The Market Monitor Minding the Nation's Business
By Riza Lozada
The Bangko Sentral ng Pilipinas (BSP) recently allowed microfinance-oriented small bank to convert into a regular thrift bank.
BSP Governor Amando Tetangco Jr. signed last October 28 Circular 929 to implement the rules for the elevation of the status of small rural banks.
The circular stated that the policymaking Monetary Board, in its Resolution 1855, allowed the conversion of microfinance-oriented thrift banks (TBs) and rural banks (RBs) to regular TBs and RBs as well as the conversion of their microfinance-oriented branches to regular branches.
The circular provided that microfinance-oriented TBs and RBs are allowed to convert to regular TBs and RBs once they comply with all the requirements for a regular TB and RB licenses, and subject to the submission of certification signed by the president or officer of equivalent rank stating that the allocation of at least 50 percent of the gross loan portfolio to microfinance is no longer feasible due to changes in market condition.
The certification will have to be supported by a market study citing, among others, changes in demographic, social, and economic factors.
The same certification will have to present strategic plan and business strategy contemplating the conversion to a regular bank and certified true copy of the resolution of the bank’s board of directors authorizing the conversion of the microfinance-oriented bank into a regular bank.
The bank must also change its business name to reflect its reclassification to a regular bank.
The circular likewise provided that microfinance-oriented branches may convert into regular branches.
In a related development, the Securities and Exchange Commission (SEC) recently announced that microfinance Non-Government Organizations (NGOs) are entitled to two percent preferential tax, collect micro-savings for capital build-up, and partner with micro-insurance based on the new Implementing Rules and Regulations (IRR) of financial inclusion for the poor sector of the economy.
The SEC will head in the implementation of financial inclusion through pro-poor credit service with the recent signing of the IRR for Republic Act No. 10693 or the Microfinance NGOs Act.
Although Microfinance NGOs are prohibited from engaging in deposit-taking activities, they may collect microsavings or capital build-up from clients only for purposes of maintaining a compensating balance.
BSP records showed that as of last June, 186 banks with microfinance operations served over a million clients with outstanding portfolio of P8.03 billion.
The same BSP data indicated these clients saving P8.872 billion as of June 2013.