PHILDEVFINANCE (old news): February 2011

Monday, February 28, 2011

Online banking to make life easy for digital Filipinos

Online banking to make life easy for digital Filipinos

INQUIRER.net
First Posted 20:42:00 02/08/2011

MANILA, Philippines – The year 2010 witnessed our nation embracing more of the digital life. According to the International Telecommunication Union, about 29,700,000 Filipinos (or 29.7% of our population) are Internet users. In fact, we have the fifth largest population on Facebook worldwide, overtaking France.

Now it’s 2011 and, given our predisposition to anything digital, it’s no surprise that more and more Filipinos are exploring the benefits of online banking, which fits the lifestyle needs of the busy, web-loving Filipino – giving him the convenience of banking anytime, anywhere.

And since quick-and-easy has become the order of the day, financial institutions are quickly rising up to the challenge.

In fact, BPI took a step further and made online banking not only convenient, but even more rewarding. By signing up for the BPI Express Online Open 24/7 Promo, BPI customers get to enjoy online banking and the chance to win exciting prizes.

Last January 24, twenty lucky BPI Express Online first-timers each received Shopping Packages worth P25,000.

Next draw, BPI will be raffling off five (5) Apple iPad + iPhone 4 Combos. And on the following, a brand new Honda City will be given away.

To join the promo, BPI account holders only have to enroll their accounts to BPI Express Online. Upon enrollment, they instantly get ten 10 e-raffle tickets. They also receive one e-raffle ticket each time they pay their bills or reload their phones online. So the more they transact, the closer they get to the lifestyle level-ups they want.

BPI customers still have a chance to join this exciting promo. Enroll in BPI Express Online now and visit http://bpiopen247.com/ to see more information about it.

If all those prizes are not enough of an incentive to sign-up and login, BPI also offers high interest rates and lower initial deposits for BPI Express Online users. It allows users to apply for various BPI products (such as loans) online. It also rewards users with Real Thrills credits every time they pay their bills or reload their mobile phones or broadband sticks. These points may then be exchanged for free treats from any Robinson’s Supermarket instantly.
Online banking is easy at BPI Express Online. Filipinos will be delighted to find banking that suits the fast-paced lifestyle they lead.

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CARLOS ANI - SEEDFINANCE Corporation - http://www.seedfinance.net
Email: carlosani@seedfinance.net
Landline: +63495010127 Cellphone: +639152919580
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CONSULTING - http://www.carlosani.com
My Clippings - http://www.myclipps.posterous.com
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Sunday, February 27, 2011

BSP fortifies consumer protection policies

BSP fortifies consumer protection policies

By LEE C. CHIPONGIAN
February 27, 2011, 12:22am

MANILA, Philippines – The Bangko Sentral ng Pilipinas (BSP) continues to review existing regulations on the credit card operations of banks, quasi banks and their subsidiaries to further strengthen policies for the protection of the financial consumer.

"The BSP is deeply involved in various projects and activities to support the economic and social development objectives of the government through its advocacies, one of which is on the promotion of consumer protection," noted a memo prepared by the Supervision and Examination Sector.

The latest of the SES amendments to credit card regulations was the prohibition on the issuance of pre-approved credit cards.

The rationale why the BSP disapproved its issuance was that it was not consistent with the general guidelines on the grant of loans and other credit accommodations under the BSP's Manual of Regulations for Banks (MORB).

Based on the MORB, before granting loans and other credit accommodations, a bank must ascertain that the borrower is financially capable of fulfuling his/her commitments to the bank.

The requirements for the granting of loans include latest income tax return or financial statements submitted to the Bureau of Internal Revenue.

The SES however noted that since credit card issuing banks and firms determine the paying capacity of a credit card applicant, the regulations may have created the impression that it is alright to issue pre-approved credit cards as long as the credit card-issuing institution has in place the system to manage risk exposures.

"Because of confusing provisions of the regulations and the stiff competition in the credit card business, a number of credit card issuing institutions have resorted to issuing pre-approved and sometimes even pre-activated pre-approved credit cards at the risk both of sacrificing the quality of their loan portfolio and of exposing the financial consumers to financial fraud which may be brought about by the unauthorized use of pre-approved credit cards," said the memo.

Last November the BSP amended its existing credit card regulations and one of the key features was the prohibition of the issuing pre-approved credit cards.

Also amended was credit card collection practices which was one of the main complaints of the financial consumer.

An important feature of the revisions was that credit card issuers are now required to disclose not only the name of the collection agency, but cardholders will be given the name of the agent assigned to his/her account once the bank or the card-issuing firm has endorsed an account to a third-party collector.

Based on newly-issued Circular No. 702 Section 4, banks and quasi-banks and their subsidiaries/affiliate credit card companies would have to inform cardholders in writing of the endorsement of the collection of their account to a collection agency at least seven days prior to the actual endorsement.

Debt problems – How to manage your debts

Debt problems – How to manage your debts
By: Angela Brown

It is important for you to manage your debts so that you don't drown yourself completely into debt. Even before any kind of serious debt problems arises, you should take steps to bring the situation under control. First, it is essential for you to realize that if you want to put a stop to your debts from increasing, you will have to stop racking up newer debts.

Managing your debts

There are various things that you can follow for making your debt management more efficient.

These are:

1. Avoid using credit cards – For better debt management, you need to lower the usage of your credit cards. Credit cards are unsecured revolving accounts that rack up most of your debts. Use cash to buy items and keep your credit cards mostly for emergency purposes.

2. Make a list of your debts – Then make a list of all the debts that you have. This helps you to maintain on-time payments on your accounts. If you miss payments, the outstanding debt amount can increase all the more. Also, remember to make more than minimum payments on your debt accounts.

3. Practice frugal budgeting – You need to practice frugal budgeting so as to save more money than you usually do (if you do it at all). It is really essential for you to save money so that you don't miss payments on your credit accounts even if any kind of financial problems arise. It is also essential for you to save money for other emergency and medical purposes so that you don't need to borrow large amounts of money.

4. Follow any of the debt payment methods – You can follow any of the debt payment methods that you think suits your financial situation and mentally the best. There are various kinds of debt payment methods like the debt snowball method, debt avalanche method, snowflake method, etc.

5. Take advice of credit counselors – You can also take the advice from the creditcounselors. They can help you in better debt management by first analyzing your financial situation and your financial obligations. The counsellor will then help you to formulate a budget so that you expend as per your affordability and so that you are able to save more. A counselling session makes you more responsible towards your finances.

As for your budgeting, you need to analyze it from time to time and change it if required.

Author: Angela Brown
See: http://www.debtconsolidationcare.com/debt-management.html

Wednesday, February 23, 2011

Amended Agri-Law to Raise P122-B in Farm Loan

Amended Agri-Law to Raise P122-B in Farm Loan
(March 08, 2010)

The government is now moving to relax the tight rural credit squeeze following President Arroyo ’s enactment of an amended Agri-Agra law that finally bars banks from skirting a requirement for them to funnel 25% of their loanable funds into farm loans, a policy shift that agriculture officials said could mean up to P122 billion in fresh loans for farmers and fisherfolk.

In a report to Secretary Bernie Fondevilla of the Department of Agriculture , DA Undersecretary Berna Romulo Puyat said that Republic Act No.10000, which the President signed just recently, repealed Presidential Decree 717, or the original Agri-Agra Law, that sought to require banks to set aside a fourth of their loanable funds for lending to entities or activities related to agriculture and agrarian reform.

Otherwise known as the Agri Agra Reform Credit Act of 2009, this new law was sponsored in Congress by Sen. Loren Legarda and Rep. Abraham Mitra.

The DA had strongly lobbied Congress for the passage of this farm-friendly law under the watch of then-Secretary Arthur Yap , who is running unopposed in this year’s elections for a House of Representatives seat representing the 3 rd district of Bohol.

During his term, Yap had backed this then-proposed law and carried out such other measures as the DA-initiated Agricultural Guarantee Fund Pool (AGFP) in step with the Department’s commitment not only to further boost agriculture and fisheries production but to also make farming and fishing more profitable for small and big stakeholders alike.

Fondevilla, who was undersecretary and Yap ’s chief of staff prior to his new Cabinet posting, has vowed to pursue the same DA commitment with greater vigor and to strictly monitor the banks’ compliance with RA 10000.

“Apart from expanding agriculture-related alternative compliance, increasing sanctions for non-compliance and under-compliance by banks, and providing for penalties that would go to the Agricultural Guarantee Fund Pool (AGFP) and the Philippine Crop Insurance Corp. (PCIC),” said Puyat, “this Agri Agra Reform Credit Act effectively eliminates non-agri alternative compliance, and frees up to P122 billion of bank funds for lending to our farmers and fisherfolk.”

Since 1987, amendments to PD 717 have been proposed in Congress “but none has managed to even pass committee-level public hearings,” added Puyat. “It is only now, or 23 years later, under President Arroyo’s administration, that an amendatory law passed through the Legislature .”

Although the intention of PD 717 was noble, banks were able to circumvent its mandatory proviso for a fixed amount of agri-agra loans, she said, because it at the same time allowed banks to engage in a list of non-agricultural    investments or transactions considered as alternative compliance with this law.

Under 717, banks are deemed to have complied with its 25% quota for loanable funds if they use such funds for investments in Local Government Unit (LGU) bonds, Pag-ibig bonds, Development loans for housing, education or medical institutions, or in zero coupon bonds of the Home Guaranty Corp.

Banks are likewise allowed to use its funds supposedly intended for agri-agra lending to fund other non-agricultural activities such as loans for barangay microbusinesses and socialized or low-cost housing projects.

Citing June 2009 data of the Bangko Sentral ng Pilipinas (BSP), Puyat reported to Fondevilla that this PD 717 provision on non-agri-related compliance “ate up Php 122.19 billion or 73.67 percent of alternative compliance with this law.”

The biggest chunk of this amount—equivalent to Php 104.034 billion or 62.72 percent of the “non-agri-related compliance” by banks to PD 717—went to development loans like those given to hospitals and schools, LGUs and proponents of socialized housing projects.

Such loanable funds, otherwise diverted to non-agri-related investments, will henceforth go to rural credit, said Puyat, because RA 10000 has limited “alternative compliance” to the following:

Ø        Wholesale lending to accredited rural financial institutions for retail lending to small farmers or fisherfolk, or opening of special deposit accounts with accredited rural financial institutions;

Ø        Loans for agriculture infrastructure like farm-to-market roads and postharvest facilities;

Ø        Investments in preferred shares of stock of rural financial institutions, including farmers’ cooperatives and mutual benefit associations;

Ø        Loans for, or investments in, activities identified under the Agricultural Modernization Credit and Financing    Program or AMCFP; and

Ø        Traditional agri-related “alternative compliance” modes like investments in Land Bank or Development Bank of the Philippines (DBP) bonds and shares of stock of Quedancor, or rediscounting of guaranteed loans of Quedancor and PCIC.

Puyat said RA 10000 also provided for stiffer penalties against banks guilty of non-compliance or under-compliance with the agri-agra loan requirement.

Whereas PD 717 only provided for a fine of P1,000 to P30,000 per day depending on the bank’s asset size, rate of compliance and length of non-compliance, Puyat noted that RA 10000 requires an erring bank to pay an amount equivalent to 0.5 percent of the total amount not complied or undercomplied.

“This new penalty provision is simpler and more transparent,” she said. “It is also more advantageous than the previous scheme because it automatically adjusts the amount in proportion to an erring bank’s delinquency.”

In 2007, penalties paid by banks reached only P26.59 million. In contrast, “if the new penalty under RA 10000 was already in effect that year, the penalty would have totaled P455 million—based on the total under-compliance amount of P91 billion,” Puyat said.

Unlike the PD 717 provision that funnels all penalty collections into the BSP,    the amended agri-agra law allocates just 10 percent of the penalties to the BSP; the balance of 90 percent now goes to the AGFP and PCIC, she said.

“With this new law, even the penalty works for the benefit of the agriculture and agrarian reform sectors by buffering the guarantee funds used to secure loans for farmers and fisherfolk,” Puyat said.

Also, RA 10000 has put in place a “review mechanism” that mandates a three-year review of the amended law’s provisions by BSP, DA and Department of Agrarian Reform (DAR), and empowers these three institutions to submit their joint findings to Congress for its appropriate action or actions.

“By adding a review mechanism—and including the DA and DAR in this process—the concerns not only of the financial sector but also of agriculture and agrarian reform sectors are given an opportunity to be heard in ascertaining whether the percentage of mandated compliance and the list of alternative compliance are sufficient and effective,” Puyat said. ### DA Press Release

Sunday, February 20, 2011

UN agency: Cost of sending money from overseas too high

UN agency: Cost of sending money from overseas too high

BY Pia Lee Brago (The Philippine Star) Updated February 20, 2011 12:00 AM

MANILA, Philippines - The United Nations agency that promotes the integration of developing countries into the world economy called for cheaper ways for migrant workers to send money back home and maximize its economic impact.

UN Conference on Trade and Development (UNCTAD) Deputy Secretary-General Petko Draganov said the costs of sending money from overseas can be high, with the current average fee of 8.7 percent, and “there is still a lack of safe, reliable, accessible transfer systems for remittances.”

“For some countries, excessive margins are charged,” Draganov said.

To lower costs, speakers at the UNCTAD meeting in Geneva this week called for an expansion of access to banks for both sending and recipient families since many, particularly in rural areas, do not have accounts.

They also urged agencies to offer a variety of options for money transfers such as through post offices, micro-finance institutions, the Internet, and mobile phones.

Draganov noted that remittances account for about two percent of the gross domestic product (GDP) of all developing countries.

Lesotho, Nepal, Samoa, Haiti and Bangladesh have even higher percentage remittances of up to 8 percent.

“Although the effects across countries are varied, remittances have reduced poverty at the household level in many developing countries,” he said, citing a recent UNCTAD study that found that in countries where remittances make up five percent or more of GDP, on the average a 10 percent rise in remittances leads to a reduction of 3.9 percent in the poverty headcount ratio.

He stressed that a significant amount of remittance transfers is spent on household consumption and human capital such as food, education, housing, health and related purchases, which can ripple outwards through the domestic economies of poor nations and, if managed well, can create jobs and business opportunities that raise living standards and keep future potential migrants at home.

UN Population Fund (UNFPA) Deputy Executive Director Purnima Mane said women now outnumber men among economic migrants in the wealthy nations of Western Europe and North America.

Although they tend to earn less than their male counterparts, evidence shows that they send a higher proportion of their incomes back home, and do so more dependably and more often.

“Often they are the only contributors to family income,” she told the meeting, dubbed “Maximizing the Development Impact of Remittances.”

“There has been too little analysis of the relation between gender and remittances. Because of the frequency of these financial transfers, women migrants – and their children back home – are especially hurt by high transaction costs.”

Assane Diop, executive director for Social Protection at the UN International Labor Organization, said remittances were a much better way to distribute wealth in developing countries than foreign direct investment, although its flows are greater in monetary terms.

But workers’ remittances go to housing, food, education, health needs and children’s needs, thus having “a very direct impact on poverty reduction.”

For her part, UN Deputy High Commissioner for Human Rights Kyung-wha Kang warned that the rights of migrant workers should not be neglected in any discussion of remittances, since “development cannot be defined solely in economic terms.”

Saturday, February 19, 2011

Latest BIR Regulation affecting cooperatives

Monday, December 13, 2010

HOLD YOUR 2010 FINANCIAL STATEMENTS, THE BIR REQUIRES A LAST-MINUTE SET OF DOCUMENTARY REQUIREMENTS

So, you are almost finished doing your cooperative's Financial Statements for 2010. But not yet.

The Department of Finance, through the Bureau of Internal Revenue, has just published last December 13, 2010 in major newspapers Revenue Regulations No. 15-2010, dated November 25, 2010.

What is so hot about this regulation that it appears like a last-minute imposition on tax payers? I said so, because the said regulations take effect "fifteen (15) days following complete publication in a newspaper of general circulation in the Philippines." This means that this will take effect on December 28, 2010, just three (3) days before the year would have ended.

I am not a tax accountant/lawyer or anything. But the little that I know about this, is that this new regulation takes effect three days before the year ends, but will have the effect of being effective for the whole of 2010, and the Financial Statements for 2010. Is not that something? Would it not have been more 'proper', if this were to take effect, covering the tax returns of 2011?

Well, the regulations might be 'last-minute', but they would have to be followed.

We have tried to visit the BIR website (www.bir.gov.ph). Revenue Regulations No. 15-2010 is not easily accessible, like the others posted on the site. It will take some efforts to access it. Anyway, a copy of the same was published on page 7, Manila Bulletin, Dec. 13, 2010.

For whatever it is worth, we are reproducing the said regulations, in the hope that those who might have missed the publication, would have at least the chance to view it online -on this space.

One caveat. Pls., check this out and clarify the implementation of these regulations with your accountant, your cooperative's external auditor and/or the Bureau of Internal Revenue within your locality.

Cooperatives are about to finish preparing their yearly Financial Statements. So, they are as much affected by this set of regulations, as others are. So, here it goes:

REPUBLIC OF THE PHILIPPINES
DEPARTMENT OF FINANCE
BUREAU OF INTERNAL REVENUE

REVENUE REGULATIONS NO. 15-2010

SUBJECT: Amending Certain Provisions of Revenue Regulations No. 21-2002, as
Amended, Implementing Section 6 (H) of the Tax Code of 1997,
Authorizing the Commissioner of Internal Revenue to Prescribe
Additional Procedural and/or Documentary Requirements in
Connection with the Preparation and Submission of Financial
Statements Accompanying the Tax Returns

TO : All Internal Revenue Officers and Others Concerned

_____________________________________________________________

Section 1. Pursuant to Section 244 of the Tax Code of 1997, as amended, in relation to Section (H) of the Same Code, these Regulations are hereby promulgated to amend certain provisions of Revenue Regulations No. 21-2002 prescribing the manner of compliance with any documentary and/or procedural requirements in connection with the preparation and submission of financial statements accompanying the tax returns.

Section 2. Section 2 of RR No. 21-02, as amended, is hereby further amended to insert the following to paragraph (e) thereof:

"In addition to the disclosures mandated under the Philippine Financial Reporting Standards, and such other standards and/or conventions as may heretofore be adopted, the Notes to Financial Statements shall include information on taxes, duties and license fees paid or accrued during the taxable year, particularly the following:

1. The amount of VAT output tax declared during the year and the account title and amount/s upon which the same was based. If there are zero-rated sales/receipts and/or exempt sales/receipts, a statement to that effect and the legal basis therefor;

2. The amount of VAT input taxes claimed broken down into:

a. Beginning of the year;
b. Current year's domestic purchases/payments for:

i. Goods for resale/manufacture or further processing
ii. Goods other than for resale or manufacture
iii. Capital goods subject to amortization
iv. Capital goods not subject to amortization
v. Services lodged under cost of goods and
vi. Services lodged under other accounts

c. Claims for tax credit/refund and other adjustments; and
d. Balance at the end of the year

3. The landed cost of imports and the amount of customs duties and tariff fees paid or
accrued thereon;

4. The amount of excise tax/es, classified per major product category, i.e., tobacco
products, alcohol products, automobiles, minerals, oil and petroleum, etc. paid on

a. Locally produced excisable items, and
b. Imported excisable items.

5. Documentary stamp tax (DST) on loan instruments, shares of stocks and other
transactions subject thereto;

6. All other taxes, local and national, including real estate taxes, license and permit
fees lodged under the Taxes and Licenses account both under the Cost of Sales
and Operating Expense accounts;

7. The amount of withholding taxes categorized into

i. Tax on compensation and benefits
ii. Creditable withholding tax/es
iii. Final withholding tax/es

8. Periods covered and amount/s of deficiency tax assessments, whether protested
or not

9. Tax cases, and amounts involved, under preliminary investigation, litigation and/or
prosecution in courts or bodies outside the BIR."

Section 3. Section 6 of RR 21-02 is hereby amended to read as follows:

"Section 6. Repealing Clause. - all existing rules, regulations and other issuances
or portions thereof inconsistent with the provisions of these Regulations are
hereby modified, repealed or revoked accordingly, including the submission of
a separate Schedule of Taxes and Licenses."

Section 4. Effectivity Clause. - These regulations shall take effect fiffteen (15) days
following complete publication in a newspaper of general circulation in the
Philippines."

(Signed) CESAR V. PURISIMA
Secretary of Finance
001263

Recommending Approval:

KIM S. JACINTO-HENARES
Commissioner, Bureau of
Internal Revenue
001650
Manila Bulletin -Dec.13, 2010

Thursday, February 17, 2011

Insurers push for payments via salary deductions

Insurers push for payments via salary deductions

INSURERS ARE asking the government to allow its employees to pay for life insurance premiums through monthly salary deductions, saying this will make insurance less burdensome for them.
“When premiums are paid through monthly salary deduction, they come out cheaper for government employees,” Philippine Life Insurance Association (PLIA) member Jose L. Cuisia, Jr. told BusinessWorld in a phone interview last Friday.

“Instead of paying, say, P20,000 at yearend, they can just pay a few thousand pesos every month. This is easier to pay than a big lump-sum.”

Salary deductions will make insurance payments lighter on government employees, added PLIA President Mayo Jose B. Ongsingco, likening the scheme to the Filipino practice of hulugan.

“Since the deduction is already pre-set, it also enforces the savings discipline on government employees,” Mr. Ongsingco said in an e-mail to BusinessWorld last Friday.

The General Appropriations Act, or the national budget, specifies which obligations are covered by automatic salary deductions. These include tax payments to the Bureau of Internal Revenue and contributions to the Philippine Health Insurance Corp. and the Government Service Insurance System (GSIS).

The 2011 national budget includes automatic deductions for payments to accredited insurers.But given the nature of the national budget -- it is scrutinized and approved by Congress each year -- PLIA is pushing for a permanent arrangement.

Mr. Cuisia said the Insurance Code can be amended to say that payments for life insurance availed of by government employees can be automatically deducted from their monthly salaries.

Proposed amendments to the Code are currently being heard by the House banks and financial intermediaries committee.

The committee signified it was amenable to the monthy salary deduction scheme when it met last week.

“Since the General Appropriations Act is changed and updated every year, sometimes salary deductions for private insurance are allowed, sometimes, they aren’t. We don’t want to expose government employees to that volatility since life insurance is a long-term contract,” Mr. Cuisia said.

Among government employees, only public school teachers enjoy the monthly salary deduction scheme for private insurance payments, as this was authorized by the Magna Carta for Public School Teachers.

An estimated 80% of public school teachers availed of the payment scheme, Mr. Cuisia said during the committee hearing last week.

For school year 2010 to 2011, there are about 501,000 public school teachers, according to the Department of Education.

“Philamlife alone had over 200,000 teachers availing of insurance products through the monthly salary deduction scheme,” said Mr. Cuisia, who is also the vice chairman of insurer Philippine American Life and General Insurance Co. (Philamlife).

PLIA wants to extend the same payment flexibility to all government employees, given the success with the teachers, Mr. Ongsingco said.

“There will be no extra cost to the government employee for this salary deduction facility. In fact, the insurer will pay the government, through the agency or government office concerned, a service fee to reimburse the office for the administrative cost of the salary deduction facility,” he added.

However, labor group Confederation for Unity, Recognition and Advancement of Government Employees (COURAGE) is unsure if government employees will avail of private insurance at all, since they are already covered by government insurance through GSIS.

“Most employees will still prefer GSIS,” COURAGE President Ferdinand R. Gaite told BusinessWorld in a phone interview yesterday. “We get loans and pension benefits, over and above what private insurance will provide.”

He added that GSIS has a “social component,” in which lesser-paid government employees are subsidized by the contributions of higher-paid government employees.

“Under private insurance, the burden will fall only on the individual policyholder,” Mr. Gaite said. “I doubt there will be a wide acceptance of these products.”

But Messrs. Cuisia and Ongsingco insisted private insurance is “supplemental” to the protection provided by GSIS.

“This is for government employees who want more than government insurance,” Mr. Cuisia said. “Now, they have another option.”

Mr. Ongsingco added, “Life insurance companies want to extend financial security to more Filipinos, one of the least insured in Asia.” -- Diane Claire J. Jiao

Bill gives MSMEs big break

Bill gives MSMEs big break

A NOTEWORTHY bill in the Senate—Senate Bill 2643 or the Jobs Act of 2011—deserves the support of rural community members since it is expected to provide the much needed and timely boost to small businesses.

Sen. Ralph Recto, who sponsored the bill, said the measure aims to harness the potential of 783,000 micro, small and medium enterprises (MSMEs) in creating jobs. This would be done through additional incentives and easier registration requirements for newly formed MSMEs.

The bill recognizes the strength of small businesses, given their sheer number, in providing jobs.

In sponsoring the bill, Recto said the MSME sector has the potential of addressing the unemployment problem with the combined wallop of a corporate giant’s total workforce if the jobs to be created were put together.

He noted, for instance, that if each of the 783,000 MSMEs hires just one more worker, this would have the combined effect of employing 783,000 Filipinos.
Recto cited government figures showing that in 2006, newly established MSMEs altogether employed 3.3 million individuals compared with 1.6 million jobs provided by bigger enterprises.

Several laws have been enacted to enhance the capability of MSMEs, such as Republic Act (RA) 6977 or the Magna Carta for Small Enterprises, RA 9178 or the Barangay Micro Business Enterprises Act of 2002, and RA 9501 or the Magna Carta for Micro, Small and Medium Enterprises. Despite these, the growth of MSMEs has been slow.

The basic problem for MSMEs is the gauntlet of red tape they encounter in business registration, one reason for many of them not to register and remain part of the underground economy.

Under the bill, small enterprises with assets not exceeding P5 million will be exempt from income tax payments, the minimum wage law, value added tax (VAT) registration and percentage tax payments that would drastically reduce paper work for small firms as well as provide them more capital to grow their businesses.

Micro-enterprises will be required only to register with the city or municipal treasurer to be formally enlisted as an ‘MSME’ while small and medium enterprises (SMEs) will have to register with the Department of Trade and Industry (DTI) to avail of incentives and benefits under the bill.

Recto noted that under the current set up, the energy and enthusiasm of an entrepreneur are already sapped out by the time they start business with the dizzying requirements.

SMEs, or those with assets of between P5 million and P15 million for small businesses, and from P15 million to P100 million for medium-sized businesses, would also be exempt from registering for VAT payments if their annual sales do not exceed P3 million.

The bill also allows SMEs five years tax deduction for up to two new workers hired at P40,000 each or a maximum of P80,000 in allowable tax cuts. The deductions would apply only if the two new hires would remain employed for at least a year.
MSMEs will also be entitled to a single registration effective for two years to avoid the tedious yearly registration. MSMEs would also be given access to cheap loans by mandating lending institutions like banks to set aside eight percent of their loan portfolio to the sector.

Banks, in return, would be exempt from paying gross receipts tax (GRT) for loans extended to MSMEs.

Latest government statistics show that the number of unemployed Filipinos stood at 2.86 million, of which 80 percent is between the ages of 15 and 34.

The bill thus makes it imperative for the state to facilitate the generation of jobs for its citizens through any means within its power.

This can be done more effectively by giving small businesses around the country the capability to employ more Filipinos.

Short URL: http://www.manilatimes.net/?p=2921

ADB plans to set up $250 mn guarantee fund for microfinance

ADB plans to set up $250 million guarantee fund for microfinance

Aveek Datta, aveek.d@livemint.com

India’s microfinance institutions (MFIs), under pressure because of stricter rules in their largest market Andhra Pradesh and the consequent slump in repayments there, may get a boost from the Asian Development Bank (ADB).

ADB is constituting a $250 million (around Rs.1,135 crore) facility to offer guarantees against loans to MFIs extended by banks in the Asia-Pacific region where it operates, including India. The move is aimed at encouraging banks to lend more to MFIs.

Lakshmi Venkatachalam, vice-president of private sector and co-financing operations at ADB, said the proposed facility would recompense the exposure that banks have to microcredit lenders—to the extent to which they are guaranteed, if they were to go bad—in return for a fee. The extent of exposure that ADB could guarantee and the fee it will charge will depend on the due diligence of the banks’ credit processes and a thorough assessment of their quality, she added.

The facility will be operative over the next three years. “...A good part of this facility will accrue to India, given the vibrant, upcoming microfinance sector in the country,” she said.

Venkatachalam, who was in Mumbai on Tuesday, plans to meet the managements of several banks to discuss the proposal.

Mint had reported on 29 November that private equity funds with MFIs in their portfolios had been lobbying with international development finance institutions to furnish such guarantees as a measure of comfort to banks, which had stopped lending to them following the crisis in the sector in Andhra Pradesh.

After a spate of suicides among microfinance borrowers in Andhra Pradesh, allegedly due to strong-arm tactics used by some MFIs to recover loans, the state government imposing strict regulations on their functioning in October. As a result, repayment rate fell sharply and fresh business came to a halt.

A panel constituted by the Reserve Bank of India, under the chairmanship of noted chartered accountant Y.H. Malegam, called for a cap of 24% on the interest rate charged by MFIs and a 10% limit on the margins they retain.

“We have been studying the feasibility of such a risk-participation facility even before the crisis broke out and believe that such a facility would help banks increase the headroom for lending more to the microfinance space,” Venkatachalam said. “The current situation, however, will make us very cautious about due diligence.”

ADB’s proposal is a part of its long-term vision of scaling up private sector development and operations, reaching 50% of annual operations by 2020.

India enjoyed the largest share of ADB’s private sector operations as of 30 September, accounting for at least 23% of the total portfolio, or $1.2 billion. The potential financial assistance lined up for private sector development in India over the next two years was pegged at $1 billion by Venkatachalam. A sizeable portion of this amount, about $700 million, would be deployed towards the development of renewable energy, apart from healthcare, education and housing finance.

While stakeholders in India’s microfinance space hailed ADB’s initiative, much will depend on the cost of the guarantee, they said. “The step is most welcome and in line with our requests to other multilateral agencies,” said Vijay Mahajan, president of Microfinance Institutions Network, a lobby of MFIs in India, and chairman of Basix, an MFI. “Lots of lenders that have no exposure to Andhra have suffered collateral damage because of the liquidity crunch and guaranteeing their portfolio would be helpful.”

MFIs such as Bangalore-based Ujjivan Financial Services Pvt. Ltd and Kolkata-based Arohan Financial Services Pvt. Ltd have been facing difficulties in securing bank finance in the aftermath of events that unfolded in Andhra Pradesh, he said.

Vineet Rai, chief executive officer of Aavishkaar India Micro Venture Capital Fund, a microfinance-focused fund, points out that if banks build the cost of such a guarantee into the interest rate charged by them, the activity may become unviable.

“Banks are already lending at around 13-14% to MFIs and if the guarantee cost is passed on, it would make bank funding more expensive. Given a 24% interest rate cap recommended by the Malegam committee, microlenders may find the situation difficult,” he said.

While bankers are not yet aware of the proposed facility, they’re keen to review it. “If such a guarantee scheme comes and we are able to pass on the fee to the MFIs, we will be very much interested in such an initiative,” said a senior official at a large public sector bank. He did not want to be named.

Mahajan said even if the microlenders have to bear a marginal loss in the short term due to the higher cost of borrowing, it would be useful to restart the flow of funds into the sector and “get the business going again”.

Anup Roy contributed to this story.

HSBC sees peso hitting 37.50:$1 this year

HSBC sees peso hitting 37.50:$1 this year

By Lawrence Agcaoili (The Philippine Star) Updated February 17, 2011 12:00 AM Comments (2)

MANILA, Philippines - British banking giant HSBC sees the peso strengthening to 37.50 against the dollar this year and further to 35.50 to $1 next year as the Bangko Sentral ng Pilipinas is likely allow the local currency to appreciate further to cushion the impact of imported inflation brought about by rising global oil and food prices.

“We believe the peso will end the year at 37.50 per dollar. By 2012, it will be 35.50 per dollar. The growth in the Philippines is strong, and the foreign exchange should reflect that,” visiting HSBC economist Frederic Neumann said at a press briefing yesterday.

The Hong Kong-based economist sees the peso appreciating steadily at 40.50 to $1 in the first quarter, 39.50 in the second, 38.50 in the third, and P37.50 in the fourth quarter of this year.

Neumann explained that strong capital inflows to emerging markets including the Philippines as well as the robust remittances from overseas Filipinos would continue to support the local currency.

Latest data show that the country’s gross international reserves (GIR) surged 36.8 percent to a record level $62.371 billion last year from $45.03 billion in 2009 while the balance of payments (BOP) surplus more than doubled to hit a new record level of $14.4 billion from $6.42 billion in 2009.

OFW remittances likewise grew by 8.2 percent to hit a record high of $18.76 billion last year from $17.35 billion in 2009, exceeding the revised growth forecast of eight percent set by the BSP.

“I would think that as growth becomes more entrenched, BSP should allow the peso to be determined by the market. Given our forecast for growth and inflation, BSP is likely to let the exchange rate do the lifting,” Neumann said.

The bank recently raised its gross domestic product (GDP) growth forecast for the Philippines to five percent instead of 4.7 percent this year and to 5.8 percent next year. The country’s GDP growth surged to its fastest in more than three decades after expanding by 7.3 percent last year from 1.1 percent in 2009.

HSBC economist Sherman Chan said in a study that another bright spot is the country’s external position that remained on a firm footing buoyed by rising reserves and steady growth in equity flows.

“That said, the economy remains vulnerable to rising capital inflows and ensuing appreciation pressure on the peso. The former may fuel asset inflation; the latter could hurt export competitiveness,” Chan added.

HSBC sees inflation climbing to 4.4 percent this year and 4.8 percent next year from 3.8 percent last year. The BSP expects inflation to average 4.4 percent instead of 3.6 percent this year and 3.5 percent instead of three percent next year but still well within the target of three percent five percent between 2011 and 2014.

Neumann expresses concern on the possibility that the BSP would keep interest rates at record lows despite the risk of higher inflation in the coming months.

“Every central bank in East Asia, except BSP, has raised its interest rates. Unless interest rates go up, there will be a danger of inflation,” he added.

Saturday, February 12, 2011

SNS Asset Management of Netherlands Launches SNS Impact Investing with $400m Managed for Microfinance, Agriculture and Water

MICROCAPITAL BRIEF: SNS Asset Management of Netherlands Launches SNS Impact Investing with $400m Managed for Microfinance, Agriculture and Water

by MicroCapital on Saturday, February 12, 2011 at 5:58am

SNS Asset Management (SNS AM), a Dutch fund manager, has announced the launch of its impact investing unit, SNS Impact Investing, which will focus on investments in microfinance, sustainable agriculture and water. The new unit will consist of a team of ten people, headed by Harry Hummels, who serves as a board member of SNS AM, and Theo Burrows, who is a director of SNS AM.

Mr Hummels stated that the investing unit will start with USD 400 million to USD 500 million assets under management with plans to grow to USD 650 million to USD 750 million at the end of 2011 and to USD 1 billion by 2014. He also stated that target will be to achieve market rate returns along with the intended social and environmental returns on investments.

SNS currently partners with Developing World Markets (DWM) and Triple Jump, two fund managers focusing on microfinance. In addition, Mr Hummels said that SNS was looking for opportunities to partner with sustainable agriculture funds outside Africa, sustainable energy funds and a third microfinance fund.

As of 2009, SNS Asset Management manages EUR 28 billion (USD 39 million).

By Medha Ravi, Research Associate

About SNS Asset Management:

Based in the Netherlands and founded in 1997, SNS Asset Management is the asset management unit of SNS REAAL, a retail banking and insurance provider. SNS Asset Management was formed following a merger between De Hollandse Koopmansbank and SNS Bank. SNS Asset Management manages two funds, SNS Institutional Microfinance Fund and SNS Institutional Microfinance Fund II, both aiming to alleviate poverty by providing capital to microfinance institutions (MFIs) around the world. As of 2009, SNS Asset Management manages total assets of EUR 28 billion (USD 39 million).

About SNS Impact Investing:

Launched in 2011 and based in the Netherlands, SNS Impact Investing is the impact investing unit of Dutch fund manager SNS Asset Management (SNS AM). As of its launch., the unit consists of a team of ten people headed by Harry Hummels, who serves as a board member of SNS AM, and Theo Burrows, who is a director of SNS AM. As of 2010, SNS Impact Investing has assets under management of approximately USD 650 million-USD 750 million.

About Developing World Markets:

Developing World Markets (DWM) is a US-based asset manager and investment bank dedicated to making socially beneficial investments to promote sustainable economic development. It provides both debt and equity investments to microfinance institutions (MFIs) and other socially motivated organizations. As of 2010, DWM has USD 600 million assets under management and has invested in approximately 100 MFIs in approximately 30 countries.

About Triple Jump:

Triple Jump was founded in 2006 to support the expansion of microfinance institutions (MFIs) in various stages of development by providing capital and advisory services. As of December 2009, Triple Jump manages five microfinance investment funds, worth a total of approximately USD 250 million. Its investments span 132 MFIs in 53 emerging markets in Latin America, Eastern Europe, Africa and Asia. Triple Jump was established by the NOTS Foundation, a Dutch development organization; Oxfam Novib, a Dutch organization for international cooperation and development; and ASN Bank, a ?sustainability-driven? Dutch bank. Its shares are divided among these organizations and Triple Jump?s management team. Triple Jump is comprised of Triple Jump Fund Management (TJFM) and Triple Jump Advisory Services (TJAS). TJFM provides its clients with four investment options: hard and local currency loans, equity, guarantees and subordinated loans. TJAS is an independent foundation that provides consulting services and technical assistance to tier-3 and tier-4 MFIs.

Source and Resources:

Responsible Investor Article: “SNS Asset Management among first houses to launch dedicated impact investing unit”, http://www.responsible-investor.com/home/article/sns/

Making money mobile with Smart

This article appeared in Manila Times today.

Making money mobile with Smart

BIZZ FIZZ

BY RENE MARTEL

GETTING mobility with your money—that’s the vision of telecom leader Smart through its newly announced “Mobile money” which will be made accessible to all Filipinos, especially those belonging to the lower economic class.

Smart’s Chief Wireless Advisor Orlando Vea shared the company’s vision to “democratize mobile money” like it did the now ubiquitous mobile phone during the Mobile Money Transfer Asia Pacific Conference held in Manila.

“Mobile money matters most to the poor. For those who have been excluded from conventional financial and banking services, mobile money opens the door to a new and better world,” he said.

“At Limasawa Island for example, what really struck us was how people’s faces lit up when they realized they would not have to take a long and expensive boat ride to the next island just to receive or send cash,” he added, citing one of the remote islands in the country now being reached by Smart’s mobile money services through its Islands Activations Program (IAP).

Smart, through its IAP, worked with microfinance institutions and community cooperatives to bring mobile payments and transfer services to 48 remote islands, whose combined population of nearly two million people has little or no access to banking services.

Financial services such as mobile payments and sending and receiving of cash in these underserved or unbanked territories are now possible through Smart Money – the world’s first reloadable payment card linked to a mobile phone.

Just last year, Smart made it possible for all Smart mobile phone subscriptions including those that do not have activated Smart Money accounts to receive funds, converting its 45 million subscriptions into virtual wallets.

“This is not simply a mobile transfer or payment model,” said Vea. “We have grafted the Smart mobile money system into microfinance and microbusiness as part of a holistic development approach for remote communities. We are turning otherwise excluded communities into vibrant microeconomies.”

Vea also shared updates on the company’s export of the mobile money technology to Brazil and revealed plans to replicate the system in other countries in Eurasia, Europe, Africa and the Middle East through a joint venture with MasterCard.

He made it clear, though, that Smart does not intend to replace the banks’ and financial institutions’ services with its mobile money solutions. Instead, Smart prefers to be their technology partner to build a more efficient and accessible financial ecosystem.

“We see ourselves as a provider of enabling platforms and services. This positioning has made our business objectives more transparent. This has enabled us to align our revenue models with those of our partners and do away with overlaps and conflicts in the value chain. As a result, we have been able to strike deals with more partners,” said Vea.

Smart has established mobile banking relations with 16 banking partners including the country’s industry leaders like Banco De Oro and Bank of the Philippine Islands. Its partnership with MasterCard allows Smart money account holders to pay at over 35 million merchants worldwide and withdraw cash from over 9,000 ATMs in the country. OFWs can also send international remittances to Smart Money through over 95,000 international money transfer locations worldwide.
Its extensive network of over 4,000 “money-in-money-out” centers for sending and receiving funds also include partner pawnshop chains like Cebuana Lhuillier and Palawan Pawnshop and Hapinoy retail stores.

As the song says, money makes the world go round. And Smart is happy to be dancing to that tune!

bizzfizz@yahoo.com
Short URL: http://www.manilatimes.net/?p=1872

Friday, February 11, 2011

Rizal Commercial Banking Corporation (RCBC) of Philippines Raising Capital for Microfinance Acquisitions

Commercial banks are beginning now to invest seriously and in large amounts into microfinance sector. See news below.

MICROCAPITAL BRIEF:

Rizal Commercial Banking Corporation (RCBC) of Philippines Raising Capital for Microfinance Acquisitions

by MicroCapital on Friday, February 11, 2011 at 1:30pm

Rizal Commercial Banking Corporation (RCBC), a private commercial bank that was established in the Philippines in 1960, has announced that it plans to raise capital in the current quarter to fund acquisitions that will expand its reach in the microfinance sector. RCBC hopes to raise at least PHP 5 billion (USD 115 million) through the sale of equity capital for the acquisition of rural commercial banks that will enable the organization to provide financial services to micro-, small and medium-sized enterprises (MSMEs) in underserved communities.

Past acquisitions by RCBC of firms involved in microfinance include Jose P Laurel Bank Incorporated, a bank based in the Philippine province of Batangas, in 2009 and Merchants Savings and Loan Association in 2007.

In 2010, RCBC reported total assets of PHP 320 billion (USD 7.4 billion), return on assets of 1.47 percent, return on equity of 14.07 percent and net income of PHP 4.25 billion (USD 97.7 million).

By Julie Moksim, Research Associate

About Rizal Commercial Banking Corporation (RCBC): Rizal Commercial Banking Corporation (RCBC) was established in 1960 as Rizal Development Bank. In 1962 it was approved by the Philippines central bank to operate as a commercial bank and, in 1963, it began operations under its current name. With its subsidiary, RCBC Savings Bank, RCBC has approximately 340 branches in the Philippines. It also offers global remittance services through approximately 160 branches in Asia, the Middle East, the United States, Canada and Europe. In 2010, RCBC reported total assets of PHP 320 billion (USD 7.4 billion), return on assets of 1.47 percent, return on equity of 14.07 percent and net income of PHP 4.25 billion (USD 97.7 million).

Sources and Resources:

Business World Online: “RCBC Wants to Complete Fund Raising in Q1″, February 6, 2011, http://www.bworldonline.com/content.php?title=RCBC+wants+to+complete+fund+raising+in+Q1&id=25838

Thursday, February 10, 2011

RE: [Philippine-DEVFINANCE] PHILIPPINE COOPERATIVES STILL TOPS IN MICROFINANCE, PROVIDING EASY ACCESS TO LOANS IN 2010

Interesting articles. Can you please put them in a singular, weekly e-mail? Otherwise I will be forced to unsubcribe from all. As interesting as they are, they are just too many independent e-mails.

Sincerely,
Brian

To: post@phildevfinance.posterous.com; vauzbij593@tumblr.com; nufo877wuna@post.wordpress.com; post@myclipps.posterous.com; jofo906nera@post.wordpress.com; philippines-devfinance@yahoogroups.com; carlosani1.jubi4033@blogger.com; execom@seedfinance.net
From: carlosani@seedfinance.net
Date: Tue, 8 Feb 2011 20:35:57 +0800
Subject: [Philippine-DEVFINANCE] PHILIPPINE COOPERATIVES STILL TOPS IN MICROFINANCE, PROVIDING EASY ACCESS TO LOANS IN 2010

Tuesday, February 8, 2011

PHILIPPINE COOPERATIVES STILL TOPS IN MICROFINANCE, PROVIDING EASY ACCESS TO LOANS IN 2010

There was this media release, "Bangko Sentral Makes Significant Strides Toward Building an Inclusive Financial System"
(visit http://www.bsp.gov.ph/publications/media.asp?id=2494).

This summarizes the efforts undertaken by the Bangko Sentral ng Pilipinas (BSP) to mainstream microfinance into the formal financial system. This means the BSP encouraging, providing the regulatory framework, creating the appropriate products, and practically holding hands with banks so that they may engage themselves in microfinance.

This is what the BSP means by building an "Inclusive Financial System," one "where there is greater access to much needed financial services to more Filipinos, especially those that are traditionally unserved or underserved."

Very pioneering. Very laudable, indeed.

And this "unserved" and "underserved", meaning those without having availed themselves of banking services (deposits, loan, etc.) still comprise some 37% of the municipalities of the Philippines.

The opportunities to reach out to this portion of the population are great, not only for banks, but also for such other microfinance players -among them the cooperatives and microfinance non-government organizations and private foundations.

In the abovementioned media release on BSP's efforts and accomplishments as of 2010, it was mentioned that "many banks have already demonstrated success in serving microfinance clients.

There are some 200 banks reportedly currently involved in microfinance, and are serving 883,863 clients with Php 6.4-billion loans outstanding and Php 3.0-billion in savings. This is a substantial accomplishment in itself.

But compared with the record of cooperatives alone, this looks small. Consider, for example, that as of June 22, 2010 (latest figures can be bigger) there is a total of 16,650 cooperatives which were registered/re-registered under R.A. 9520. This figure includes some 1,192 cooperatives organized between March 23, 2009 to June 22, 2010.

Total members of abovementioned cooperatives reached almost 7 million individuals (6.8 million). The combined assets of these cooperatives reached Pph 163-billion, consisting mainly of loans/loan receivables. The paid capitalization was something like Pph 34.2-billion. This does not include the savings deposits.

Likewise, this does not include the microfinance loans, assets or savings extended or generated by institutions other than cooperatives, like non-government organizations or foundations.

Cooperatives are still tops in microfinance. Maybe they also deserve corresponding or as much support and capacity-building assistance similar to what banks are getting from the government and private organizations. (END).

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Microfinance gains ground

BY MIA FRANCES AGCAOILI and JACKSON UBIAS

Microfinance gains ground

When the poor and the underserved need to borrow money, they often turn to informal lenders who slap them with exorbitant interest rates.
As an alternative, microfinance is starting to get noticed. Aside from the poor and low-income earners, small household-based entrepreneurs have begun to tap microfinance to cover the short-term needs of their enterprises.
Unknown to many, the Philippines has actually had a longer history of microfinance. More than 400 years ago, the Spanish colonizers granted some form of loans to local farmers to prop up production of exportable goods such as tobacco.

The American colonizers also provided similar lending programs to support various social and economic goals

Direct credit programs such as these were formally institutionalized in the country in the 1970s via government-subsidized loans to the poor. Serious loan recovery problems, however, led to the decline of the program in the mid-1980s.
The subsidies were also cornered mostly by the more affluent borrowers, thereby defeating the purpose of targeting poor and deserving recipients. Still, it was not totally stamped out, and it persisted even through the 1990s.

These days, the government is not the only source of microfinance. Rural cooperative banks, non-government organizations, and credit unions or cooperatives all provide some form of micro-lending programs.

This is perhaps inspired by the success of Grameen Bank in Bangladesh, which underscores the capacity of microfinance to help the poor progress out of poverty.
Still, microfinance is not a cure-all approach to poverty.

In fact, even if it aims to target the less privileged, beneficiaries still have to satisfy certain criteria. The entrepreneurial poor, for example, will need to demonstrate adequately their capacity in managing a successful business.
Ultimately, and just like the bigger, more established lending channels, the success of microfinance depends on ensuring that the loans it gives out are also repaid.
The market for such loans exists and, unfortunately, persists in the Philippines.
Data from the 2006 Family Income and Expenditure Survey showed that about 33% of Filipinos (or about 27% of households) live under poverty. In addition, over 40% of families in rural areas in the country are poor.

There clearly is much room for microfinance to serve the rural poor, but its success entails significant risks or even prerequisites. The productivity of these potential beneficiaries are highly dependent on agriculture.

Unless support infrastructure such as irrigation and farm-to-market roads are provided adequately, their incomes, and thus capacities to repay their loans, will remain impaired.
That is, microfinance and infrastructure can result in increased agricultural production and productivity, and one without the other seems inadequate in addressing rural poverty.

At any rate, it may take some time before the country reaps the full rewards of microfinance. As it is, microfinance appears to be a short-term strategy to address poverty.

What it needs are complementary strategies -- specifically, those aimed at improving the capacities of beneficiaries to earn incomes and repay their obligations -- to ensure its effectiveness and sustainability in the long run.

The Institute for Development and Econometric Analysis, Inc. (IDEA) is an economic think-tank based in the University of the Philippines - Diliman. For inquiries on IDEA, please contact Eduard Robleza at edjrobleza@idea.org.ph

PNB to proceed with P10-B borrowing

PNB to proceed with P10-B borrowing

THE PHILIPPINE National Bank (PNB) will finally push through with a P10-billion borrowing after the central bank lifted a moratorium on the issuance of Tier 2 notes.

“The bank plans to raise unsecured subordinated debt [or lower Tier 2 debt] worth up to P10 billion in one or more tranches this year,” PNB Executive Vice- President and Head of Treasury Group Horacio E. Cebrero III told BusinessWorld in a telephone interview yesterday.

“This is to refinance the bank’s maturing lower Tier 2 debt and raise additional capital to finance [the bank’s] planned asset growth,” he added.

The Bangko Sentral ng Pilipinas imposed a moratorium on Hybrid Tier 1 and Tier 2 capital issuances lasting until Dec. 31 last year while it reviewed the kinds of capital that could be admitted under Basel 3.

The central bank then issued a circular that simplified bank capital into Tier 1 and Tier 2, with Tier 1 composed of bank equity and retained earnings plus “additional going concern” or Hybrid Tier 1 capital, and Tier 2 capital composed of just lower Tier 2 capital.

Other Philippine banks have also raised capital in preparation for the adoption of the stricter Basel 3 banking standards.

PNB has P5.5 billion worth of lower Tier 2 debt maturing in August.

Mr. Cebrero said “the first tranche would be worth P5.5 billion as we would have to refinance the P5.5 billion maturing in August.”

The size of the next issuance, he added, would depend on market conditions and the bank’s need to do so.

PNB, the country’s fifth largest bank, has already asked the Bangko Sentral ng Pilipinas (BSP)the go-ahead to issue P5.5 billion worth of notes.

“After we get the approval of the BSP, we would push through with the capital raising. That would be towards the first quarter or early second quarter,” Mr. Cebrero said.

Asked to elaborate on the bank’s plan to grow its assets, he said: “We plan to expand the bank’s balance sheet by expanding our lending or loan portfolio, be it the corporate or retail business. The bank also plans to set up branches in strategic locations.”

In a separate phone interview, PNB President Eugene S. Acevedo said “PNB plans to grow its assets across all the bank’s businesses, that is, SME (small and medium enterprise) lending, consumer and corporate lending.”

“As for the number of branches, the bank plans to add 15 to 20 more branches this year, which would be mostly located in urban areas or non-restricted areas in Metro Manila,” he added.

“We plan to put branches in CALABARZON (Calamba, Laguna, Batangas, Rizal and Quezon) or provinces close to Manila and Cebu and Davao,” Mr. Acevedo also said.

Early last month, Mr. Acevedo declared that “[the bank] is interested in acquiring either commercial or savings banks.”

PNB shares closed at P50 apiece yesterday, up from P49.35 each on Friday. -- Ann Rozainne R. Gregorio

Amendment to Insurance Code approved

Amendment to Insurance Code approved

INSURANCE CONSUMERS have to be careful on who they entrust their premium payments to, as they will be held responsible should their brokers fail to remit these payments to insurance companies.
The House banks and financial intermediaries committee yesterday approved a provision in House Bill No. 1502 seeking to amend the Insurance Code. The approved provision stated: “Payment of premiums to brokers is not considered payment of premiums to insurers.”

Brokers are financial intermediaries who find sellers of insurance products on behalf of their clients. They are different from insurance agents who represent specific insurance companies. Payments made to insurance agents are considered payments made to insurance companies.

The Insurance Code provides that “No policy or contract of insurance issued by an insurance company is valid and binding unless and until the premium thereof has been paid.”

The approved amendment, however, was contested by Surigao del Norte Rep. Guillermo A. Romarate, Jr. who pointed out this could expose the public to risk.

“They might expect protection, not knowing their payments to their brokers were not received by the insurer,” he said during the hearing yesterday.

But industry players did not want to be held liable for erring brokers either.

“We cannot extend coverage when we have not received a single centavo,” said Fortunato D. Peralta, Philippine Insurers and Reinsurers Association (PIRA) deputy general manager.

He explained that brokers were representatives of insurance clients, unlike agents who have contractual obligations to insurers.

“They are ‘shopping boys’ for the assured, based on industry parlance,” Mr. Peralta explained. “They are not representatives of the insurers.

That’s why they don’t even get commissions, like agents.”

PIRA board member Victoria B. Roman also revealed there was a scheme in the past wherein some brokers allegedly made money by pocketing their clients’ premium payments.

Industry practice usually allows brokers a credit extension or a grace period of 90 days after a policy is issued, before payments have to be made.

“Clients already have an insurance policy in those 90 days. But there are some brokers who would cancel the policy on the 89th day, and then move to another insurance company, and then start all over again,” Mario C. Valdez, PIRA general manager told BusinessWorld in a phone interview yesterday.

Mr. Valdez added that a client could be moved to different insurance companies and effectively earn coverage for an entire year, without premiums actually being paid to an insurer.

Mr. Romarate, however, insisted insurance companies were in the best position to control brokers.

“But if we had a measure of control over them through a contract, they wouldn’t be brokers anymore. They would be agents,” PIRA’s Mr. Peralta said.

So, to strike a balance between the interests of the insurers and the protection of consumers, the House banks and financial intermediaries committee resolved that the provision would instead read, “Payment of premiums to brokers, who are not agents of insurance companies, is not considered payment of premiums to insurers.”

Industry players suggested several measures to help the insuring public protect their premium payments.

“Deal with brokers you know and trust,” PIRA’s Mr. Valdez said. “Always ask for the original receipt of the insurance company, not just the acknowledgment receipt of the broker.”

Consumers often think paying premiums is a nuisance, he added. Once they make their payments, they no longer bother to get proof it has been remitted to insurance companies.

Philippine Life Insurance Association representative Jose L. Cuisia, Jr. also urged the Insurance Commission to regulate brokers, since they are the ones who give licenses to them.

Mr. Valdez was quick to clarify, though, that the scam of pocketing premiums was limited to a few brokers. -- Diane Claire J. Jiao