Recent Microfinance Regulations and Issuances presented during the MABS Regional Roundtable Conference 2010

RBAP-MABS Microfinance Specialist Bernabe Bunao Jr. shares lessons from the Regional Roundtable Conference 2010 on new microfinance regulations
During the RBAP-MABS Luzon-Visayas and Mindanao Regional Roundtable Conferences held in November, Ms Pia Roman-Tayag and Ms. Rochelle Tomas from the Inclusive Finance Advocacy Staff, discussed the latest BSP regulations and issuances on microfinance and rural banking.
The BSP’s policy initiatives have been grounded on providing market-based solutions that address access to financial services to the microenterprise sector. Among the policies approved by the BSP Monetary Board in 2010 were regulations that encourage the microfinance industry to create more market-driven products and services that are appropriately designed and priced to suit the demands of microenterprises. The BSP representatives stated that although the microfinance has inherent risks, these are manageable. By supporting an appropriate regulatory environment, the BSP has provided appropriate guidelines for banks engaged in microfinance to better manage risks while expanding outreach. Similarly, BSP sees to it that banks have the technical capability and financial stability to properly serve this market segment.
The achievements of the BSP microfinance regulations promote new and supportive developments for rural banks to better expand services to meet the needs of microfinance clients. The new issuances for 2010 include BSP Circular 678 – Rules and Regulations for the Approval and Provision of Housing Microfinance, Circular 680 – Rules and Regulations for the Provision of Micro-Agri Loans; and, Circular 694 – Amendment of Regulations on the Establishment of Other Banking Offices and Notes to Microfinance.
BSP Circular 694, the latest addition to the regulations, now allows banks to offer a broader range of financial services through other banking offices (OBOs).  It allows for the specialized OBOs called Micro Banking Office (MBO), which can offer additional financial services including collecting and allowing withdrawals from micro deposit account holders, disbursement and collection of micro loans, handling remittances, hosting ATMs, providing payment services, mobile money cash-in and cash-out services as well as other banking services. Banks interested in transitioning their existing OBOs to MOBOs or MBOs need to submit a Letter of Intent and a Business Plan to the Central Application and Licensing Group of BSP.  According to the BSP representatives, a task force to oversee and evaluate the applications for MOBOs or MBOs has been organized to fast track approvals at a reasonable timeline. For more details of application procedures, kindly refer to BSP Memorandum No. M-2010-040 – Processing Guidelines for Microfinance Other Banking Offices (MF-OBOs).  MABS has also provided templates for banks to follow.
In addition, the notes on microfinance, which were attached to the latest circular, also provide a much broader definition of microfinance services.  This definition now states that “microfinance is the provision of a broad range of financial services such as deposits, loans, payment services, money transfers and insurance products to the poor and low-income households, generally for the microenterprise and small businesses, to enable them to raise their income levels and improve their living standards.”
The activist role of BSP in the field of regulations for microfinance is an important factor that placed the Philippines at the top position for regulations supporting microfinance in Asia, and at the no. 2 position for overall microfinance business environment among 55 countries in the annual global microfinance index by the Economist Intelligence Unit.
During the question and answer session various questions were raised and answered:
1. Can rural banks offer any kind of insurance?
Rural banks are now allowed to sell microinsurance products provided by licensed microinsurance providers.
2. What are the AMLA rules apply to all clients including microfinance clients without two proper forms of ID?
AMLA regulations apply to all of the bank’s transactions. The BSP recognizes the fact that some microentreprenuers in rural areas cannot present a valid ID, thus, the BSP reiterates Circular No. 608 – Valid Identification Cards (IDs) for Financial Transactions. Please note that the requirements are now lowered from two (2) valid IDs to only one (1).
Pia Roman-Tayag

Ms. Pia Roman-Tayag of the BSP Inclusive Finance Advocacy Staff

RBAP-MABS Microfinance Specialist Bernabe Bunao Jr. shares lessons from the Regional Roundtable Conference 2010 on new microfinance regulations

During the RBAP-MABS Luzon-Visayas and Mindanao Regional Roundtable Conferences held in November, Ms Pia Roman-Tayag and Ms. Rochelle Tomas from the Inclusive Finance Advocacy Staff, discussed the latest BSP regulations and issuances on microfinance and rural banking.

The BSP’s policy initiatives have been grounded on providing market-based solutions that address access to financial services to the microenterprise sector. Among the policies approved by the BSP Monetary Board in 2010 were regulations that encourage the microfinance industry to create more market-driven products and services that are appropriately designed and priced to suit the demands of microenterprises. The BSP representatives stated that although the microfinance has inherent risks, these are manageable. By supporting an appropriate regulatory environment, the BSP has provided appropriate guidelines for banks engaged in microfinance to better manage risks while expanding outreach. Similarly, BSP sees to it that banks have the technical capability and financial stability to properly serve this market segment.

The achievements of the BSP microfinance regulations promote new and supportive developments for rural banks to better expand services to meet the needs of microfinance clients. The new issuances for 2010 include BSP Circular 678 – Rules and Regulations for the Approval and Provision of Housing Microfinance, Circular 680 – Rules and Regulations for the Provision of Micro-Agri Loans; and, Circular 694 – Amendment of Regulations on the Establishment of Other Banking Offices and Notes to Microfinance.

Ms. Rochelle Tomas of the BSP

Ms. Rochelle Tomas of the BSP

BSP Circular 694, the latest addition to the regulations, now allows banks to offer a broader range of financial services through other banking offices (OBOs).  It allows for the specialized OBOs called Micro Banking Office (MBO), which can offer additional financial services including collecting and allowing withdrawals from micro deposit account holders, disbursement and collection of micro loans, handling remittances, hosting ATMs, providing payment services, mobile money cash-in and cash-out services as well as other banking services. Banks interested in transitioning their existing OBOs to MOBOs or MBOs need to submit a Letter of Intent and a Business Plan to the Central Application and Licensing Group of BSP.  According to the BSP representatives, a task force to oversee and evaluate the applications for MOBOs or MBOs has been organized to fast track approvals at a reasonable timeline. For more details of application procedures, kindly refer to BSP Memorandum No. M-2010-040 – Processing Guidelines for Microfinance Other Banking Offices (MF-OBOs).  MABS has also provided templates for banks to follow.

In addition, the notes on microfinance, which were attached to the latest circular, also provide a much broader definition of microfinance services.  This definition now states that “microfinance is the provision of a broad range of financial services such as deposits, loans, payment services, money transfers and insurance products to the poor and low-income households, generally for the microenterprise and small businesses, to enable them to raise their income levels and improve their living standards.”

The activist role of BSP in the field of regulations for microfinance is an important factor that placed the Philippines at the top position for regulations supporting microfinance in Asia, and at the no. 2 position for overall microfinance business environment among 55 countries in the annual global microfinance index by the Economist Intelligence Unit.

During the question and answer session various questions were raised and answered:

1. Can rural banks offer any kind of insurance?

Rural banks are now allowed to sell microinsurance products provided by licensed microinsurance providers.

2. What are the AMLA rules apply to all clients including microfinance clients without two proper forms of ID?

AMLA regulations apply to all of the bank’s transactions. The BSP recognizes the fact that some microentreprenuers in rural areas cannot present a valid ID, thus, the BSP reiterates Circular No. 608 – Valid Identification Cards (IDs) for Financial Transactions. Please note that the requirements are now lowered from two (2) valid IDs to only one (1).