO Regulatory Council eradicate poverty by encouraging poor families to package of financial, business and human start businesses. NGOs play a crucial role in development services and other Section 1. The Microfinance NGO Regulatory promoting entrepreneurship and providing nonfinancial services, including education Council or the "Council".— The Council shall be microfinance. The government will support NGOs to enable them to lead productive lives; composed of four to implement inclusive financial policies and mechanisms, like microfinance. (f) Microfinance – the viable and (4) permanent members from the government sustainable provision of a broad range of sector SEC. 3. Definition of Terms. – As used in this Act, financial services to poor and low-income 1. Chairman of SEC or designated the following terms shall mean: individuals engaged in livelihood and representative as the chairman of the council. microenterprise activities. It uses 2. Secretary of the Department of Finance or (a) Accreditation – the process of giving nontraditional and innovative designated representative. official recognition to duly registered methodologies and approaches, namely: 3. Secretary of Department of Trade and microfinance NGOs, after meeting the the extension of small loans, simplified Industry or designated representative minimum standards set by the relevant loan application procedures, group 4. secretary of the Department of Social Welfare regulator; character loans, collateral-free and Development or designated arrangements, cash flow-based lending, representative. (b) Compensating balance – the alternative loan repayments, minimum proportion of the total loan of a requirements for CBU/minimum balance (3) members from the Microfinance NGO microfinance client, which is retained with retention, and small denominated savers’ sector: the microfinance institution as capital instruments aimed to improve their asset I. Organizations, associations, and alliances of build-up (CBU) or microsavings. This base and expand their access to capital Microfinance NGOs shall have at least five (5) amount can be used by the microfinance and savings; Microfinance NGO members before they can institution to offset the clients’ outstanding nominate a representative to the Council. balance in case of default; (g) Microfinance loans – small loans granted to the basic sectors, as defined in II. The organizations, associations, and alliances (c) Gross receipts from microfinance Republic Act No. 8425, otherwise known of Microfinance NGOs shall nominate their operations – interest income, penalties, as the “Social Reform and Poverty respective nominees within sixty (60) days surcharges, commissions and discounts, Alleviation Act”, and other loans; as from the effectivity of these Implementing service and general fees, and other defined by the government as to their Rules and Regulations. charges related to microfinance operations; amount, scope, and coverage that are granted to the poor and low-income individuals for their microenterprises and small businesses so as them to raise their (l) Social performance – the effective (d) Microfinance NGOs shall aim to income levels and improve their living translation of a Microfinance NGO’s provide both financial and social protection standards. Microfinance loans to enable mission into practice; and programs to an increasing number of are granted on the basis of the borrower’s disadvantaged and for underprivileged cash flow and are typically unsecured; (m) Social welfare promotion/purposes people; – the thrusts, objectives, plans, programs, (h) Microfinance NGO – a nonstock, services and activities designed to aid (e) Microfinance NGOs shall abide by the nonprofit organization duly registered with and/or ameliorate the living conditions of Client Protection Principles such as, but the Securities and Exchange Commission the poor, disadvantaged, marginalized, not limited to, appropriate product design (SEC), with the primary purpose of vulnerable and underprivileged individuals and delivery, prevention of over- implementing a microenterprise and their families in order to attain indebtedness, promotion of transparency, development strategy and providing improved quality of life and well-being. practice of responsible pricing, fair and microfinance programs, products, and respectful treatment of clients, privacy of services, such as microcredit and SEC. 4. Scope of Application. client data, and mechanisms for complaint microsavings, for the poor and low-income – This Act shall apply to NGOs with the primary resolution; clients; purpose of implementing a microenterprise development strategy and providing microfinance (f) Microfinance NGOs shall develop (i) Microsavings – the program of a programs, products and services for the poor. financial, social and governance Microfinance NGO to collect relatively These shall be referred to as “Microfinance NGOs”. performance standards that shall help small amounts of money from their clients define and govern the industry toward for purposes of maintaining a SEC. 5. Core Principles of Microfinance NGOs. greater outreach and sustainability; and compensating balance; – Microfinance NGOs shall conduct its operations in accordance with the basic principles (g) Microfinance NGOs shall develop and (j) Nongovernment organization (NGO) of microfinance which include, but are not limited provide the appropriate community – a nonstock, nonprofit organization duly to, the following: development projects and programs to registered with the SEC, focusing on the ensure attainment of social welfare and upliftment of the basic or disadvantaged (a) The State recognizes Microfinance holistic transformation of the poor. sectors of society by providing advocacy, NGOs as its effective partners in training, community organizing, research, promoting social welfare and development SEC. 6. Basic Features and Purposes of access to resources, and other similar and pursuing poverty alleviation and Microfinance NGOs. activities, as defined in Republic Act No. holistic transformation and acknowledges – A Microfinance NGO shall have the following 8425, otherwise known as the “Social microfinance as a viable solution to features and purposes: Reform and Poverty Alleviation Act”; empower the poor; (a) Provides the poor direct access to reasonable (k) Poor – individuals and families whose and affordable credit and related programs and income fall below the poverty threshold as (b) The poor shall be given access to services which shall include, but shall not be defined by the NEDA. Generally, the poor appropriate financial services that are limited to, microfinance, microinsurance, are regarded as those who cannot afford, convenient, flexible and reasonably priced microenterprise development, health care, and in a sustained manner, to provide their including, but not limited to, credit, savings, micro housing, subject to existing laws and minimum basic needs of food, health care, and insurance; regulations; education, housing and other essential amenities of life as defined by Republic (c) Microfinance shall be undertaken on a (b) Provides business development opportunities Act No. 8425, otherwise known as the sustainable basis, where providers shall such as leadership training and entrepreneurial “Social Reform and Poverty Alleviation Act” be able to recover all of its costs to allow skills enhancement; sustainable operation and regular provision of financial services to the poor; (c) Provides human development services to help (h) Accepts donations or grants or contributions in (e) Money transfer and other related the poor achieve a level of sustainability and accordance with existing laws and regulations; remittance services, in partnership with empowerment, and adopts measures to promote a authorized agents and/or entities; and spirit of generosity and selfless giving among (i) Invests its funds in sound, nonspeculative individuals and institutions that shall help support enterprises and instruments, subject to rules and (f) Other relevant and/or innovative programs directly involved in poverty eradication; regulations of the relevant government regulatory programs, products and services that agency; address social welfare purposes and (d) Collects compulsory savings or CBU only from which are not contrary to existing laws and its clients for purposes of maintaining the (j) Maintains a transparent and comprehensive regulations. compensating balance in relation to the same management information system; and client’s loan. Acceptance of client savings for this SEC. 9. Establishment of the Microfinance NGO purpose shall not cause the Microfinance NGO to (k) Publishes and discloses audited accounts at Regulatory Council. – The SEC shall establish an be deemed engaged in deposit-taking operations; the end of every financial year. accrediting body to be known as the Microfinance NGO Regulatory Council, herein referred to as the A Microfinance NGO shall not, at any time, Nothing in this section shall be construed as “Council”.The Council shall be composed of four (4) undertake deposit-taking activities. precluding a Microfinance NGO from performing permanent members and three (3) members from such services or exercising such powers as may the Microfinance NGO sector. For the purpose of implementing this provision, be granted by law or as may be necessary or deposit-taking shall not include taking of funds incidental to its activities as a nonstock, nonprofit The permanent members of the Council shall be from current or prospective borrowers for the NGO. composed of the following: purpose of equity build-up of an individual (a) The Chairman of the SEC or borrower’s own loans. A Microfinance NGO shall SEC. 7. Minimum Core Programs and Services. designated representative as the be a net lender at all times, wherein net loans – Microfinance NGOs shall provide at least any of Chairperson of the Council; mean total loans minus total equity build-up. The the following programs, products, or services: (b) The Secretary of the Department of compensating balance or total CBU should not Trade and Industry (DTI) or designated exceed the total loan portfolio; (a) Microcredit and financial literacy representative; programs; and (c) The Secretary of the Department of (e) Is prohibited from directly engaging in the Finance (DOF) or designated insurance business. However, a Microfinance (b) Microcredit and CBU or micro savings. representative; and NGO may establish partnerships with authorized (d) The Secretary of the Department of microinsurance agents and/or entities in the SEC. 8. Other Programs and Services. Social Welfare and Development (DSWD) furtherance of its social protection objectives; – The following are the other programs and or designated representative. services that Microfinance NGOs may undertake, (f) Charges reasonable interest and collects such subject to existing laws and regulations: The three (3) representatives from the necessary fees and charges incidental to its (a) Agricultural microfinance; Microfinance NGO sector shall be chosen microfinance operations; (b) Housing microfinance; by at least majority of the permanent members of the Council from among the (g) Borrows money or incurs such obligations for (c) Microinsurance, in partnership with nominees of organizations, associations, the purpose of relending to microfinance borrowers, authorized microinsurance companies, and alliances of Microfinance NGOs duly subject to existing laws: Provided, That a agents and/or entities; registered with the SEC. They shall serve Microfinance NGO shall not be deemed as for a term of three (3) years. engaged in quasi-banking activities if the proceeds (d) Electronic payment system such as of such borrowings are exclusively used for mobile or any innovative digital platforms Once the full membership of the Council is relending to microfinance borrowers; or channels; obtained, all members of the Council are entitled to one (1) vote each in the conduct of its business.  The Council shall be assisted by a that a Microfinance NGO no longer meets the SEC. 15. Social Performance Standards. secretariat to be lodged in the SEC, which criteria for accreditation; – The Council shall establish a set of shall coordinate the activities involved in parameters for assessing the social performance the accreditation process. (d) Require regular submission of reports by of Microfinance NGOs such as, but not limited to, Microfinance NGOs; their social objectives; governance and SEC. 10. Accreditation of Microfinance accountability mechanisms; transparency; product Institutions Registered as Nonstock, Nonprofit (e) Collect reasonable accreditation and design, services and delivery channels; and ethical Corporation. monitoring fees from a Microfinance NGO which treatment of clients. – Microfinance NGOs shall be required to obtain shall be used for the accrediting entity’s accreditation from the Council as a condition for operational requirements; SEC. 16. Governance Standards. the availment of the incentives under this Act. – The Council shall establish the standards and (f) Submit an annual report to the President of the principles of good corporate governance for Upon the effectivity of this Act, Microfinance NGOs Philippines and the concerned committees of both Microfinance NGOs such as, but not limited to, which are certified by the SEC to have no Houses of Congress; and fairness, management responsibility, respect for derogatory information shall be deemed accredited rights, corporate integrity, loyalty, compliance with for one (1) year, unless earlier revoked by the (h) Perform such other functions as may be regulations and transparency. Council for good cause after review. necessary to accomplish the purposes and objectives of this Act. SEC. 17. Initiative of the Concerned Regulatory SEC. 11. Functions and Responsibilities of the Authorities to Examine Microfinance NGOs. Microfinance NGO Regulatory Council. SEC. 12. Financial Performance Management. – The Bangko Sentral ng Pilipinas and the – As the accrediting entity, the Council shall have – Microfinance NGOs shall develop and Insurance Commission may request the Council to the following functions and responsibilities: implement systems, practices, and controls for examine the operations of Microfinance NGOs for efficient, effective, and sustainable financial the purpose of determining that the Microfinance (a) Institute and operationalize a system of operations through prudent resource management, NGOs are not engaged in unauthorized accreditation for Microfinance NGOs: Provided, asset-liability management, liquidity management, undertaking or activities which are subject to their That the criteria for accreditation shall include and financial information management. respective jurisdictions. sound and measurable standards of financial In case of a finding by the Council that an performance, social performance and governance, SEC. 13. Social Performance Management. accredited Microfinance NGO is engaged in an pursuant to Sections 12 to 16 of this Act; – Microfinance NGOs must have an unauthorized undertaking or activities subject to institutionalized process of translating social their said respective regulations, it shall place on (b) Issue certificate of accreditation as a mission into practice, which includes setting clear probation, suspend or revoke the accreditation of Microfinance NGO upon determination that the social goals, monitoring progress towards these the Microfinance NGO based on such ground, as criteria set for this purpose have been fully objectives and using information to improve may be appropriate under the circumstances. satisfied: Provided, That the certificate of performance and practice. Social performance accreditation shall be valid only for such period as information must be integrated into the SEC. 18. Access to Government Programs and may be prescribed under the implementing rules Microfinance NGO’s work, operational routines, Projects. and regulations of this Act; and value system to affect decision-making – Duly accredited Microfinance NGOs shall be practices at both operational and strategic levels. given ready access to related programs and (c) Monitor the performance of Microfinance NGOs projects of the government. Government agencies to ensure continuing compliance with the SEC. 14. Financial Performance Standards. and government financial institutions shall develop provisions of this Act and its implementing rules – The Council shall establish a set of and make available support programs for and regulations; parameters for assessing the financial Microfinance NGOs operating in areas and sectors performance of Microfinance NGOs such as, but with poverty, or affected by or vulnerable to natural (d) Place under probation, suspend or revoke any not limited to, portfolio quality, efficiency, disaster or armed conflict. Support programs may certificate of accreditation upon due determination sustainability, and outreach. include the provision of operational and capacity building grants, low interest loans and guarantee SEC. 22. Implementing Rules and Regulations. Monetary Board funds. – Within ninety (90) days after the ∙ The Central Bank has a unique legal structure effectivity of this Act, the SEC, in coordination with in which the Central Bank is not an SEC. 19. Technical Assistance. the DTI, the DOF, the DSWD and relevant incorporated body. – Duly accredited Microfinance NGOs are entitled organizations, shall promulgate, rules and to access any form of technical assistance from regulations for the implementation of this Act Monetary Law Act the government, donors and other support and/or for the public interest or for the protection of - The corporate status is conferred on the organizations in facilitating the linkage between the Microfinance NGOs accredited or regulated Monetary Board, which is vested with all powers, poor households/microenterprises and pursuant to the authority granted under this Act, functions and duties. microfinance institutions, community organizations, including the requirement of cooperation within and capacity building of the target clientele; social and among all Microfinance NGOs and the The Monetary Board composed of Seven (7) preparation activities, and those that will lead to adoption of appropriate corporate governance members appointed by the president of the the broadening and deepening of microfinance principles and practices. Philippines for a term of six years. services such as development of microfinance products, training in microfinance technologies, SEC. 23. Separability Clause. ∙ The Governor - as the Chairman and upgrading of performance standards, – If, for any reason, any provision or part hereof is ∙ The Secretary to the Ministry of Finance ( ex- operating systems and procedures. declared invalid or unconstitutional, the other officio ) provisions not affected thereby shall remain in full ∙ A member of the cabinet designated by the SEC. 20. Taxation of Microfinance NGOs. force and effect. president five (5) members who shall comes – A duly registered and accredited Microfinance from the private sectors, all of who, shall NGO shall pay a two percent (2%) tax based on its SEC. 24. Repealing Clause. serve full time gross receipts from microfinance operations in lieu – All laws, issuances, rules and of all national taxes: Provided, That preferential tax regulations inconsistent with any provision of this NOTE: no member of the board may be treatment shall be accorded only to NGOs whose Act shall be deemed amended, modified, or reappointed more than once. primary purpose is microfinance and only on their repealed accordingly. microfinance operations catering to the poor and Monetary and Economics Sector (MES) – mainly low-income individuals in alignment with the main SEC. 25. Effectivity. responsible for the operations/activities related to goal of this Act to alleviate poverty. The non- – This Act shall take effect fifteen (15) days after monetary policy formulation, implementation, and microfinance activities of Microfinance NGOs shall its publication in any newspaper of general assessment be subject to all applicable regular taxes. circulation. Financial Supervision Sector (FSS) – mainly Duly registered and accredited Microfinance NGOs, responsible for the regulation of banks and other as well as their clients, shall be required to have a BSP-supervised financial institutions Taxpayer Identification Number (TIN): Provided, WEEK 14 That this shall be accomplished within a The Monetary Board Payments and Currency Management Sector reasonable time as prescribed, by the Council: (PCMS) – mainly responsible for maintaining the Provided, further, That the relevant government ∙ Exercises the powers and functions of the safety and integrity of the Philippine currency and agencies, in coordination with the Council, shall BSP and supervision of the financial system. ensuring a well-functioning payments and cash provide simplified forms and procedures for ∙ Its chairman is the BSP Governor, with five ecosystem that facilitates the economic activity securing the TIN. full-time members from the private sector and and supports long-run economic growth one member from the Cabinet. SEC. 21. Appropriations. Meets at least once a week. (Thursday) The – The amount necessary to carry out the initial Board may be called by the governor of the implementation of this Act shall be included in the bangko sentral or by two (2) other members General Appropriations, Act. of the Board. ∙ Regional Operations and Advocacy Sector – (2) Cooperative Banks – Organized primarily to (b) Majority of the members of the mainly responsible for the management of make financial and credit services available to board of directors have activities related to regional operations, consumer cooperatives and their members. It may perform experience in micro financing with empowerment and advocacy, and communications; any\all of the services offered by a rural bank, at least one (1) member having including the operation of an FCDU subject to actual banking experience. Corporate Services Sector (CSS) – mainly certain conditions. responsible for the effective management of BSP’s (5) In addition to the requirements for the human, financial, and physical resources to (3) Thrift Banks – Refers to any banking establishment of banks, the application for support the BSP’s core functions, including corporation organized for the following purposes: authority to establish a microfinance- oversight of the operations of the New Clark City – I. Accumulating the savings of depositors and oriented bank must be accompanied by Program Management Office. investing the following documents: II. Providing short-term working capital, medium- and long-term financing, to businesses (a) A vision and mission statement FELIPE MEDALLA - New BSP Governor engaged in agriculture, services, industry and with clear expression of the housing; and commitment to reach low-income The Governor is the chief executive officer of the III. Providing diversified financial and allied clients. BSP and is required to direct and supervise the services for its chosen market and (b) A written manual of operations, operations and internal administration of the BSP. constituencies especially for small and which shall include the medium enterprises and individuals. administrative and credit program DEPUTY GOVERNOR - A deputy governor (or a systems and procedures. Senior Assistant Governor in the case of the The Guidelines on the Establishment of a Currency Management Sect​ or) heads each of Microfinance Oriented Bank are as follows: (6) At least fifty percent (50%) of the the BSP's operating sector. bank’s gross loan portfolio shall at all (1) That the microfinance-oriented bank to times consist of microfinance loans as ∙ Deputy Governor - Francisco G. Dakila, Jr. be established shall either be a TB or an defined in Sec. 314. Head of Monetary and Economics Sector RB; (a) The requirement that the ∙ Benjamin Diokno (Former BSP Governor) is (2) That the capital of the microfinance- president, chief operating officer Now the Finance Secretary/Chief oriented banks to be established should or general manager of a TB or RB be owned by private persons, multilateral must have at least two (2) year Microfinance Oriented Bank entities or a combination thereof; experience in banking and/or finance may be substituted with A bank that provides financial services and (3) That the minimum paid-in capital of microfinance experience in cases caters primarily to the credit needs of the basic or microfinance-oriented banks shall be the of officers of a microfinance disadvantaged sectors such as urban poor and low applicable capitalization requirement organization applying for authority income households for their microenterprises and under Sec. 121 to establish, or convert into a TB small businesses so as to enable them to raise or RB: their income levels and improve their living (4) That the organizers must have the (b) Subject to the standard standards. capacity to engage in micro financing, branching requirements under Sec. which may be indicated by the following: 105 and minimum capital (1) Rural Banks - Are supervised by BSP. requirements under Sec. 121, Monitors other banks such as cooperative and (a) At least twenty percent (20%) microfinance-oriented banks may commercial banks. Purpose is to provide credit of the paid-in capital of the apply for establishment of a and facilities to farmers, agricultural laborer, and proposed bank must be owned by branch after one (1) year of small entrepreneurs in rural areas. persons or entities with track profitable operations. record in micro financing.  (c) Existing non-bank microfinance A.2 Eligible papers – Promissory Note (PN) authorized rediscount ceiling of the organizations applying for of the RB or Coop Bank executed in favor borrowing bank. authority to establish, or convert of the Bangko Sentral and secured by duly into a microfinance-oriented TB or endorsed PN of microcredit borrowers. The proceeds of availment or drawdown RB may also be allowed to against the approved microcredit line shall convert their existing A.3 Manual of operations – Written be credited to the account of the RB or branches/offices into branches of policies on microfinance operations must Coop Bank maintained with the depository the bank proposed to be be set forth and documented in a policy bank or with Bangko Sentral. established by simultaneously manual duly approved by the bank’s board applying for authority for the of directors. C. Terms and Conditions purpose. A.4 A copy of System of Reviewing Asset (1) The loan value shall be equivalent to Guidelines of Governing Re- Accounts and Setting Up of Adequate eighty percent (80%) of the outstanding Discounting of Micro Credit Allowance for Credit Losses submitted. balance of the microfinance borrower’s PN. Rediscounting Window Available to Rural A.5 Staff training and experience – Key (2) The RB or Coop Bank’s loan from the and Cooperative Banks for the Purpose of officers and staff responsible for Bangko Sentral shall have a term of not Providing Liquidity Assistance to Support microcredit operations must have a more than 360 days. The maturity date of and Promote Microfinance Programs. The minimum experience of one (1) year and the microfinance borrower’s PN shall in no following guidelines shall govern the have completed a training course in case be beyond the maturity date of the rediscounting facility available to RBs and microlending activities. RB or Coop Bank’s PN. Coop Banks for the purpose of providing liquidity assistance to support and promote A.6 Prescribed financial ratios and (3) The loan shall be assessed an annual microfinance programs. regulations – Applicant bank must comply interest rate equivalent to the ninety-one with the following financial ratios and (91) day Treasury Bill rate for the last A. Eligibility Requirements regulations auction date of the preceding month. A.1 Eligible Borrowers – RBs and Coop B. Microcredit Line (4) The demand deposit account of the RB Banks with at least one (1) year track or Coop Bank will be automatically debited record in microfinance and at least 500 Application for Microcredit Line shall be at the maturity date of the Bangko Sentral active borrowers, ratio of past due filed with the DLC, Bangko Sentral at its loan for the full amount due excluding microfinance loans to total outstanding head office in Manila or the appropriate collections from microfinance borrowers microfinance loans of not more than five Bangko Sentral Regional Loans and Credit which were credited to the Special percent (5%) as of end of the month Unit (BSPRLCU). The term of the Savings Account of the Bangko Sentral preceding loan application and collection microcredit line shall not exceed one (1) with the borrowing bank. ratio of not less than ninety-five percent year from the date it is granted. The line (95%) based on ratio of total collections may be renewed for another year upon (5) Any responsible officer who is holding (excluding prepayments) during the submission of an application at least two a position that is not lower than manager preceding twelve (12)-month period to the (2) months before expiry, subject to full or equivalent rank must, upon approval by sum of past due microfinance loans at the compliance with the prescribed eligibility the bank’s Board, endorse the beginning of said period and amount of requirements and the credit review by the rediscounted PNs and certify that the matured loans including principal DLC. same are still outstanding as of the time of amortizations during the same twelve (12)- application. month period. Total availments against the facility, which shall be charged against the approved (6) Collections made on amortizations due microcredit line, shall form part of the total and maturing PNs shall be remitted to the  DLC not later than two (2) banking days E. Remittance of following the date of receipt of collections Collections/Payments/Repayments (a) 1st Offense – a warning that a by the Head Office/branches located Collections made on amortizations due and repetition of the same or similar offense within Metro Manila and not later than four maturing PNs shall be remitted to the DLC not shall subject the erring director/officer to (4) banking days following the date of later than two (2) banking days following the date monetary penalties and/or sanctions; receipt of collections by the Head of receipt of collections by the Head (b) 2nd Offense – a fine of P500 per day Office/branches located outside Metro Office/branches located within Metro Manila and for each violation from the time the Manila as provided under this Section on not later than four (4) banking days following the violation was committed up to the time it is Rediscounting Window Available to Rural date of receipt of collections by the Head corrected without prejudice, however, to and Cooperative Banks for the Purpose of Office/branches located outside Metro Manila. As the imposition of higher penalties; and Providing Liquidity Assistance to Support an alternative, collections may be deposited in a (c) 3rd and Subsequent Offenses – a fine and Promote Microfinance Programs – Special Savings Deposit Account (SSDA) which of P5,000 per day from the time the Remittance of shall be maintained by the Bangko Sentral with the violation was committed up to the time it is collections/payments/repayments. borrower-bank and remitted to DLC or the corrected without prejudice, however, to appropriate BSPRLCU on the last banking day of the imposition of higher penalties. (7) A penalty of five percent (5%) per every month. The SSDA shall earn interest of one annum shall be imposed on matured and percent (1%) lower than the 91-day Treasury Bill unpaid bank PNs in favor of the Bangko rate for the last auction date of the preceding Sentral. month. D. Documentary Requirements F. Reports Required A monthly report on microfinance transactions (1) Application for Microcredit Line - RBs or Coop shall be submitted to DLC or the appropriate Banks applying for an microcredit line shall submit BSPRLCU within the deadline set in Appendix 7. a letter of application to DLC or the appropriate BSPRLCU accompanied by the following H. Sanctions documents: Any misrepresentation and/or violation of the provisions of this Section shall subject the RB or (a) Certificate of the Secretary Coop Bank and/or the erring directors/officers to (b) Certification of the applicant bank any of the following sanctions: (c) Consolidated Financial Statements (d) Report (1) Erring RB or Coop Bank (e) Rediscounting Line Agreement (a) Fines in amounts as may be (f) Notarized custodian agreement determined by the Monetary Board to be appropriate, but in no case to exceed (2) Availment of Microcredit Line - For availment of Thirty thousand pesos (P30,000) a day for microcredit line, the RB or Coop Bank shall submit each violation; the following documents: (b) Suspension of rediscounting privileges or access to Bangko Sentral credit (a) Application for Microcedit Line facilities; and/or Availment (c) Reduction of rediscounting line. (b) Rediscount Schedule (RS) (c) Notarized PNs in favor of the Bangko (2) Erring Directors / Officers Sentral For violation of any of the provisions of this Section the following shall be imposed against the directors and officers of the bank: