PHILDEVFINANCE (old news): November 2010

Tuesday, November 30, 2010

8 big banks violated DOSRI rule – BSP

8 big banks violated DOSRI rule – BSP
By LEE C. CHIPONGIAN

November 30, 2010, 8:00pm

MANILA, Philippines – The Bangko Sentral ng Pilipinas (BSP) is closely monitoring eight commercial banks found to have violated provisions of the DOSRI rules, or loans to directors, officers, stockholders and their related interests.

The BSP's policy-making body, the Monetary Board, have noted the list of erring banks.

The BSP is also looking into thrift banks and rural banks with assets of more than P1 billion for DOSRI rule non-compliance.

There are 37 commercial and universal banks in operation in the Philippines, 37 thrift banks of a total 74 under BSP supervision with total assets exceeding P1 billion and 23 rural banks of 661 with assets above P1 billion.

Sources at the BSP said of 37 thrift banks with assets of over P1 billion, 13 are found to have violated the DOSRI rule, while 23 of the rural banks with assets of more than P1 billion are also identified for non-compliance.

Under Section 36 of the General Banking Law of 2000, the BSP is authorized to implement restrictive DOSRI rules. Other BSP regulations also allow the central bank to limit banks' loans and other credit relating to DOSRI.

Sources at the BSP said the nature of the violations committed include, among others, excess or breach of DOSRI caps and failure to report the loans. The banks may have also used dummy accounts for the borrowers, said sources.

In May last year, the BSP relaxed the DOSRI regulations on bank loans to subsidiaries in the energy and power generation sectors so long as these projects are in line with the government's Medium Term Development Program or part of the public investment strategies.

BSP Circular No. 654 amended the ceiling on loans, other credit and guarantees to subsidiaries and affiliates of banks/quasi-banks with businesses in energy and power generation by allowing a separate individual limit to loans of banks/quasi-banks of 25 percent of the net worth of the lending bank provided that the unsecured portion will not exceed 12.5 percent.

Last November 19 the BSP's Monetary Board, after shelving a similar proposal, announced that it has approved a separate single borrower's limit of 25 percent for three years for infrastructure and/or development projects undertaken under the Public-Private Partnership Program of the government. Sources said the move was "perfectly timed" for the Aquino government's PPP pilot program.

At the moment, DOSRI individual limit or ceiling is 10 percent and five percent for unsecured limits, and aggregate 20 percent limit on loans, other credit accommodations and guarantees granted by banks to their subsidiaries and/or affiliates.

In the past, the BSP has been known to be 'harsh' on DOSRI transactions but in the last years after 2003, it has been conducting reviews on relaxing circulars.

At one point the BSP also considered removing the coverage of bank subsidiaries or the RI (related interests) in DOSRI.

It was in April, 2004 when the BSP expanded the definition of RI, which covered corporations, associations or firms that own or control at least 20 percent of the subscribed capital of a substantial stockholder of the lending bank.

Also included in the definition were corporations, associations or firms in which the lending bank owned at least 20 percent of the subscribed capital. If the entity has an existing management contract or any similar arrangement with the lending bank, they would also be considered "related interests."

The BSP review removing loans to subsidiaries as DOSRI is an easing of the 2004 circular. Subsidiaries refer to a corporation or firm, of which more than fifty percent of the outstanding voting stock is "directly or indirectly owned, controlled or held with power to vote by its parent corporation."

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Mobile Banking in the Emerging World

November 28, 2010

Mobile Banking in the Emerging World

By KEVIN J. O'BRIEN

BERLIN — In Tanzania, a hospital sends money by text message to women in remote areas so they can pay for bus fare to travel for critically needed surgery. In Afghanistan, the government pays its police officers by text message to skirt corrupt middlemen. In Pakistan, the biggest financial network is not a bank, but a unit of Telenor, the Norwegian mobile phone operator.

While storefront bank branches and online banking are ubiquitous in the United States and most developed countries, in less-developed countries only a small fraction of the population is served by banking services.

Mobile banking first appeared in the Philippines in 2001, when two operators, Globe and Smart, introduced their own domestic payment plan. In most mobile banking models, the person sending a payment sends the amount by text to the recipient’s phone number.

The person receiving the payment goes to an authorized local agent, typically a mom-and-pop retailer that also sells prepaid mobile phone cards, and withdraws the cash.

In parts of Latin America, Africa, the Middle East and Asia, more than 90 percent of people typically carry at least one mobile phone, a technological tether that mobile operators are exploiting to become retail bankers to the emerging world.

“Five years ago, there was hype around mobile banking but no real numbers in terms of customers,” said Mung Ki Woo, vice president of electronic payments and transactions at Orange, the wireless unit of France Télécom. “Now we are starting to see significant numbers. I think the potential of mobile banking is huge, going forward.”

Since December 2008, Orange has signed up one million people for its Orange Money mobile banking service in six African countries: Mali, Senegal, Ivory Coast, Madagascar, Kenya and Niger. In Kenya and Tanzania, subsidiaries of the British mobile operator Vodafone now process more international wire transfers than Western Union.

In Kenya, Vodafone has 13 million customers and in Tanzania, six million customers for its mobile banking service, which generated 670 million transactions last year, primarily for domestic or international money transfers, said Peter Cornforth, a Vodafone business development manager for the service, called M-Pesa. Pesa is the Swahili word for money.

In Kenya, coffee growers routinely pay their field workers by text message, and in Tanzania, Vodafone customers pay the national electric utility, Luku, by text. In Dar es Salaam, Tanzania, a rehabilitation hospital called C.C.B.R.T. sends bus fare via texts to women who travel to it for surgery to correct fistula incontinence, a common side effect of childbirth.

“Apart from being a serious new business for operators, these services for the first time are connecting people to critical banking services, and making positive changes” in their lives, said Mr. Cornforth, who is based in London.

Telefónica, the Spanish operator that is a market leader in Latin America, plans to start mobile banking services in four South American countries next year. Globally, the number of mobile banking users is expected to surge more than sixteenfold, to 894 million by 2015 from 55 million in 2009, according to Berg Insight, an industry research firm based in Stockholm.

Almost all of those mobile banking customers — 78 percent, or 697 million people — are in Asia, Africa, the Middle East and Latin America, according to Berg Insight. In Europe and North America, mobile banking remains secondary to personal computer-based Internet banking. Even so, the on-the-go convenience of mobile banking is attracting users in the West.

About 10 percent of U.S. bank consumers use mobile banking, usually to transfer money, make payments or monitor bank accounts, said Teresa A. Epperson, a partner at Mercatus, a Boston company that advises banks and financial institutions. As more U.S. consumers buy smartphones, mobile banking’s market penetration is expected to exceed online banking’s, which currently is about 50 percent, by 2015, Ms. Epperson said.

“This is only going to get bigger, in our opinion,” she said.

The potential is great in Latin America, where only 35 percent of the people have bank accounts, only 19 percent have bank cards but 90 percent have mobile phones, said Pablo Montesano, the head of mobile financial services at Telefónica.

Investors are also beginning to recognize the potential of the technology. In September, a leading maker of mobile banking technology for SIM cards, a French company called Gemalto, bought Trivnet, an Israeli company that makes financial transaction management software for mobile operators, for $40 million.

Only six months earlier, Trivnet had won the contract to supply mobile banking technology in Latin America to Telefónica.

Amit Mattatia, the Trivnet chief executive, said that 10 to 15 operators next year are planning to start large mobile banking operations in big markets in Latin America, the Middle East and India. Citing confidentiality, he declined to identify the operators.

“Because so much of the world is under-banked, consumers want these services very much,” Mr. Mattatia said.

As the cost of a simple mobile phone has fallen below $20 in most of the world, mobile banking is becoming affordable in emerging markets.

“This is now poised to explode in the developing world,” said Philippe Vrignaud, a senior vice president in Singapore for Gemalto.

In Pakistan, where only 14 percent of the people have bank accounts, Telenor introduced mobile banking in November 2008.

The service, called Easypaisa (100 paisa equal a Pakistani rupee), now has 500,000 active users who sent transactions worth a combined 5.5 billion rupees, or $64.1 million, in the first quarter of this year.

Most were domestic money transfers, which are limited to $120 a transfer. Telenor exacts a fee of as much as 5 percent of the transaction.

Easypaisa is available at 11,000 independent retail agents that make up Telnor’s distribution network, which outnumber the 8,300 combined branches of all Pakistani banks.

Within three years, Telenor plans to expand the number of retailers in its network to 36,000.

“This service is about addressing the unmet needs of the consumer,” said Aamir Ibrahim, a vice president and chief strategy officer at Telenor Pakistan. “I think this is suitable for all of our markets everywhere.”

Monday, November 29, 2010

DoE backs electric vehicles

DoE backs electric vehicles
By CARLO S. SUERTE FELIPE
November 28, 2010, 3:18pm

MANILA, Philippines – During the e-tricycle donation of the Asian Development Bank (ADB) in Mandaluyong City last week, Department of Energy (DoE) Secretary Jose Almendras expressed support in promoting the use of electric vehicles, especially those using Lithium-ion Phosphate batteries.

Almendras said that electronic vehicles have a better energy efficiency ratio than hybrid vehicles.

He added that it is more efficient to make use of coal or other source of energy to convert it to electrical energy to charge the batteries of electric vehicles.

He said that all the components of the Lithium-ion batteries are 100 percent recyclable.

“Some car manufacturers are not going to make hybrid cars anymore and they are shifting to electric vehicles. Also, we are the only country that has a tricycle industry this big which eases the mode of transportation,” he pointed out.

Almendras said that even if the batteries and motors can be imported from abroad, other parts of the electric tricycle or e-trike can be manufactured locally which can provide jobs to Filipinos.

Sunday, November 28, 2010

Farmers make their co-op work

Farmers make their co-op work
By Tonette Orejas
Central Luzon Desk

First Posted 18:04:00 11/27/2010

STA. RITA, Pampanga, Philippines—There are cooperatives and cooperatives but 26 farmers here, two of them women, are doing things together differently. They rely little on government.

Registered in April, the Sta. Monica (Sta. Rita, Pampanga) Farmers Marketing Cooperative has one goal for its first planting season: raise the rice yield to 200 cavans a hectare.

“Target 200” is how they call their pet project, their second since the cooperative was established.

Their first collective undertaking in the village, known to old folks as Dampul, is a set of tests. For that, they planted 7 kilograms of “bigante,” a hybrid rice variety, on 5,000 square meters. With strong rains and wind brought about by Typhoon Juan damaging 30 percent of the crop, the produce totaled 56 cavans.

The sale from that, members’ capital contributions of P130,000, proceeds from the rental of a thresher and financial assistance from engineer Mario Panlilio increased the cooperative’s funds to P500,000, says Hilgardo David, the group’s chairman.

“We used part of that to buy seeds,” treasurer William Gueco says.

Farmers solicited the thresher from the Butil party-list group. They also asked the Department of Agriculture in Central Luzon to lend them technical assistance in the management of water and pests for the planting season, which they began on Saturday.

In a Mass held at the Sta. Monica chapel, they offered live chicken, vegetables, palay and carabao milk as thanksgiving.

“It’s going to be a transition for them, this planting of a new rice variety,” says Fr. Deo Galang, who celebrated the Mass.

Emigdio Guanlao, 76, the oldest in the group, says farmers in Sta. Monica stick to local seeds and old farming ways.

The youngest farmer is Jayson Cuenco, 30. The members, including Milagros Baluyut and Amelia David, owned 5,000 square meters to three hectares of land. These are either inherited or parcels under tenancy.

Water is either obtained from the National Irrigation Administration, deep wells or rains. The cooperative’s project will now cover 40 hectares.

“At first, we did not want to organize ourselves into a cooperative because previous cooperatives had failed in our town. They always failed because the government made us beneficiaries. We were not running our group,” David says.

“[But] we are [now] managing our organization. We [are] raising the resources we need,” he says.

Roy Imperial, DA assistant director in Central Luzon, says the cooperative started on the right footing by developing self-reliance and discipline.

All over the region, he says there are 150 active farmers’ cooperatives. More than 200 others are inactive for lack of resources or too much reliance on government’s support.

Panlilio, owner of the Mahogany Farm, a private farm in this town, says he helps in organizing farmers because he wants to help “change the cooperative culture.”

“This can be a business model,” he says of the efforts of Sta. Monica farmers.

BSP bars execs’ kin from bank posts

BSP bars execs' kin from bank posts
By Michelle Remo
Philippine Daily Inquirer
First Posted 20:08:00 11/26/2010

MANILA, Philippines—The Bangko Sentral ng Pilipinas has issued a regulation prohibiting spouses and relatives of key bank officers from occupying sensitive positions in a bank.

Under Circular 699, spouses and relatives within second degree of consanguinity of a bank manager, a cashier or an accountant may not occupy positions that deal with handling, managing or recording of assets of a bank.

These include senior management positions, such as chairperson, president, chief executive officer, chief operating officer, general manager and chief financial officer; as well as treasurer, controller and chief accountant, chief cashier, compliance officer and internal auditor.

"The spouse or a relative within the second degree of consanguinity or affinity of any person holding the position of manager, cashier, or accountant of a branch or extension office of a bank/financial institution or their respective equivalent positions is disqualified from holding or being appointed to any of said positions in the same branch or extension office," BSP Governor Amando Tetangco Jr. said in the circular.

The circular is to take effect 15 days after publication in a newspaper of general circulation.

Regulators said the circular was meant to further safeguard banks from fraud. They said risks could be greatly reduced if certain individuals would be barred from occupying sensitive bank positions.

The BSP regularly reviews bank regulations to protect the depositing public.

According to Tetangco, the country's banking sector is now enjoying high levels of liquidity and profitability, winning the confidence of the public as reflected in the growing amount of bank deposits.

The BSP said efforts should be exerted to maintain this high level of confidence in the banking sector.

Data from the central bank showed that total bank deposits in the country amounted to P3.4 trillion as of end-August, up by 8 percent from P3.2 trillion posted in the same period last year.

"Savings and time deposits remained the main source of funds for banks.... Growth in deposits reflected sustained depositor confidence in the banking system," the BSP said in a separate report.

Nurturing Paeng’s vision for microfinance

Nurturing Paeng's vision for microfinance

By Daxim Lucas

Philippine Daily Inquirer
First Posted 17:34:00 11/27/2010

MANILA, Philippines—Eleven years after bringing the concept of microfinance to the mainstream, the pet project of former Bangko Sentral ng Pilipinas Governor Rafael "Paeng" B. Buenaventura has taken root in the local banking industry.

Microfinance today is a multibillion-peso industry that is helping improve the lives of thousands of borrowers and beneficiaries.

However, four years after Buenaventura's death on Nov. 30, 2006, a new challenge has emerged that threatens not only the future of his legacy, but also the viability of an industry crucial to the livelihood and well-being of millions of Filipinos.

"There is an unfolding crisis in the microfinance industry of India," says Leonilo Coronel, who is the executive director of RBB Foundation—an organization put up several years ago to continue the advocacy of the late banker.

"More alarmingly, we see patterns in India which, if left unchecked, could duplicate themselves here."

Victim of own success

The microfinance school of thought started in Bangladesh, but it was in India that the industry really found its scale.

According to Coronel, the Indian microfinance industry has become so successful that it is now in danger of becoming a victim of its own success.

"To grow their client base, [microfinanciers] had to lower their credit standards so that they could lend more money to more borrowers," he says.

The result is the steady erosion of credit quality across the industry.

"Default rates in India are rising," Coronel says, fearing that the same may soon happen in this country.

Cheaper than loan sharks

Over the years, RBB Foundation has helped the microfinance industry in the country grow by providing training and capacity-building programs for entities entering the industry.

Together with groups like PinoyME, founded by the late President Corazon Aquino, the foundation is helping spread the gospel of microfinance across the country.

The result is, people once considered "unbankable" now have ready access to affordable capital.

Before microfinance took off, the only access people had to financing was through loan sharks, commonly known as "five-six" lenders.

Thankfully, Buenaventura's vision of providing the poor with better access to capital is shared by the likes of former Development Bank of the Philippines chairman Antonino Alindogan, former Monetary Board member Teodoro Montecillo, Bank of the Philippine Islands president Aurelio Montinola, JP Morgan Chase Philippines chairman Roberto Panlilio, former Bankers Association of the Philippines president Deogracias Vistan and Paeng's elder brother, Cesar Buenaventura—all of whom serve as the foundation's trustees.

Credit quality

In trying to head off an Indian-style crisis, the people behind RBB Foundation believe that local microfinance institutions have to share information about creditors the way banks in more advanced economies do.

"To maintain credit quality in microfinance, we need something akin to a credit bureau," Coronel says. "This will entail building a central database, where information about microfinance borrowers will be stored for the use of lenders."

Under this scheme, the database will be used as reference by lenders to check the credit of potential borrowers.

Instead of conducting tedious and expensive door-to-door or bank-to-bank checks, credit investigators may simply submit the name of a potential borrower to a credit bureau for verification.

"Immediately, they will see if the borrower has outstanding loans with other microfinance institutions, what their repayment track records look like and, more importantly, if they have been subject to credit checking by other banks recently (an indication that they have been "shopping around" for loans)," he explains.

According to the official, the credit bureau marks the next stage of development for the microfinance industry.

"This is what we're doing to preserve Paeng's vision and legacy," Coronel says.

Indeed, such an effort to maintain credit quality amid the temptation to throw caution to the wind is something Paeng would have approved of.

Cash-transfer program vulnerable to power abuse—NGO exec

Cash-transfer program vulnerable to power abuse—NGO exec

By Leila B. Salaverria
Philippine Daily Inquirer
First Posted 20:53:00 11/27/2010

MANILA, Philippines—The selection of beneficiaries is one of the most contentious aspects of social welfare cash transfer programs in various countries, according to Social Watch coordinator and Third World Institute executive director Roberto Bissio.

Bissio, who works with non-government organizations around the world, said the dynamics of choosing whom to give the cash assistance make the process vulnerable to corruption and abuse of power.

"The problems related with cash transfer are mainly around the decision of whom do you give the money to. How do you determine who is entitled to it or not? And that is one of the aspects where many, many things can go wrong," Bissio told reporters.

He also said a cash-transfer program could help people, but for it to help people get out of their impoverishment, it has to be coupled with job provision and other services.

"Cash transfer can be a very fast way of reaching a lot of people fast and efficiently, and improve immediately their lives. But then it has to be supported and be part of a wide range of other measures and service provision and job creation if you want the poverty eradication to be sustainable," he said.

The Uruguay-based Bissio also spoke at a Pan Asian Capacity Building workshop on regional development hosted by Social Watch Philippines in Ortigas, Mandaluyong.

The conditional cash-transfer program in the Philippines, which the new administration seeks to expand, has become controversial.

Critics question its sudden expansion to cover 2.3 million households (from one million households), as well as its P21 billion budget, which they say should be devoted to basic services and livelihood projects.

According to Bissio, biases may be involved in determining who is poor enough to receive monetary assistance from the government. The selection of beneficiaries could also vary from country to country, from region to region and from province to province.

The absence of very clear rules on who is entitled to the cash assistance could also create problems. The interpretation of these rules could pave the way for corruption or abuses of power when determining which households get the money. Officials could choose the beneficiaries arbitrarily or based on their personal preference.

But even with set criteria, the selection of beneficiaries is not a cut and dried activity, Bissio said. For instance, it would be difficult to choose beneficiaries from impoverished communities based on income because the residents are essentially unemployed and their money comes sporadically, depending on whether they have come upon an odd job or some other means to put food on the table.

Families that own certain appliances, like a flat-screen TV, for instance, may be deemed excluded, but in reality the item may have been a gift and the family could still be considered poor.

And keeping an eye on the chosen beneficiaries, to make sure they are qualified and that they are keeping their part of the bargain, could be a costly and complicated activity.

"You may have to check and recheck, and then it's complicated, expensive, bureaucratic," he said.

He also said that when families fail to meet the conditions set for the cash assistance, such as not sending their children to school, it usually means there is a bigger problem, like lack of food

Taking the cash assistance away because of the families' failure to meet the conditions could just exacerbate the families' woes, he pointed out. He said that in most of the cash transfer programs, the condition "tends to be more like an ethical statement of commitment than a natural trigger that would stop the transfer."

But he said not automatically cutting the cash assistance for failure to meet the condition was okay, especially if the cash transfers are going to the families that need it.

"You have to understand the real logic of what you want to achieve," he said.

Bissio also stressed the need to ensure the proper selection of beneficiaries and distribution of the money, especially since cash transfer programs tend to involve large sums of money. He said such big amounts tend to attract interest and greed.

"It's unavoidable, it's human nature. People will have an interest of some kind, either tapping from that money or tapping from the political power or benefits that one way or the other they can extract out of being perceived as the providers of that money," he said.

Bissio also said the cash-transfer programs still have a role to play in helping countries reduce poverty, even if many countries have come to realize that it is better to offer universal services, such as education for all, rather than setting up programs specifically targeting the poor.

According to him, monitoring the quality of programs geared toward helping the poor is difficult because the poor usually do not have the means to complain and just accept what is given to them, no matter how deplorable it is. But when a service is offered to all, the middle class acts as a quality control measure, since they have the means to complain when the services deteriorate.

Saturday, November 27, 2010

2,750 rural homes to get solar power

2,750 rural homes to get solar power

Gov’t resorts to green energy for remote areas
By Cris Evert Lato
Inquirer Visayas
First Posted 20:28:00 11/26/2010

CEBU CITY, Philippines—The push for green energy is producing results in the country’s remotest villages.

The Department of Energy (DOE) announced that it would spend at least P92 million to provide 2,750 households in many of the country’s remote villages and islands with electricity derived from the power of the sun.

Regional energy department officials said the money would be spent to install what they called solar home systems in the households listed as beneficiaries of the government’s barangay electrification project.

The project seeks to bring electricity to every village in the country.

Project costs

Lourdes Arciaga, science research specialist of the DOE’s Visayas Field Office, said the project would bring solar power to 782 households in Luzon, 370 households in the Visayas and 1,598 households in Mindanao.

The funds earmarked for the project, said Arciaga, would also be used for what she said were “social preparations cost.”

These include forming so-called barangay power associations, or groups that would be in charge of maintaining solar power systems and recruiting more users to generate enough revenue to keep the solar power going.

Arciaga said funds would be also used for other operating and maintenance costs.

The bidding process for the project has already started, said Arciaga.

In the Visayas, Arciaga said the project would be rolled out in Bohol, Northern Samar and Cebu.

Arciaga said the project would benefit households located in off-grid areas or areas not covered by electric distribution utilities and cooperatives.

Apart from being located in off-grid areas, she said the households were chosen based on social acceptability and willingness to provide counterpart funding.

The solar home system that would be installed in each of the 2,750 households next year was the same system currently installed and used by 50 households in Barangay Alumar in Getafe, Bohol, according to Magdaleno Baclay Jr., senior science research specialist of the DOE Visayas Field Office.

P200 a month

The Barangay Alumar project cost P500,000. It was completed in 2008. JICA extended a financial assistance of P275,000 and counterpart funds were provided by the DOE, the local government and P1,500 in one-time fees from the 50 households.

“Solar power is energy efficient and environment-friendly. What is important is that power generation should be more than what you consume,” Baclay said.

In Bohol, each household has a monthly contribution of P200 to maintain the solar power system.

The energy department said 97.1 percent of the country’s 41,980 barangays have been electrified.

BSP to raise lending caps, adopt better rules

BSP to raise lending caps, adopt better rules
11/14/2010 | 05:37 PM

Banks may soon expand their lending limits to particular borrowers, separate themselves from their trust units, and reduce the number of documents they submit for regulatory purposes, the central bank said this weekend.

Bangko Sentral ng Pilipinas (BSP) managing director Johnny Noe Ravalo announced the possible adoption of some reforms after the US Federal Open Market Committee said last week that the Federal Reserve would have a second round of monetary stimulus to jump start the sluggish US economy.

This list of reforms was included in the BSP’s quantitative impact study or QIS, which will be released “within two weeks or so," Ravalo told reporters.

There is a long list of unpursued reforms because central banks around the world are redefining their regulatory landscape to police the financial sector in an efficient way, he said

“We are reassessing the lending caps to provide some leeway in financing broad applications like infrastructure and medical services, while taking cognizance of the nature of deposits between banks and trading instruments," Ravalo.

“We are also working with the Securities and Exchange Commission, Insurance Commission, and Philippine Deposit Insurance Corp. in crafting a formal regulatory framework for private banking. We have proposed the creation of trust corporations that are separate juridical entities from banks," he added.

At present, there are trust entities that form part of a larger banking unit, like the Metropolitan Bank and Trust Co., one of the country’s largest financial institutions.

The central bank also intends to reduce the number of documents — normally 17 — that banks must submit to the BSP, Ravalo said.

“Submitting 17 documents is not fun. But there’s the question of making the process more efficient without sacrificing any of the prudential controls. We will not simplify just because it’s simple, but do so because it is efficient. That is important," he said.

Paring down the paper work to the bare minimum will cover such activities as declaring dividends, remitting profits by foreign bank branches, and extending the time bank branches are allowed to stay open.

“We are streamlining our applications so that we require less submission of documents, while others no longer require prior approval but only require due certification from the chief executive officer and the compliance officer," Ravalo said.

It will also benefit the BSP, which only has 36 accountant-processors reviewing over 1,700 applications a year.

Also covered by the ongoing review are central bank “policies on distribution so that relatively simple products can be handled within the cross-selling framework while allowing more complex products to be handled by parallel guidelines but with sufficient mitigants."

With the revision, the ability to handle risks will be the sole issue when it comes to approvals instead of inclusion within a set of permissible activities.

“We are revitalizing our check-and-balance pillars, making sure that the functions carried out respectively by the compliance officer, the chief risk officer, and the internal auditor are clearly understood and effectively administered," Ravalo said. — JE/VS, GMANews.TV

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DoF seeks repeal of law exempting life insurance premiums from taxes

DoF seeks repeal of law exempting life insurance premiums from taxes

By CHINO S. LEYCO

November 23, 2010, 7:22pm

MANILA, Philippines – The Department of Finance (DoF) is proposing to repeal the law that permanently exempts life insurance premium from all taxes.

In an obtained document, the DoF said the proposal aims to level the playing field among financial instruments since the provision will result in inequality as other similar financial instruments will continue to be taxable.

“The exemption of life insurance premium form tax is not pro-poor since it will deprive the government of revenues that can be spent on services that benefit most the poor, not to mention that insurance is consumed more by the middle to high-income earners,” the DoF said.

The agency estimated that the government will forego P1.34 billion in annual revenues for the initial year and will increase to a minimum of P2.2 billion every year once the exemption commences after five years.

Republic Act 10001 otherwise known as the “Act of Reducing the Taxes on Life Insurance Policies, Amending Section 123 and 183 of the National Internal Revenue Code of 1997” was signed into law by former President Arroyo last February.

The law reduced the premium tax from 5 percent to 2 percent and replaced the current DST rate pf P0.50 for every P200 of premium with fixed peso amount ranging from being exempt to P100 depending on the amount of insurance coverage per policy.

Also, the law exempts life insurance premium from all taxes after five-years of implementation.

The finance department had requested former President Arroyo to line veto the provision exempting the life insurance premium from all taxes after five years. Aside from life insurance premium exemption, the finance department is also proposing to amend the optional standard deduction (OSD) for corporation.

“We support the Bureau of Internal Revenue proposal, which was made by the BIR early this year, to reduce OSD for corporation from 40 percent of gross income to 10 percent,” the DoF said.

The DoF cited the OSD is intended to help the unsophisticated taxpayers, or small taxpayers who cannot hire tax accountants, in filing a return, adding it is not meant to be a tool to deliberately reduce the income tax due of a taxpayer.

Exposure to Microfinance Sector Threatens Banks’ Stocks,in India

MICROCAPITAL BRIEF:
Exposure to Microfinance Sector Threatens Banks' Stocks
in India

by MicroCapital on Friday, November 26, 2010 at 1:03pm

Recent analyses by Citigroup, a US-based international financial services conglomerate, indicate that banks in India are experiencing stress on their stock prices due to the falling asset quality of their microfinance institution (MFI) holdings, mainly due to the recent trouble in microfinance in the state of Andhra Pradesh.

Citigroup reports 0.5 percent of all loans in the Indian banking industry are exposed to the microfinance sector. 3.6 percent of YES Bank's total loans are in the microfinance sector, and both ICICI Bank and Axis Bank have exposure of 1.2 percent.

Citigroup estimates that banks' profit could drop anywhere from 10 to 50 percent depending on their exposure to the microfinance sector. In YES Bank's case, pre-tax profit could drop by 25 percent for the year and book value could ebb 4.2 percent. Shares of the bank have already fallen a total of 10 percent in three recent trading sessions. Other Indian banks have suffered similar decreases in share price [1].

By John Howard-Smith, Research Associate

2010 micro-entrepreneur awardees named

2010 micro-entrepreneur awardees named

November 24, 2010, 8:38pm

MANILA, Philippines – Citibank Philippines and the Citi Foundation, in partnership with the Bangko Sentral ng Pilipinas (BSP) and the Microfinance Council of the Philippines, Inc. (MCPI), recognized 11 outstanding Filipino microentrepreneurs during the 2010 Citi Microentrepreneur of the Year Awards held at the Metropolitan Museum of Manila last November 17, 2010.

Now on its eighth year, the awards program has been successful in increasing awareness of microfinance, and providing incentives for microentrepreneurs to enhance technology, improve production, and accelerate income-generating activities.

Addressing the winners and the guests during the ceremonies, Bangko Sentral ng Pilipinas Governor Amando M. Tetangco, Jr. said: "We continue to be amazed with the variety and scope of microenterprises that have survived birth pains, cyclical trends, and financial constraints to become inspiring success stories that benefit not only their immediate families but also their communities."

“The Citi Microentrepreneur of the Year awards was introduced here in the Philippines in 2002,” related Citibank Philippines’ Country Head, Sanjiv Vohra.

Through the years, the inspiring stories of awardees have served as motivation for other microentrepreneurs to succeed in their own fields. This year, Citibank and the Citi Foundation gave more than P1 million to deserving awardees in various categories.

The Masikap Award is given to micro-entrepreneurs who successfully started a business that is now a reliable source of income for the family. The asset size of the micro-enterprise in this category must be below P300,000. Under this category, one National Awardee gets P200,000, while three Island Group Awardees receive P100,000 each. This year’s National Awardee is Ester Lumbo, a manufacturer of bags made from pandan leaves, from the Visayas. The Island Group winners are: Pawid trader and duck raiser Zenaida Avellaneda from Luzon; Turmeric tea grower and trader Mary Jane Reyes from the Visayas; and Carinderia owner Analiza Candole from Mindanao.

The Maunlad Award is given to microentrepreneurs whose businesses are generating employment for other people aside from household or family members. The asset size of the microenterprise in this category must be between P300,000 to P1 million.

As with the Masikap category, one National Awardee gets P200,000, while three Island Group Awardees receive P100,000 each.

This year’s National Awardee for the Maunlad category is Nora Bagaforo, fisher and sari-sari store owner from the Visayas. The Island Group winners are: Farmer Elma Gabriel from Luzon; organic farmer Enrico Jingco from the Visayas; and owner and manager of a Manpower services company Letecia Tabotabo from Mindanao.

Special Awards are also given to three microentrepreneurs engaged in agriculture, green or sustainable enterprises, and businesses operating in hard-to-reach areas. These awardees receive P75,000 each.

Farmer Herminigildo Dulatre is the winner in the Agriculture category, copra harvester Lourdes Acuna bagged the prize in businesses operating in hard-to-reach areas category, while recycler Ismael Adiaton won for green or sustainable enterprises.

Friday, November 26, 2010

Risk-based capital for non-life insurers urged

Risk-based capital for non-life insurers urged

By Ted P. Torres (The Philippine Star)

Updated November 26, 2010 12:00 AM Comments (0)

MANILA, Philippines - The Philippine Insurers and Reinsurers Association (PIRA), the trade organization of the country’s non-life insurance industry, is urging the Insurance Commission (IC) to implement the risk-based capital (RBC) framework.

The RBC means an insurance company must raise a certain amount of capital based on the amount of risk – or types of insurance products – it sells, to ensure its ability to pay claims. In the banking sector, it is roughly the equivalent of the risk-weighted capital adequacy ratio (CAR).

PIRA president Michael F. Rellosa said that insurers with a “small appetite for risks” need only raise capital commensurate to the products marketed under the RBC framework.

“This means that the amount of capital a company would be required to raise will be proportional to the amount of risks it wants to take,” he said at the opening of the ASEAN Insurance Council (AIC) meeting yesterday.

The Department of Finance (DOF) and the IC wants an increase in the paid-up capital of all insurers, as well as a RBC framework, to strengthen the industry, which should lead to better protection for the insuring public.

By the end of 2010, paid-up capital for life, non-life and reinsurance companies must not be less than P125 million or a net worth of P250 million. By 2015, capital must reach P500 million.

PIRA wants to do away with the paid-up capital requirement, with the RBC as the only guidance or benchmark.

Rellosa said the top 30 non-life insurance firms have a capital base well over P125-million level.

However, this poses a problem for the small ones – those writing only the third party liability (TPL) insurance for motor vehicles. Some small companies have been in existence for 50 years or even longer, mainly catering to risks like TPL for vehicles or insurance for equally small businesses.

“The insurance industry can be compared to the retail industry. There are big ones like hypermarts, and there are also ones that can be considered sari-sari stores. Under the RBC framework, these hypermarts and sari-sari stores can still co-exist and cater to their niche markets,” he explained.

Early this month, the IC reminded insurance companies of the scheduled increase in their capital base.

Deputy Commissioner Vida Chiong said that by the end of the year, “the paid-up capital must at least be equal to the amount previously scheduled for Dec. 31, 2009,” or equivalent to P125 million in paid-up capital.

Chiong said the order’s implementation – supposed to start in 2007 – was delayed for a year by virtue of a memorandum circular after insurers appealed they be given time to adjust to the new requirements.

Manila’s credit rating seen to stay ‘junk’ through 2020

Manila's credit rating seen to stay 'junk' through 2020

Friday, 26 November 2010 00:00

BY LAILANY P. GOMEZ REPORTER

Standard & Poor's Ratings Service (S&P) said a junk rating would likely hound the Aquino administration, as the New York-based firm expects the Philippines' credit score to remain below investment-grade in the next 10 years barring radical structural reforms.

In its report titled "Global Aging 2010: Philippines," S&P drew up a number of scenarios with their corresponding implications for the country's credit rating.

"We project that the Philippines' favorable demographic profile in conjunction with expected fiscal consolidation under our base-case scenario will continue to reduce net general government debt. Our analysis suggests that with fiscal policy reforms, net debt could fall to 11 percent of GDP by 2050 in the Philippines, considerably lower than the sample median of 245 percent of GDP," Agost Benard, S&P credit analyst, said.

An indicator of economic performance, GDP or gross domestic product is the amount of final goods and services produced in the country.

While "such macroeconomic and fiscal trends would imply an improvement to the current 'BB' long-term foreign currency sovereign rating on the Philippines," Benard however said that "in the very long term, prolonged fiscal imbalances and wealth [as measured by GDP per capita] tend to become the dominant factors."

"Using this approach, our 'BB' rating on the Philippines would likely improve in the next decade," he said.

"By 2020, we expect that the Philippines' fiscal indicators will have strengthened such that they would be more in line with sovereigns currently rated in the investment-grade category ('AAA' to 'BBB-') because of the complementary effects of fiscal reforms, stronger growth, and the negligible impact of aging-related expenditures on fiscal balances," he added.

On November 13, S&P raised its credit rating on the Philippines by a notch from "BB-" to "BB." Despite the upgrade, the country's credit score remains in junk territory, as investment-grade ratings range from "AAA" to "BBB-."

A rating of "AAA" has the highest quality with minimal risk, while the "BBB-" carries moderate risk, with adequate capacity for timely payments.

In making the upgrade, S&P cited the country's ample dollar buffer and improving economic prospects, coupled with the orderly conduct of last May's national elections.

On Thursday, the government said Philippine GDP rose by 6.5 percent in the third quarter, or weaker than the 6.7 percent to 7.7 percent projection of the National Economic and Development Authority (NEDA).

This led the economy to grow by 7.5 percent in the first nine months of the year.

So far this year, the country's balance of payments (BOP) position and gross international reserves (GIR) have grown past the full-year projections set by the central bank.

The GIR at end-October rose to $56.8 billion as against the full-year projection of $50 billion. The BSP will likely revise its GIR forecast when the Monetary Board meets on November 18.

Similarly, the BOP registered a surplus of $3.062 billion in September, bringing the cumulative surplus to $6.54 billion in the first nine months as against the full-year forecast of $3.7 billion.

For the third time this year, the central bank revised upward to $8.2 billion its GIR forecast, from an earlier estimate of $3.7 billion.

Banks pressed to use BSP payment, settlement

Banks pressed to use BSP payment, settlement

Friday, 26 November 2010 00:00

The Bangko Sentral ng Pilipinas (BSP) has again asked lenders and other financial institutions to use the electronic payment and settlement system to cut down the cost of remittances.

In a circular letter, BSP Deputy Governor Armando Suratos said pursuant to the memorandum of agreement between the BSP and the Association of Bank Remittance Officers Inc., together with the Bankers Association of the Philippines, the Chamber of Thrift Banks and the Rural Bankers Association of the Philippines, banks are urged to use the Philippine Payments and Settlements System (PhilPaSS) effective October this year.

The PhilPaSS Remit System uses the BSP-PhilPaSS as the local clearing house to transfer remittances from a local bank to another bank where the beneficiary of an overseas Filipino worker (OFW) maintains an account.

The BSP has been encouraging banks to use PhilPaSS to lower transaction fees. The system is also equipped with a feedback mechanism that will enable OFW remitters to trace the status of their remittances.

The participants in the PhilPaSS are Allied Banking Corp., Asia United Bank, Banco de Oro, Bank of the Philippine Islands, China Bank, Development Bank of the Philippines, Land Bank of the Philippines, Metropolitan Bank and Trust Co., Philippine National Bank, Philippine Savings Bank, Rizal Commercial Banking Corp. and United Coconut Planters Bank.

According to Suratos, these banks have established their connectivity with the PhilPaSS and have been transmitting batches of remittance transactions to the BSP gateway server for processing and settlement since May this year.

“For the purpose of such, all banks and other financial intermediaries performing overseas remittance business are hereby enjoined to participate in the PhilPaSS,” Suratos said.

The volume and value of transactions through the PhilPaSS went down 1.3 percent in the second quarter to 198,837 at P46.1 trillion.
LAILANY P. GOMEZ

India is the world’s largest microfinance industry: M-CRIL

India is the world's largest microfinance industry: M-CRIL

Tuesday, November 23, 2010, 22:07Latest News1 comment

Microfinance Focus, November 22, 2010: According to the recently released M-CRIL Microfinance Review, India now has the largest microfinance industry in the world with the phenomenal growth of 62% per annum in terms of numbers of unique clients and 88% per annum in terms of portfolio over the past five years and around 27 million borrower accounts. Micro Credit Rating International (M-CRIL) is a leading rating and advisory agency. It has been publishing Microfinance Reviews since 2000.

The high growth rate of microfinance has been fuelled by commercial bank funding which inherently gravitates towards for-profit institutional structures. Thus, there is a continued India-wide trend towards the transformation of MFIs into for-profit non-bank finance companies (NBFCs) so that over 50% of the 66 MFIs in the M-CRIL analysis now consist of such institutions.

At the regional level, the South continues to dominate the sector in concentration of numbers of MFIs. However, there are some MFIs which now have multistate operations and cannot be clearly categorized as working in a particular region. Such MFIs have been grouped as All India for the purpose of analysis. The rush to be regulated (as NBFCs) along with the push for growth has become the dominant characteristic of Indian microfinance claims the report.

Tuesday, November 23, 2010

‘Above 7% full-year GDP growth still attainable’

'Above 7% full-year GDP growth still attainable'

TUESDAY, 23 NOVEMBER 2010 19:44 CAI U. ORDINARIO / REPORTER
EVEN with expectations that the country's fourth-quarter economic growth will be slower, the National Economic and Development Authority (Neda) believes that the economy can still post a growth of above 7 percent in 2010.

The Neda forecasts that the economy could have grown 6.7 percent to 7.7 percent in the third quarter. This will likely result in a gross domestic product (GDP) growth that is above the government's 5-percent to 6-percent target for the full year.

If the Neda is right in its projection, Neda Deputy Director General for Planning Margarita Songco said the economy will only need to grow around 6.7 to 6.8 percent in the last quarter of the year to attain a growth of about or above a 7-percent rate this year.

"The average is already 7.9 in the first semester, isn't it? So our forecast was correct, which is 6.7 percent to 7.7 [percent], it will be above 7 percent for the whole year. We still have to wait for the fourth quarter," Songco said, partly in Filipino, in a briefing with reporters on Tuesday.

Songco said the government is also not bent on changing its macroeconomic targets for 2011, given the still satisfactory performance of the economy.

The Neda official said given the current track of economic growth, the 7-percent to 8-percent GDP target for 2011 will still be maintained by the government. However, she said for budgetary purposes, the forecast used by the government was a more conservative 4 percent to 5 percent.

The conservative forecast takes into consideration the same factors that could also lead to a slower fourth-quarter growth. These include expectations of export-earnings slowdown due to the strong peso, the current trend of economic growth in the region and base effects.

"[For 2011, 7 percent to 8 percent] is the target. Projection is different, compared with the target. For budgetary purposes, I think [its at] 4 to 5 [percent]. That's what we used for the budget. But [the] target is 7 to 8 percent," Songco explained.

"Hopefully the performance of the industry would improve, with all the different measures that we're undertaking, like improving competitiveness. I think the Department of Trade and Industry has also initiated specific measures to improve competitiveness, the ease of doing business, there are initiatives being undertaken to make it simpler, lesser hassle," she said.

The Neda's projections for the third quarter was based on expectations that the growth of the industry and services sectors were the main drivers of economic growth in the July-to-September period.

She said the main drag came from the agriculture sector, which posted a contraction of 2.8 percent in the third quarter and 2.62 percent in the January-to-September period due to the prolonged El Niño phenomenon.

Songco said the main growth driver for industry in the third quarter was due to the strong external and domestic demand that fueled manufacturing, construction, and the mining and quarrying subsectors.

For services, Songco said the sector benefited from the low-inflation environment, which propped up the trade, private services, transportation, communication and storage subsectors.

"The continued global economic recovery, low-inflation environment, and improvement in consumer and business confidence were seen to have influenced the country's economic growth. GDP growth, however, could have been limited by the negative impact of the prolonged El Niño phenomenon on the agriculture sector," Songco said.

Bangko Sentral relieves banks of same-day check-clearing risks

Bangko Sentral relieves banks of same-day check-clearing risks

MONDAY, 15 NOVEMBER 2010 19:45 JUN VALLECERA / REPORTER

STARTING on Jan. 1, 2011, banks will no longer bear the risk of an unfunded check under new regulations approved by the Monetary Board of the Bangko Sentral ng Pilipinas (BSP) requiring same-day clearing instead of the following day as practiced at present.

The same-day clearing rule shifts the risk of an unfunded check and its accompanying responsibility from the bank to the issuer where it properly belongs.

The shift, BSP managing director Johnny Noe Ravalo said, means that starting next year one should refrain from issuing any check knowing that the instrument is not backed by funds at the bank.

Under present regulations, the issuer of a bounced check has until 4 p.m. of the following day to make good on his obligations.

Well, the BSP found in a study it commissioned that existing regulations unduly puts the entire banking system at risk of defaulting check issuers, especially in cases where large sums of money are involved, Ravalo said.

For instance, a bankrupt financial institution merely writes hundreds of millions of pesos worth of unfunded checks to panicky clients just so it escapes collective public ire at an institution that should have practiced more financial prudence in the first place.

“The BSP did a study on clearing risks and the fundamental message is we don’t want to get away from the message that if you write a check you must have the funds to back it,” Ravalo said.

“There is an antibouncing check law. The current process allows for next-day clearing. This one says same-day clearing. It is not a tightening. We’re only taking away the potential for risk and abuse,” he quickly explained.

He cited the case of a bank that is about to fail, but its officers insisting on writing checks with the full knowledge that its vaults of have been taken to the cleaners.

“What happens to banks that are about to fail? What happens to incoming checks which are claims against the bank and those checks have not been funded? The Monetary Board approved the change in regulation already. It kicks on Jan. 1 next year. The risk here is not to the individual check writer anymore but to the system,” Ravalo said.

He said further the Monetary Board agreed to rewrite the regulations in recognition of the systemic nature of the risks involved in unfunded checks, which could mean either the bank or the check writer really had solvency problems.

Also, Ravalo said, the Monetary Board recognized that consumer issues are likewise involved where an unwitting client accepts a check that was never funded from the beginning.

In any case, the practice of next-day check clearing has got to stop for the greater protection and comfort of the one who writes it and also for the person, juridical or otherwise, who accepts it in good faith.

Monday, November 22, 2010

‘Paluwagan’ style on calamity fund eyed

'Paluwagan' style on calamity fund eyed

Tuesday, 19 October 2010 00:00

BY JEFFERSON ANTIPORDA REPORTER

INTERIOR and Local Government Secretary Jesse Robredo is proposing the
pooling of national calamity fund with the calamity fund of local
governments to ensure that the resources would be readily available in
the event of a disaster. In a press news briefing during the launching
of the 19th anniversary celebration of the local Government Code held at
Heritage Hotel in Pasay City,
Robredo said that the Deapart-ment of Interior and Local Government
(DILG), with the help of different local officials, are now formulating
the mechanics that would be used in the said program. He said that they
expect it to be completed before the end of the year.

"This concept of disaster risk pooling has been successful in other
countries and I believe that it will work in the Philippines if it will
be supported by the local officials," Robredo said referring to the
proposed project dubbed as "Paluwagan para sa paghahanda sa Kalamidad."

The project, he said, is similar to the concept of saving for a
paluwagan, an agreement in which members pool money at a scheduled time
and take
turns in receiving the pooled amount.

Robredo said that the project would give local government units (LGU)
better access and discretion in the use of funds since they are in a
better position to know which areas and sectors badly needed disaster
intervention.

He added that this is a better alternative to the existing set-up where
financing for calamities and disasters are largely disbursed through
national government agencies which also have their own priorities.

"Come to think of it if all cities in the country would contribute P5
million a year we will have at least P600 million in the calamity pool
plus the national calamity fund it would be a big help for the relief
and rehabilitation of LGUs hit by calamities," he explained.

Robredo said the plan had already received support from the League of
Municipalities and League of Province of the Philippines but they have
yet to seek the approval of President Benigno Aquino 3rd.

When asked if the plans still requires the approval of the congress
before it can be implemented, Robredo said the project could be
implemented through the signing of a memorandum of understanding with
all concerned parties.

Meanwhile, also on Monday, four joint memorandum circulars were signed
between the Interior department, Department of Finance, Department of
Budget and Management, Department of Justice and the Department of
Social Welfare and Development (DSWD) that aims to increase real
property tax collection, transparency and protection to the women and
children.

Two of the joint circulars were signed by the Interior department under
Robredo and Finance department headed by Secretary Cesar Purisima, that
enjoin all provinces, cities and municipalities to prepare for the
schedule of fair market values of real property in their jurisdiction
and the imposition of an additional ad valorem tax on idle lands.

A joint memorandum was also signed between the Interior department and
the Budget and Management department that requires the full public
disclosure of local budgets, bids and public offerings and other
financial information.

The purpose of the memorandum is to institutionalize public
accountability and transparency in local government transactions and to
advance the primacy of full public disclosure of financial information
as a guiding principle in performance-based local governance.

The fourth memorandum was signed between the Interior department,
Justice department and DSWD that calls for the creation of local
committees on the anti-trafficking and violence against women and their
children.

--
CARLOS ANI - SEEDFINANCE Corporation - PhilDevFinance
http://phildevfinance.posterous.com
Email:carlosani@seedfinance.net

Sunday, November 21, 2010

A new idea in banking for the poor: correspondent banking

A new idea in banking for the poor: correspondent banking

By teaming up with retail outlets in low-income, often hard-to-reach areas, financial institutions can create value both for themselves and their new customers.

NOVEMBER 2010

By Alberto Chaia, Robert Schiff, and Esteban Silva
Source: Social Sector Practice

Correspondent banking can significantly lower the costs of serving low-income clients.

Correspondent banking has become one of the most promising strategies for offering financial services in emerging markets. In this model, financial institutions work with networks of existing nonbank retail outlets—such as convenience stores, gas stations, and post offices—to deliver financial services. This approach can be especially powerful when serving the unbanked poor because of its ability to reduce banks’ cost-to-serve and reach low-income workers where they live. In Brazil, where the strategy has enjoyed its greatest successes, about 1,600 municipalities (approximately one-third of the total) are served solely by correspondent-banking outlets.

Correspondent (or agent) banking benefits a range of stakeholders. The poor gain convenient access to financial services in their own communities. Financial institutions reach a vast new customer segment. Agents increase their sales volumes and have an opportunity to develop deeper relationships with customers.

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CARLOS ANI - SEEDFINANCE Corporation - PhilDevFinance http://phildevfinance.posterous.com
http://phildevfinance.wordpress.com
http://www.carlosani.com
http://www.myclipps.posterous.com
http://www.seedfinance.net
Email: carlosani@seedfinance.net
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BSP approves higher cap, longer term for micro loans

BSP approves higher cap, longer term for micro loans

Friday, 25 June 2010 00:00

BY LAILANY P. GOMEZ REPORTER

The Rural Bankers’ Association of the Philippines (RBAP) said the central bank has approved an increase in the ceiling of its housing micro finance loan product. Joseph Omar Andaya, RBAP president, said the Bangko Sentral ng Pilipinas (BSP) approved the generic operations and procedures manual that would allow micro finance lenders and rural banks to raise the loan ceiling from P150,000 to P300,000.

“It would enable micro finance institutions, like rural banks, to increase the depth and breadth of their outreach to provide financial services addressed to the segments belonging to the economic base of the pyramid,” Andaya said.

The RBAP official said that BSP allowed a longer loan term for micro finance loan products.

“The terms of micro loans before only ranged from 6 months to one year. Housing micro finance terms [can now] range from five years [for home renovation] to a maximum [of] 15 years [for] cases which involve acquisition of lot and construction of house,” he said.

He said the BSP also approved the application for incentives and regulatory treatment granted to the Housing and Urban Development Coordinating Council.

Based on the resolution signed by BSP Deputy Governor Nestor Espenilla Jr., all RBAP-accredited banks, which have complied with the pre-qualification requirements set by the organization, can offer housing micro finance products.

They must provide the latest Camels rating of at least three and a management score of at least three.

On top of that, the banks must have a capital adequacy ratio at least 12 percent, should not have major supervisory concerns that would warrant a prompt corrective action under existing regulations, and no arrearages in micro finance borrowings.

What is the NAPC?

What is NAPC?

By Malou Mangahas

THE NATIONAL Anti-Poverty Commission or NAPC was created by Republic Act 8425 or the "Social Reform and Poverty Alleviation Act" that came into force on June 30, 1998, the day the first supposedly "pro-poor" president, Joseph ‘Erap’ Estrada, came to power.

The law was a legacy of his predecessor, Fidel V. Ramos, who took a fancy for periodic meetings with representatives of the basic sectors and organizations of the poor.

What was conceived to be a "coordinating and advisory" agency for the poor, however, has since then been visited by politics, political appointees, and incessant infighting between and among representatives of the poor, and the NAPC secretariat personnel.

And then it was forgotten. To this day, 70 days after Benigno Simeon C. Aquino III was installed president -- like Estrada on the wings of an anticorruption and pro-poor platform -- the NAPC remains headless, listless, and without direction.
Mr. Aquino, who chairs the NAPC under the law, has not named a new NAPC lead convenor or director general -- who enjoys the rank of Cabinet secretary. Too, two vice-chairpersons have yet to be appointed, one for the "Basic Sector" component, with representatives from 14 sectors; and another for the "Government Sector," with representatives from 25 national agencies and the four leagues of local governments. The state of flux has left in limbo NAPC’s 100-odd personnel as of December 2009. An undersecretary is serving as interim chief.

The NAPC crew includes 23 permanent personnel, three detailed, and 73 contractual or hired under "contract of service," according to the Commission on Audit (CoA). Since June 30, a number of contractuals have left, bringing the number of non-plantilla personnel to 58. Last August staff salaries were delayed for a month, says a member of NAPC’s human resources unit.

To be sure, budget support for the NAPC was not wanting over the last three years of the previous administration. In 2008, it received an allocation of P181.3 million, in 2009 P79.1 million, and this year, P112 million. These sums are on top of funds for microfinance loans for the poor that NAPC assists in managing, as well as funds from United Nations agencies for various programs.

RA 8425 institutionalized the processes of the Social Reform Agenda (SRA) "in order to sustain its gains," and mandated the NAPC "to enhance the programs, approaches and strategies to strengthen the partnership between government and the basic sectors." In addition, the NAPC was tasked to "develop and promote microfinance through the establishment of the People’s Development Trust Fund (PDTF), strengthening of the People’s Credit and Finance Corporation as the forerunner for microfinance services, and encouraging private and government financial institutions to open a special window for microfinance."

Over the years, the NAPC has evolved into an elaborate bureaucracy, triggering an overlap with many departments and agencies devoted to the same functions and programs.

Its superstructure now has these teams:

Macropolicy Unit (MPU), created in 2001 and assigned to "develop poverty reduction strategies and integrate such into national and local plans; monitor cross-sectoral policies; and advocate and develop tools to assist in poverty monitoring and assessment."

Micro-Finance Unit (MFU), created in June 2004 and assigned to "pursuing the development of the microfinance industry and ensuring the integrated delivery of sustainable microfinancial services to the poor..."

Basic Sector Unit (BSU), which "coordinates and ensures the participation of the 14 basic sectors identified in the Social Reform and Poverty Alleviation Act in the governance processes..."

Localization Unit (LU), which "introduces the government’s poverty-reduction strategy into the systems of local governments and sustaining the antipoverty convergence mechanism at the regional level..."

Water and Sanitation Coordination Office (WASCO), which "facilitates and monitors the implementation of the President’s Priority Program on Water."

Media Bureau, which "implements public relations and social marketing activities that promote the government’s social reform and poverty-reduction programs..."
Administrative and Finance Unit (AFU), which oversees the general operations of the NAPC Secretariat, including payroll, employee benefits, procurement, and the like.
Management Information System (MIS), which is "responsible for maintaining and updating of ... the Secretariat’s hardware and software. It is also tasked with constantly updating the NAPC website."

The big question is whether the NAPC has been worth all the millions in taxpayers’ money that it has received and continues to receive.

For years now, the CoA has issued audit reports on the NAPC that have been peppered with "qualified" observations. Its 2009 report alone contained as many as 35 of these regarding such things as million-peso contracts with a popular radio anchor and a reporter colleague, and a public-opinion pollster that were not authorized in the NAPC budget; the overpayment of per diem and allowances for travel and conferences; and the non-remittance to the Treasury of program funds received from external donors.

As far as the Aquino administration is concerned, though, NAPC personnel have the assurance of Budget Secretary Florencio Abad that it "will be retained." He even says, "Its continued existence was never an issue."

Yet those introduced to both government and civil society circles like Karina Constantino David, former chairperson of the Civil Service Commission, has serious doubts that the NAPC remains relevant.

"It’s been in limbo in the last few years, sa totoo lang," she says. "Maybe the concept sounds good on paper but in actual fact, a coordinative body headed by the president, with Cabinet members at the forefront ... the coordinator like NAPC has no stature or power to craft policy that the departments should implement."
If for anything, when the NAPC started disbursing microfinance credits, and providing for cell phones and perks for the basic sector representatives sitting on its board, it evolved into a virtual "dispenser of largesse" to the leaders of the poor and the basic sectors.

Asks Ms. David: "How do you reinvent it with a defective law? With the kind of law and the kind of practice it has had over the five past years, is it worth trying to reinvent it? Should you throw in more money where it does not seem to work?" -- Malou Mangahas, PCIJ