The Market Monitor Minding the Nation's Business
By Riza Lozada
The rules for the setting up of microfinance non-governmental organizations (NGOs) has been released that, among other things, will provide such financing firms a low 2-percent preferential tax.
The institutions can also collect savings for capital build-up, and partner with micro-insurance firms, based on the new Implementing Rules and Regulations (IRR) of the law providing for financial inclusion of the poorest sector of the economy.
The Securities and Exchange Commission (SEC) will oversee the implementation of the IRR issued for Republic Act No. 10693 or the Microfinance NGOs Act.
SEC Chairman Teresita Herbosa, Finance Secretary Carlos Dominguez III, Trade and Industry Secretary Ramon Lopez, and Social Welfare Secretary Judy Taguiwalo were signatories to the IRR.
The IRR, however, provided that other income by the Microfinance NGO that are not generated from the lending activities and insurance commissions, shall be subject to all applicable taxes.
Although Microfinance NGOs are prohibited from engaging in deposit-taking activities, they may collect microsavings or capital build-up from their clients only for purposes of maintaining a compensating balance.
Microfinance NGOs may also partner with microinsurance companies, agents and/or entities in furtherance of their social protection objectives but they cannot directly engage in the insurance business, the IRR added.
A Microfinance Council will set up the criteria for accreditation of the NGOs which shall include sound and measurable standards of financial performance, social performance, audit and governance.
It shall also monitor the performance of NGOs to ensure their continuing compliance with the accreditation standards.
It also has authority to audit the books of accounts, records and papers of Microfinance NGOs and conduct inspections.
The four permanent members of the council are the SEC chairman or a designated representative who shall act as the chairman of the council; the Finance secretary or representative; the Trade and Industry secretary or representative; and the Social Welfare and Development secretary or a representative.
The council will also have three members from the private sector. The representatives shall serve for a term of three years who may be reappointed.
The signing of the IRR was also attended by Sen. Paolo Benigno Aquino IV, Rep. Pablo R. Nava III, and members of the Microfinance Council of the Philippines Inc. and APPEND Inc., the two largest microfinance networks in the country.
The Microfinance NGOs Act aims to contribute in poverty eradication by supporting and working in partnership with qualified NGOs which promote financially inclusive and pro-poor financial and credit services.
The Microfinance NGOs Act covers only microfinance non-government organizations, and does not cover microfinance institutions set up for profit.
The council is also empowered to place under probation, suspend or revoke any certificate of accreditation upon due determination that a Microfinance NGO no longer meets any of the criteria for accreditation.