BSP: Only certified banks can engage in microfinance

BSP: Only certified banks can engage in microfinance

MONDAY, 28 MARCH 2011 20:13     JUN VALLECERA / REPORTER  

NOT just any bank may engage in the business of extending so-called micro loans to small borrowers as the privilege is and shall remain a regulated activity, the Bangko Sentral ng Pilipinas said on Monday.

Deputy BSP Gov. Nestor Espenilla Jr. stressed this point in the BSP’s latest communications to the banks in which he emphasized only those properly trained and documented may engage in it.

“This is to remind that only authorized banks are allowed to engage in the presentation, marketing, sale and servicing of microinsurance products,” Espenilla said.

According to him, banks may act as a microinsurance agent only from authorized insurance providers duly recognized by the Insurance Commission.

As agent, only those banks passing a qualifying exam and prescribed training course may engage in the business and the bank’s articles of incorporation must be amended to reflect this fact.

“In view of the latter requirement, applicant banks shall amend their articles of incorporation by including a secondary purpose of acting as a microinsurance agent and shall submit simultaneously the amended AOI to the appropriate BSP office and the Insurance Commission,” he said.

Only after the requirements have been complied with in full will the BSP issue its approval in the form of a “No Objection” notice.

“This ‘No Objection’ notice, together with other requirements, shall serve as the basis for the IC to issue the appropriate license to the applicant bank. However, the licensed bank shall submit the approved amended AOI on or before June 30, 2012; otherwise, the license shall no longer be renewed,” Espenilla stressed.

He also said the “unauthorized conduct of microinsurance as well as other insurance-related activities shall subject a bank and/or the responsible directors and/or officers of the bank to the applicable sanctions and/or penalties under existing banking laws, rules and regulations.”

The microinsurance program, which involves loans as small as P5,000 per borrower, is an important advocacy program started by then BSP Gov. Rafael Buenaventura that current BSP Gov. Amando M. Tetangco Jr. has conscientiously pursued.

It is a highly regulated activity mainly because it affects the financial welfare of small borrowers whose trust and confidence in the system forms the bedrock of banking, especially in the countryside.

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