PHILDEVFINANCE (old news): June 2011

Thursday, June 30, 2011

Text-SSS service: SSS gets IT award

Text-SSS service: SSS gets IT award

(The Philippine Star) Updated June 28, 2011 12:00 AM Comments (1)

MANILA, Philippines - The Social Security System (SSS) has received an award for its “visionary applications of information technology” that gives members access to their contribution and loan records using mobile phones.

Computerworld, a global media hub based in the United States, picked the SSS as its 2011 Honors Laureate distinction awardees, for the Philippine pension fund’s success of Text-SSS which brings its services closer to workers in the Philippines.

Text-SSS was launched on February 2010 to allow members to check their contributions, loan application status and loan balance. An estimated 130,000 members have registered with Text-SSS as of May 2011.

The pension fund plans to expand Text-SSS services to include inquiries on benefit eligibility and claim status, location of SSS servicing branches and documentary requirements for benefit applications. Loan and benefit applicants would also receive notices through text instead of letters through the mails.

“Access to information is important to our members. We want to make it easy for them to verify if their employers remit their monthly contributions, or if they are qualified to avail of SSS benefits and loans,” Edgar Solilapsi, SSS officer-in-charge, said.

The SSS is an awardee under the human services category of the 2011 Computerworld Honors Program. The awards, which is on its 23rd year, is governed by the Computerworld Information Technology Awards Foundation based in Massachusetts, USA.

To use Text-SSS, members must text their social security number, date of birth (DOB) and name in the following format: “SSS REG <SS number> <DOB MM/DD/YY> <FIRST NAME> <LAST NAME>” to 2600 to register and get their PIN code, which will be used for text-based transactions.

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BAP Credit Bureau taps MFIs

BAP Credit Bureau taps MFIs

By Ted P. Torres (The Philippine Star)

Updated June 28, 2011 12:00 AM

MANILA, Philippines - After practically saturating the country’s banking system and a number of non-banking financial institutions, the BAP Credit Bureau Inc. (BAP-CB) has successfully penetrated the critical microfinance sector.

The BAP-CB is a product of the Bankers Association of the Philippines (BAP), the trade organization of the commercial banking system. It is a computerized credit information exchange institution that allows members credit-dealing reports on individual and corporate borrowers to combat fraud and bad loans.

With the help of the Rafael B. Buenaventura Foundation (RBB Foundation), the BAP-CB was able to start the Microfinance Credit Bureau project.

“It was the personal mission of former Bangko Sentral ng Pilipinas Governor Rafael B. Buenaventura to establish a nationwide credit bureau, and a sustainable microfinance program,” Leonilo G. Coronel, BAP managing director, said.

The program allows microfinance institutions (MFIs) to fulfill their social mission of poverty alleviation with the help of shared credit information. Presently, the program has enrolled seven MFIs that cover thousands of micro-entrepreneurs nationwide.

These are: CARD Bank Inc., Negros Women for Tomorrow Foundation Inc., Taytay sa Kauswagan Inc., ASA Philippines Foundation Inc., OK Bank Inc., Alon Sa Hirap Inc. and LifeBank Foundation Inc.

The shared list of micro-borrowers coming from the seven members will allow the MFIs to “reform” those with bad credit history after thorough review. The MFIs were the ones that provided the vision, strategic directions and specific business requirements for the project.

“We are just the platform or the data bank that the members provide,” Coronel said. “The bureau only develops solutions, operates the infrastructure and provide the services.”

The project is presently under pilot testing and it will be reviewed in September this year.

Meanwhile, the BAP-CB membership list has reached 140 sectors including three government financial institutions, 50 rural banks, 21 thrift banks, 14 credit unions and cooperatives, 28 commercial banks and universal banks (the original members), and 24 other non-banking financial institutions.

So far, the list reached 4.5 million names of individuals and institutions, and the average inquiries are 15,000 a day. The historical peak in a single day reached a little over 30,000. A P5 fee is charged for every inquiry.

A Negative File Information System (NFIS) has over millions of records of credit cards cancelled due to mishandling, current accounts closed by the banks due to improper handling, loans classified as foreclose, litigation and written off accounts and court cases related to sums of money provided by the Credit Management Association of the Philippines (CMAP).

All inquiries by members, including the NFIS, can be accessed through the Internet, and inquiries are electronically processed in practically real time from receipt of inquiries.

Other services are the Real Property Database System (RPDS), an electronic compilation of fair market values of real estate properties held by banks and financial institutions as loan collaterals, foreclosed/dacioned (dacion en pago) assets, among others. Through this system, members would be able to electronically access and share in real time fair market valuation data of real estate properties.

The Titles Caution List Database (TCLD) is a web-based service that gathers and maintains information about spurious, non-existent, or otherwise questionable land titles. With this system, members have a first line of defense against spurious titles.

Proper enrollment by members to the systems is, however, necessary.

The presence of the BAP-CB more than compensates for the continued absence of the Central Credit Information Corp. (CCIC), formed by the implementation of the Credit Information System Act (CISA) in 2008.

Sixty-percent of the corporation will be owned by the National Government through the Securities and Exchange Commission (SEC) while the remaining 40 percent will be shared by the private sector.

So far, the formation of the mandated entity has not been formed despite the fact that the private sector representatives have already invested in the government-led credit information bureau.

Banking for the future: Divining what’s in store in 40 years

Posted on June 29, 2011 11:30:18 PM

Taxwise Or Otherwise -- By Blesilda A. Pestaño

Banking for the future: Divining what's in store in 40 years

'The accelerating shift in economic power from the developed to emerging economies is dramatically changing the banking industry across the world.'
-- PwC, from the report, 'Banking in 2050'

Talks about a shift in global powers produce a sense of anxiety, while giving hope to others of finally being able to realize their potential in the world stage.
Similarly, it cannot be helped that talks about the banking industry and its outlook will bring about a feeling of apprehension, coupled with anticipation -- and then you throw in the global financial crisis into the mix.

The world of banking and the players in the international corridors of power are expected to undergo a major shake-up in the next 40 years.

When the global financial crisis hit, not a few raised concerns on how it will affect the industry in the long term.

A report released this month by the global professional services firm PricewaterhouseCoopers (PwC), titled "Banking in 2050," said such concerns may very well affect the profile of the world's leading economies.

Coming from its 2007 report on the same topic, PwC presented updated projections on the size and growth of the banking sectors in the world's different economies and how soon the shift in "power" from the developed to the emerging economies may happen.

A total of 22 countries were included in the PwC analysis -- covering both developed (G7 and other countries such as Australia, Republic of Korea and Spain) and emerging (E7 and newly emerging) economies.

PwC combined gross domestic product (GDP) projections with estimated future domestic banking assets based on a historic upward trend in the ratio of domestic banking assets to GDP and projected banking profits from the net interest margin on these banking assets.

The key findings put forward by the PwC report were:

• The gap between the growth of the emerging economies' banking sectors over those of the developed economies will be greater than what was initially projected prior to the financial crisis;

• In 40 years, the G7 economies' domestic banking assets and profits would be exceeded by the leading E7 emerging economies by around 50%;

• By 2023, China may surpass the size of the US' domestic banking sector; and

• India, with its strong long-term growth potential, is expected to overtake almost everyone else -- including Japan, the UK and Germany -- on its way to becoming the third largest domestic banking sector by 2050, behind China and the US.

The broad finding is that the E7 economies will overtake those of the G7 earlier than PwC's original projections of 2046 in its 2007 report.

The E7, as a group, is likely to surpass the domestic banking assets of the G7 by around 2036.

PwC further reported that E7 banking assets and profits are projected to surpass those of the G7 sometime in the latter half of the 2030s, with the E7 higher than the G7 by around 50% come 2050.

Again, the expectation is that the shift in the power from developed to emerging economies would probably happen earlier than had previously been expected.

This and the rest of PwC's analysis raise some questions:

• Which economies and what areas show the greatest potential for growth and competitive advantage?

• In view of this shifting global landscape, what growth strategies are available to and would best be adopted by businesses?

• How will banks evolve to match the global financial system's evolution?

• How will these changes affect regulatory capital and other requirements and vice versa? And with the prospective growth expected to exceed the industry's capital generation capacity from retained earnings, where will the additional capital come from?

• Will the growth in Asian banks create a new "elite" circle of banks that will dominate global markets?

And, on a general level, why is the shift coming earlier than expected?
PwC reported that it is mainly because of the short- and long-term effects of the global financial crisis.

The crisis, at its peak, effectively stalled the growth of most developed economies and recovery is taking a long time.

While projections for emerging economies' expansion have remained fairly on track, the financial crisis resulted in a downward revision of their growth prospects.

In the aftermath of the global financial crisis, a lot of questions have been asked by people from all walks of life -- Are we in the clear? Are banks safe again? Can we move on?

More than these questions and without having to delve into the morality and other social repercussions of the recent crisis, the information and resulting questions posed by the PwC report should provide organizations with relevant, useful information to help them develop their long-term strategies and plans.
The author is an Assurance Partner of Isla Lipana & Co., the Philippine member firm of PwC (PricewaterhouseCoopers) global network.

Readers may send feedback via e-mail to blesilda.pestano@ph.pwc.com.

Views or opinions presented in this article are solely those of the author and do not necessarily represent those of Isla Lipana & Co.

Confidence

Editorial
Confidence
Philippine Daily Inquirer
12:58 am | Thursday, June 30th, 2011

A full year after President Aquino took his oath of office, two important sets of numbers seem to tell a story of decline. The surveys show an erosion in his popularity; GDP figures indicate a slowing down in economic growth. But in fact the same numbers demonstrate the strength of both the support for the President’s electoral mandate and of developments in the economy which began last year. We should not allow the expectedly contentious cast of public discourse in the immediate post-Arroyo years to desensitize us to the nuances of achievement.

To be sure, no one will argue that the second Aquino administration satisfied the high expectations that surrounded its rise to power and responsibility (or much less, surpassed them). In the last 12 months, the record of governance has been decidedly mixed. A long-overdue overhaul of the massive bureaucracy of government-owned and -controlled corporations has begun, but the perception that unsuccessful appointments to key positions continue to be tolerated has deepened. An obstructionist ombudsman was finally removed from office, but the Truth Commission has been stuck in limbo, unable even to probe the truth, never mind speak it. Reform is slowly taking root in several departments, and the republican ideal of greater transparency in government affairs is becoming the norm rather than the exception, but the new administration’s sudden coyness on such initiatives as the proposed Freedom of Information Act is disconcerting, and deeply disappointing.

We note that the tedious but essential task of unearthing proof of corruption committed in the last decade – the rot in the Philippine Charity Sweepstakes Office being only the latest discovery – continues without letup, but at a much slower rate than anyone expected; the plodding pace is a cause of popular frustration or even cynicism. We recognize the sterling work of several highly placed officials; in fact, we acknowledge that very many men and women of good will and proven competence have joined government, at all levels, inspired by last year’s watershed elections and the people’s call for reform; the unmistakable factionalism at the center of the Aquino administration, however, puts all that work in jeopardy. When even senators joke openly about the so-called Balay and Samar factions, it is well to remind ourselves that strong factions ultimately mean weak government.

But given that the first year is necessarily a time of transition, of learning the proverbial ropes and building working political coalitions, and given the political divisiveness of the decade that helped create the anti-corruption mandate of the 2010 vote, it would be irresponsible to equate the mixed record and thus the shortcomings of the current administration with those of the Arroyo years.

This kind of false equivalence would not only be illogical but rankly immoral, as though the institution-wrecking, morale-sapping, value-distorting scandals of the previous administration can be excused by the missteps of the Aquino administration in its first year. To see no difference between, say, the Arroyo administration’s misguided counter-insurgency policy that resulted in the death of hundreds of activists, and Undersecretary Rico Puno’s terrible mishandling of the Aug. 23 hostage-taking incident, where nine lives were lost, is to accept that politics is really just “weather-weather lang” – a cynical game of musical chairs.

But in fact, a year into its term, the Aquino administration has begun to put an end to the culture of impunity, of non-accountability, of calamitous corruption, that we had come to identify with the previous regime. Its first achievement, in other words, is to inaugurate, slowly, perhaps not too steadily, but also surely, the post-Arroyo era.

One of the best proofs that things have changed lies in the kind of data that businessmen like to pore over. Economic trends of the last four quarters tell us that local business confidence in the new dispensation has grown dramatically. (It is a sentiment that parallels survey reality: Ratings are still high, both in themselves and historically.) As former Socio-economic Planning Secretary
Cielito Habito noted in his column last week, “Over the past four quarters, growth in private domestic investment has been consistently surging.” This vigorous growth comes in spite of the drop in foreign direct investments and the drop in government construction spending.

What does this mean? It means that, after years of low levels of domestic investment under the previous administration, business enterprises in the Philippines are again putting their money where their mouth is.

Smart, DoCoMo offer mobile remittance

Smart, DoCoMo offer mobile remittance

SMART Communications Inc. on Wednesday said it has partnered with a Japanese firm to offer a mobile-to-mobile remittance service.

In a statement, Smart said the partnership with Japan-based NTT DoCoMo Inc. would allow residents of Japan to send directly to the Smart Money account of their loved ones and friends in the Philippines via DoCoMo Money Transfer.
“Our partnership with NTT DoCoMo underscores our long standing strategy of collaborating with different service providers, financial institutions and remittance companies, here and overseas, to enable them to offer innovative services to a wider customer base,” Tricia Dizon, head of the Smart Financial Services Group said.
“We are certainly excited to bring another first to the telco landscape that will benefit overseas Filipinos and their loved ones,” she added.
The service, which is a product of NTT, will be available to service remittances to any of over 8.5 million Smart Money accounts in the Philippines.
Smart Money is the world’s first reloadable payment card linked to a Smart cellphone powered by the mobile commerce platform of the telco.
NTT is a partner of Smart’s mother company—Philippine Long Distance Telephone Co.
The service is expected to benefit over 200,000 Filipinos in Japan and their friends and loved ones back home. It may also service the remittance requirements of Japanese nationals sending to fellow Japanese in the Philippines.
In 2010, Japanese visitor arrivals in the Philippines stood at over 350,000.
To avail of the service, the Japan-based sender simply has to register for a DoCoMo Money Transfer account. Once registered, the sender then can remit cash to any Smart Money account in the Philippines by making an order from a mobile phone.
Once the designated recipient, cash value and 16-digit Smart Money account number have been indicated, remittance of funds will commence. Cost of the service is 1,000 Japanese yen per transaction.
Besides the Philippines, the DoCoMo Money Transfer will enable remittances to Brazil, South Korea and China.
Nationals of these four countries account for almost 80 percent of all foreign residents in Japan.
The DoCoMo Money Transfer is expected to benefit more countries in the future.

Updates on the BAP-Credit Bureau

Updates on the BAP-Credit Bureau

29 June 2011

Mr. Leonilo ‘Topper’ Coronel, Managing Director of the Bankers Association of the Philippines Credit Bureau (BAP-CB), presented the private credit bureau’s latest changes and activities to participants of the 2011 RBAP-MABS National Roundtable last May 23-24 in Manila. He shared the latest developments in the effort of BAP-CB and a consortium of microfinance institutions’ (MFIs) to build a responsive credit information system for the microfinance sector.

He reported the over 60% growth in the number of participating rural banks from 28 to 46 in May 2011, attributing this increase to the BAP-CB’s efforts to reach out to rural bank federations in the country, and the assistance of the USAID-supported RBAP-MABS Program.

He also underscored the enhancements in the bureau’s Negative File Information System (NFIS) particularly its accessibility via the Internet, which allows the credit bureau to automatically process requests on a daily basis, even on non-working days. In addition, BAP-CB provides its participating institutions with (1) one-on-one training for their key officers, (2) data management modules, and (3) other data mining applications such as SNIP (or Similar Names Inquired Previously). Finally, the inquiry fee has been reduced by half – the bureau now charges P5.00 per inquiry versus P10.00 in the past.

Mr. Coronel also presented the activities that BAP-CB is currently working on with major microfinance institutions (MFIs) that rural banks can participate in soon. In what he described as a historic meeting of minds, the leading microfinance players in the country agreed to build a ‘client at risk’ file in contrast to the traditional ‘caution list’ or negative list for delinquent borrowers.

The objective is to provide reform programs for delinquent borrowers from lower income segments with the aim of rehabilitating their credit worthiness and making them ‘bankable’ again based on a better understanding of their financial situation.

The tripartite partnership for the experimental project has defined the roles for each of the partners: the group of MFIs provides the vision, strategic directions and specific business requirements; the Rafael B. Buenaventura (RBB) Foundation, a microfinance enabler, plays a key role as catalyst to match needs against resources; and BAP-CB develops solutions, operates the technology infrastructure, and provides credit bureau services for the participating institutions.

This project enables MFIs to create a new category of outreach that supports former borrowers and provides a pathway for them to become financially healthy and creditworthy once more. Furthermore, as rural banks join the efforts of the BAP-CB, the client database is enriched to cover key rural areas in the country and not just urban town centers. This supports the credit risk management processes of many financial institutions and at the same time allows rural banks to explore ‘client at risk’ issues.

Interest in BAP-CB services has also prompted the Federation of Laguna Rural Banks to pilot test the sharing of positive data among its members.

Furthermore, BAP-CB is now at the forefront of developing SMS-based or text-based information inquiry through the mobile phone that will open up a new venue for more accessible credit information even for banks’ field credit officers.

The USAID-supported RBAP-MABS program started its partnership with the BAP-Credit Bureau more than 10 years ago with a pilot implementation in Mindanao that allowed some rural banks to test the use the credit bureau services. BAP-Credit Bureau is a private non-government organization providing credit bureau services.

Mr. Leonilo“Topper” G. Coronel is the current Executive Director of the Rafael B. Buenaventura (RBB) MicroFinance Resource Center Foundation, which was established by the BAP to continue the vision of the late BSP Gov. Rafael B. Buenaventura in support of microfinance.

Mobile banking likely to help two billion people by 2020

Posted on June 29, 2011 08:39:28 PM

Mobile banking likely to help two billion people by 2020

FRANKFURT -- Mobile financial services are expected to improve the lives of around two billion people in developing countries within a decade and boost economies, a Boston Consulting Group study found.
“Overall, mobile financial services can reduce financial exclusion by five percent to 20% through 2020, and increase gross domestic product (GDP) by up to five percent, with Pakistan, for instance, potentially seeing a three percent uplift,” the study said.

It added that improved access to finance fostered entrepreneurship, new business creation and new jobs.

The report, released by Norwegian telecom group Telenor on Tuesday, focused on five countries -- Pakistan, Bangladesh, India, Malaysia and Serbia -- which represented a broad development range, it said.

Some 72% of the population in developing countries are without access to banks or credit cards according to the study.

They manage to work around this by borrowing from friends and family, obtaining short-term credit from employers, forming savings clubs or seeking out moneylenders but these options were often risky, costly and with indeterminate results.

Telecom firms such as Telenor, Vodafone, Orange, and MTN have begun investing in mobile payment systems in Asia and Africa that allow consumers to make basic payments for utilities for example but also participate in savings, credit and insurance programs via mobile phones.

Mobile financial services can also help overcome economic shocks such as natural disasters or unexpected medical emergencies, the study said.

In Kenya, Safaricom’s M-Pesa’s UAP Insurance insures poor farmers through mobile phones against weather-induced crop failures for example.

Norway’s Telenor said it was still early days but that the potential for growth was expected to be huge.

Telenor’s EasyPaisa program in Pakistan started with 2,200 retail outlets in October 2009 and now has 12,600 retailers spread over 650 cities across the country.

It has some 10 million estimated users and the total value of money transfers has reached 17.4 billion Pakistan rupees ($167.2 million).

“We believe that mobile financial services will be one of the key drivers for financial inclusion going forward and thus has the potential to be the most powerful tool for economic and social development in emerging economies,” Telenor Chief executive Jon Fredrik Baksaas said in a statement on Tuesday. -- Reuters

NGO to boost microlending operations

NGO to boost microlending operations

NONGOVERNMENT organization Center for Agriculture and Rural Development (CARD) Inc. has issued corporate notes worth P750 million to expand its microlending operations.

In a statement, CARD said it issued the five-year notes last June 13 with PNB Capital & Investment Corp. (PNB Capital) acting as lead manager. PNB Capital is the wholly-owned investment bank subsidiary of the Philippine National Bank.

Joining the group of noteholders were Allied Banking Corp., Banco de Oro Unibank, Inc., BDO Private Bank, Philippine National Bank, Rizal Commercial Banking Corp., and Security Bank Corp.

Incorporated in December 1986 as an NGO, CARD focuses on improving the quality of life of microenterpreneurs and their families in underdeveloped, and economically challenged areas of the Philippines.

In its capacity as a microfinance institution, the organization provides direct financing, research, development work, and economic evaluation in pursuit of its social mission.

The notes issuance, which was more than two times oversubscribed, is said to be a milestone transaction for CARD because it establishes the group’s ability to raise long-term financing from the capital markets without any form of gurantee support, the same statement read.

Bank consolidation OK’d

Posted on June 29, 2011 08:42:35 PM

Bank consolidation OK'd

THE BANGKO SENTRAL ng Pilipinas has approved the consolidation of Valiant Rural Bank, Inc. (Valiant Bank), Rural Bank of Sapian, Inc. and Rural Bank of Ma-ao, Inc., with Valiant Bank as the surviving entity.
"The central bank approved Valiant Bank's consolidation with Rural Bank of Sapian and the Rural Bank of Ma-ao," said Ian Eric S. Pama, Valiant Rural Bank, Inc. president and the incoming president of the Rural Bankers Association of the Philippines, in a phone interview yesterday.

The consolidation will allow Valiant Bank to increase its branch network which would in turn allow it to expand its loan services in Visayas.

"With the opening of new branches it will allow Valiant Bank to expand its loan portfolio in the small-medium enterprises sector, as well as micro- and agri loans," Mr. Pama said.

"The bank has so much excess liquidity through these years so this consolidation of Valiant Bank with the two rural banks is an opportunity for us to grow our loan portfolio," he added.

Rural banks are known for their expertise in serving the countryside, where they offer products such as micro-agri loans, micro-housing loans and micro-insurance.

Valiant Bank has one head office, two branches and five business lending centers within Ilo-Ilo City.

The Rural Bank of Sapian, meanwhile, has a head office in Poblacion, Sapian in Capiz, while the Rural Bank of Ma-ao has five business lending centers in Bago City in Negros Occidental.

Due to the consolidation, the central bank allowed Valiant Bank to convert its five business lending centers -- offices where it could only give out loans but not take deposits -- to regular branches.

Mr. Pama said, they were also given five new banking licenses by the BSP.

Valiant Bank has applied with the central bank the conversion of the Rural Bank of Ma-ao's five business lending centers to five regular branches.

"We are currently waiting for the central bank's approval to convert the five business lending centers of the Rural Bank of Ma-ao to fully operational branches," he said.

"We will just add tellers and savings book keepers and the business lending centers may be considered as a regular branch," he added.

After the completion of the consolidation (and in the condition that the BSP allows the conversion of the Rural Bank of Ma-ao's five business lending centers to regular branches)Valiant Bank will have a total of 19 branches.

Asked when the consolidation of the three banks would be completed, he said, they are still awaiting for the approval of the articles of the merger which is now with the Securities and Exchange Commission. -- Ann Rozainne R. Gregorio

SC’s foreign ownership formula said worrying investors

SC's foreign ownership formula said worrying investors

A SUPREME COURT ruling that changes the calculation of foreign ownership stakes in local public utilities has started worrying investors, the bourse warned in a statement on Wednesday.

In that decision, promulgated last Tuesday, the court ordered the Securities and Exchange Commission (SEC) to study whether telecommunication giant Philippine Long Distance Telephone Co. (PLDT) has breached foreign ownership limits, and to impose sanctions if necessary.

"The Philippine Stock Exchange (PSE) would take strong reservations [sic] on the reported new interpretation of the Supreme Court modifying the concept and computation of the 60-40 capital limitation on foreign ownership of public utilities, as prescribed under Section 11, Article XII of the Constitution," the bourse said, acknowledging it has yet to receive a copy of the Supreme Court decision.

The PSE noted that some foreign investors have begun inquiring on the implication of the ruling. The bourse expressed "grave concern" that the "interpretation on foreign capital limitation may result in capital flight of existing foreign investors, further cause market volatility and discourage the entry of foreign investments into the country."

The PSE index fell 40.64%, or by 0.95%, to 4,4249.35 on Wednesday.
In its decision, the Supreme Court, voting 10-3, ordered the SEC to determine the extent of foreign ownership in PLDT. In doing so, the court granted part of the petition of lawyer Wilson P. Gamboa, who sought in 2007 to void the sale of the state's 46% stake in Philippine Telecommunications Investment Corp. -- representing a 6.4% interest in PLDT -- to Hong Kong-based First Pacific Co. Ltd., which partly owns PLDT.

The court said that in determining foreign ownership, the SEC should define "capital" in Section 11, Article XII of the Constitution to refer only to "shares of stock entitled to vote in the election of directors," or the common shares of stock, as opposed to the total outstanding capital stock, which includes preferred shares that do not have voting powers.

The Constitution allows foreigners to own only up to 40% of a local public utility.
"[The decision] is disappointing for me as a Filipino. One, it has negative and adverse impacts here and abroad," PLDT Chairman Manuel V. Pangilinan told reporters after the Philex Mining Corp.'s annual stockholders' meeting yesterday.
He noted that, since the news broke, PLDT officials have been flooded by calls from analysts, brokers and investors.
Mr. Pangilinan said that while only 13% of PLDT is foreign-owned if computed on the basis of both common and preferred shares, this percentage jumps to 64% if based on common shares alone.
"Our investors are asking why are they (Supreme Court) changing the rules. It's not good from a foreign investor's perspective to change the rules," Mr. Pangilinan said.
"That could lead to tremendous selling pressure on PLDT prices."
PLDT shares fell by as much as 3.75% before paring losses to close down 3.17% to P2,324 a share.
Metro Pacific Investment Corp., the local flagship of First Pacific, fell by as much as 3.3% before closing down 1.94% to P3.54.
"This common and preferred share capital structure of PLDT is something that we inherited. It was there when we came in in 1998. And that structure, from an ownership standpoint, is legal and valid," Mr. Pangilinan stressed.
He said the Supreme Court ruling could affect other listed utilities, as well.
"We are aware that certain listed companies have the same structure [hence, this ruling could also have] adverse impact when they're discovered by the market," he warned.
"I don't understand why we're doing this, why we're committing economic suicide."
Sought for comment, Gerard M. Lukban, commission secretary of the SEC, said in an interview yesterday that regulators will meet as soon as they get a copy of the ruling.
"We will have special executive sessions to address urgent concerns," Mr. Lukban said.
In its statement, the PSE said it will closely work with the SEC to clarify the issue.
Mediaquest Holdings, Inc., a unit of PLDT's Beneficial Trust Fund, has a minority stake in BusinessWorld. -- reports from Reuters and NJCM

Wednesday, June 29, 2011

DBP sets up credit facility for overseas Filipino workers

DBP sets up credit facility for overseas Filipino workers

By: Michelle V. Remo

Philippine Daily Inquirer
12:33 am | Wednesday, June 29th, 2011

The state-owned Development Bank of the Philippines has set up a financing facility called the “OFW Reintegration Program” to provide loans and other financial products to overseas-based Filipinos.

The facility is aimed at pursuing the national government’s plan of providing income and investment opportunities to overseas-based Filipinos, with a medium- to long-term goal of encouraging them to eventually go back to the Philippines and stay with their families for good.

The facility offers credit to OFWs and their families to fund their business plans. The facility also offers financial products that will help the target market grow their assets.

“The DBP hopes that through the OFW Reintegration Program, we shall be able to help nurture in our overseas Filipino workers and their families a culture of savings, investment and entrepreneurship, along with the values of honesty, discipline and hard work necessary for poverty reduction and economic empowerment of our communities,” DBP president Francisco del Rosario Jr. said in a statement.

Those who can avail themselves of the DBP’s program are OFWs registered with the Overseas Workers Welfare Administration (OWWA)—with ongoing or finished employment contracts.

DBP said these workers could apply for a loan equivalent to 80 percent of the cost of a business venture and must range from P300,000 to P2 million.
Loans from the facility carry an annual interest rate of 7.5 percent, reviewable every year and payable over seven years.

“Loans may be used for construction, renovation, expansion or repair of building for use as business site; working capital for business venture; acquisition of equipment; and other business-related purposes,” DBP said.
DBP said the facility would give priority to investments involving the following industries: franchising, tourism and related industries, health care and allied industries, and agribusiness and related businesses.

Imelda Nicolas, secretary of the Commission on Filipinos Overseas (CFO), earlier said the government, through the office she heads, has started drafting a road map that would create an environment that provides sufficient investment and income opportunities to OFWs and their families with the end goal of encouraging OFWs to go back home.

She said providing more income-generating opportunities within the country was necessary to allow migrants to go back home without worrying about the financial security of their families.

Tuesday, June 28, 2011

Common best tax practices

Let’s Talk Tax -- By Wendell D. Ganhinhin

Common best tax practices

One of the strategies that unscrupulous taxpayers employ in a bid to become successful in business is not paying the right taxes.
These taxpayers justify such claim by saying that their businesses will not survive if they pay taxes diligently, since their competitors do not pay proper taxes either.
Applying such strategy, these taxpayers maintain at least two books of accounts -- one for the Bureau of Internal Revenue (BIR) and one for management’s use.
The latter supposedly reflects the true income and value of the company.
Indeed, some of these taxpayers have become successful in the past and some of them are still successful today.
In general, companies employing the said strategy did not experience any significant tax problems during the reign of first and second generation of owners since most of them are united and committed to observing the same practice.
At that stage, confidentiality of information is properly kept.
However, problems will arise in the next generation of owners.
The new generation of owners might be active in the business, but some could be passive stockholders who are not directly involved in operations.
These stockholders, particularly the passive owners, will normally demand more transparency regarding the affairs of the business.
They will ask: Is the amount of dividends declared enough? How much is the true value of my shareholdings if it will be sold? Can the internal financial statements be relied upon?
If those questions cannot be answered satisfactorily, internal conflict will likely arise. Several cases could be filed against the management of the company.
Information about noncompliance might be fed to the BIR.
If not handled properly, such dissent might cause the collapse of the company.
Another scenario is when a company wants to tap the stock market to avail of cheap funds for business expansion.
However, some of these companies cannot do so because of the bad condition of their accounting records and huge possible tax exposure.
When a company wants to be listed in the stock exchange, it should expect high demand for transparency and good corporate governance, including a high level of tax compliance.
If existing business owners want to keep their legacy and share it with their progeny, they might consider adopting a number of common best tax practices to ensure transparency and continuity of their business.
Always maintain only one set of accounting records
Accountants say that it is difficult enough to maintain one set of books of accounts.
Hence, it is doubly difficult for a company to maintain two sets of accounting records.
Likewise, it is costly to keep more than one set of books of accounts in terms of needed accounting software and manpower.
Moreover, keeping two sets of books would be prone to a lot of errors.
Also, owners and officers have the burden of keeping these data confidential and avoid any leak of information which can lead to criminal prosecution.
Having more than one set of accounting records is like keeping a time bomb inside the house. For your peace of mind, maintain one set of reliable and accurate accounting records.
Comply with tax laws
Some businessmen say that if you will not cheat on your tax obligations, you will not succeed.
But our country is replete with success stories of companies that complied with tax laws from the very start of their business and have continuously succeeded. In fact, if you survey the top businesses in the country, these are mostly businesses who are top taxpayers and who have paid their taxes honestly.
Noncompliance will result only in unnecessary costs like the 25% penalty for late filing, 20% interest per year and compromise penalties, as well as possible imprisonment.
It will result not only in monetary penalties, but may also damage the reputation of the company.
This, in turn, can sometimes cause its ultimate demise.
Avail of tax exemptions
Study your business operation and determine if it will qualify for registration with incentive giving bodies such as the Philippine Economic Zone Authority or Board of Investments to avail of tax incentives like income tax exemption and lower corporate income tax rates.
Small enterprises can also consider availing tax incentives under the Barangay Micro Business Enterprise Act of 2002.
Tax evasion is a crime, but tax avoidance is legal.
Hence, a taxpayer can always adopt a legal tax avoidance scheme to minimize its taxes.
Know when to consult a tax specialist
If you do not know which tax rules and regulations are applicable to your business, hire a good and reputable tax specialist to either perform tax consulting job or tax compliance review, or both.
The tax function of your accounting department can also be outsourced if you want to avail the expertise and stability of service from an accounting firm.
If you want to know the tax implications of any significant agreements, you can engage a tax specialist so you will not overlook any tax exposures and avoid penalties.
In the old days, we believe that "honesty is the best policy."
In addition to this, advocates of good corporate governance also believe that "transparency is the best policy."
To have a successful and sustainable company, businessmen should learn to incorporate honesty and transparency in their corporate values.
An honest and transparent company is not just every businessman’s responsibility to the tax agency; it should be his legacy to his progeny.
The author is a Director at the Cebu branch of Punongbayan & Araullo.

RCBC, RCBC Savings Bank to open more branches, ATMs

RCBC, RCBC Savings Bank to open more branches, ATMs

YUCHENGCO-led Rizal Commercial Banking Corp. (RCBC) and its thrift bank arm RCBC Savings Bank want to strengthen their presence in the country by putting up more branches and automated teller machines (ATMs).
In a statement released over the weekend, RCBC said that after having completed its capital raising program in the first half of the year, the banks now targets to execute its expansion plans.

Last month, CVC Capital Partners infused P4.96 billion in RCBC, the country’s fifth largest bank in asset terms. In March, International Finance Corp., the private sector investment arm of the World Bank, invested P2.1 billion in the bank.

RCBC had said its two-tranche fund-raising exercise will be used to finance the bank’s expansion plans and firm up its capital base in anticipation of Basel 3.

“RCBC plans to deploy 350 ATMs this year,” RCBC executive vice president and retail Banking Group Head Ismael R. Sandig was quoted as saying in the statement.

The ATMs will be placed in off-site locations or outside RCBC and RCBC Savings branches to enhance the convenience the bank provides to its clients. Around 150 ATMs will be added to the existing 152 ATMs of RCBC Savings and the remaining will be added to the 632 ATM units of RCBC. On its plans to widen its branch network, Mr. Sandig said, RCBC will put up 15 branches and extension offices, while RCBC Savings will open 15 branches this year.

“Our growth targets get higher every year... we will surpass our year-on-year targets as a way to serve our clients better,” Mr. Sandig said.

RCBC shares closed at P26.25 apiece last Friday, 15 centavos higher than its close the previous day. -- Ann Rozainne R. Gregorio

Banks welcome opportunity to increase business volumes

Banks welcome opportunity to increase business volumes

BANKS HAVE welcomed the central bank’s move to open formerly restricted cities to branches as this would allow them to increase business volumes, but expressed dismay at how much it would cost them.
“We are looking forward to expanding our branch network in the [former] restricted areas,” East West Banking Corp. (EastWest) President Antonio C. Moncupa, Jr. said in an e-mail to BusinessWorld.

“We had been advocating for the liberalization of branches in these areas because a very significant part of banking business is conducted in these areas and additional branches... would [allow us to] generate more business.”

The Bangko Sentral ng Pilipinas (BSP), in Circular 728 dated June 23, allowed the phased lifting of branching restrictions in Makati, Mandaluyong, Manila, Paranaque, Pasay, Pasig, Quezon City and San Juan.

Mr. Moncupa said having branches in the eight areas would allow banks such as EastWest to compete with the bigger banks that are well-represented in these eight cities.

For his part, Lamberto R. Villena, Sterling Bank president and chief executive, in a text message said banks will grab the opportunity to open in the eight cities because “[they] know the potential business that can be generated from there.”

To set up a branch, however, a universal or commercial bank would need to cough up a “non-refundable special licensing fee” of P20 million per branch while thrift banks have to pay P15 million per branch.

Officials of eight banks interviewed by BusinessWorld said the fee is too high, which has made them carefully consider setting up branches in the eight cities.

Under Phase I, universal, commercial and thrift banks that have less than 200 branches as of December 2010 may set up offices in the eight cities until June 30, 2014. Starting July 1, 2014, all banks may do so, except for rural and cooperative banks that are generally not allowed to establish branches in Metro Manila.

Government-owned banks, meanwhile, may immediately apply for bank branches in the eight cities, subject to “consistency with mandates” and compliance with the “requirements prescribed for private banks.”

Universal and commercial banks must also satisfy a capital requirement of at least P10 billion, and thrift banks, P3 billion. If they don’t have this amount, they may build up their capital until June 30, 2014 to reach the required capitalization.

The central bank lifted branching restrictions in December 2005 except for the eight cities, which it said then were “adequately served by existing banking offices.” Microfinance-oriented thrift and rural banks, were allowed to establish branches all over the country, even in the eight cities. Thrift banks must have a combined capital account of at least P1 billion, while rural banks or cooperative banks must have a combined capital account of at least P100 million.

BSP data showed that as of December last year, there were 93 bank head offices and 2,783 branches in Metro Manila, of which universal and commercial banks accounted for 37 head offices and 2,179 branches, and thrift banks, 34 head offices and 524 branches. There were also 22 rural bank head offices in Metro Manila.

While more branches in the eight cities would boost banks’ deposit-taking and lending and other businesses, officials said this needs to be weighed against the full cost of setting up an office, hiring people and buying equipment in addition to paying the central bank the P20 or P15 million in special licensing fees.

EastWest Bank’s Mr. Moncupa said the high cost of putting up the infrastructure, the licensing fee, the manpower costs and need to manage risks which comes naturally as a bank expands, must be seriously studied by banks especially in the “low interest environment we are in now.”

RCBC Savings Bank president Rommel S. Latinazo said in a text message, “the decision [to open branches in the eight areas] will have to be weighed against the costs of putting up branches in those areas.”

Pascual M. Garcia III, president of Philippine Savings Bank, the thrift banking arm of the Metropolitan Bank & Trust Co., in a text message said, “The fee is a significant amount. Unless a potential branch site has a huge revenue potential, it would be difficult to consider expanding a bank’s presence in these areas.”

A thrift bank, he pointed out, caters to the consumer market -- a narrower market than that served by a universal and commercial bank -- and must therefore consider carefully if it wants to add a branch in these eight cities.

Robinsons Bank Corp. President Reynold Y. Gerongay, in an e-mail, said any bank that plans to set up a new branch must consider the “start up cost including licensing and other regulatory costs and weigh whether it can recover [fast] enough to add value to its [bottom line], within a period of five years.”

For his part, BSP Deputy Governor Nestor A. Espenilla, Jr., in a text message, said the special licensing fee “replaces the [central bank’s] former restriction on putting up branches” in the eight cities.

“If [the banks] do not want to pay for that privilege, they should go to non-restricted areas,” he added.

BSP Governor Amando M. Tetangco, Jr. explained, in the June 3 statement announcing the BSP was lifting the restrictions in these cities, that “liberalization [was] aimed at improving the competitive environment, which should translate to better financial services for the public.”

He said the move would encourage banks to “scale up” in order to stay competitive, and added the special licensing fee was meant to “continue to promote balanced delivery of financial services nation-wide.”

Meanwhile, an official at one of the rural banks, which were not covered by Circular 728, expressed his dismay.

Ian Eric S. Pama, the incoming president of the Rural Bankers Association of the Philippines (RBAP), told BusinessWorld, “Why are we not allowed to set up branches in Metro Manila when some rural banks have a bigger capital base and branch network than some thrift banks.”

RBAP has initiated discussions with the BSP, he said, and the association would ask that the central bank open the eight cities to all banks.

“If a bank can comply with the required capitalization and it has the capability to operate, why not allow everyone to open branches in the eight areas,” he said. -- Ann Rozainne R. Gregorio

Microfinance sector needs flexible schemes

BY ANTONIO SIEGFRID O. ALEGADO

Microfinance sector needs flexible schemes

PHILIPPINE-based microfinance institutions may have to tailor fit their products to clients’ needs in order to keep high repayment rates and further tap prospective customers.

Microfinance institutions should personalize products based on their clients. -- JONATHAN L. CELLONA

The country’s microfinance sector remains buoyant with a high repayment rate -- proof that the poor make good debtors.

Nongovernmental organizations (NGOs) who engage in microfinancing posted a repayment rate of 95% as of last year, while rural banks reported 85%.

But microfinance institutions may need to do more than just comply with set regulations to keep the sector in tip-top shape.

“Microfinance institutions should have flexible schemes and should personalize their products depending on the type of businesses of their clients,” Rizal Commercial Banking Corp. senior vice president and microfinance head Maria Lourdes S. Pineda told BusinessWorld at the sidelines the Regional Forum on Supporting Micro, Small and Medium-scale Enterprises (MSME) Access to Finance organized jointly by the Association of Development Financing Institutions in Asia and the Pacific (ADFIAP) and the Australian APEC Study Center.

Ms. Pineda encouraged the use of a “cash-flow based” collection scheme, where clients repay loans depending on how their businesses operate and earn.

“The sari-sari store (mom and pop shop) vendor earns on a daily basis so you collect their payments more often than a tailor who earns seasonally depending on orders,” she said.

Ms. Pineda added that microfinance institutions have to “talk the language of their clients” when marketing financial products.

“It is important to make a distinction between microfinance institutions and larger banks and financial institutions,” University of Melbourne economist Peter Bardsley said in his presentation. “You have to treat the two sectors and its borrowers differently.”

Moreover, the country has made significant inroads in adhering to key Basel proposals for microfinance institutions which summarize principles to the supervision of microfinance activities. The proposals were to define microfinance carefully, allocate supervisory resources efficiently, develop specialized knowledge within the institutions’ supervisors, and note that control practices for microfinance are different from that of other financial institutions, University of Sydney Professor Ros Grady said in her presentation during the forum.

Bangko Sentral ng Pilipinas (BSP) Deputy Governor Nestor A. Espenilla, Jr., speaking at the event, said “We are at par to these standards.”

In fact, the BSP was part of the committee that helped draft the proposals, he added.

The two-day forum, which ends today, was held to evaluate regulatory and policy impediments that impact on the flows of finance to MSMEs and discuss measures and best practice regulatory principles that would enhance access to finance of the sector. The output would be proposals submitted for consideration by APEC Finance Ministers and best practice regulatory principles to further enhance best practice regulatory approaches.

DA pushes cooperative ownership of rice mills

DA pushes cooperative ownership of rice mills

AS part of efforts to modernize the country’s rice milling industry, the
Department of Agriculture plans to create qualified farmer cooperatives
that would be allowed to take ownership of rice mills.

Under the DA’s six-year mechanization and postharvest program for rice,
the Philippine Center for Postharvest Development and Mechanization said
that qualified farmer cooperatives engaged in rice farming will be given
financing support to own their rice mills and increase efficiency in grain
production.

Based on surveys and field studies conducted by PhilMech, most private
rice mills in the rural areas use single pass mills where the recovery
rate from unhusked rice or palay is from 50 percent to 57 percent.
Ricardo Cachuela, PhilMec executive director, said mills using the
multi-pass technology will be made available to qualified farmer
cooperatives.

A multi-pass rice mill has a recovery rate of 65 percent to 70 percent,
Cachuela said.

“Recovering an additional 8 [percent] to 13 percent from milling
operations alone will contribute significantly to the supply of rice in
the Philippines if many farmer cooperatives are able to operate the
multi-pass mills,” he said.

Under the program, the DA will provide a grant equivalent to 75 percent of
the cost of the multi-pass rice mill, while the qualified farmer
cooperative will shoulder the remaining 25 percent with loans and capital
outlay.

A modern rice mill employing the multi-pass system costs around P4
million, excluding cost of land, the official said.

Farmer cooperatives that can take part in the program should be registered
with the Cooperative Development Authority, and willing to shoulder
preconstruction expenses like land filling, compacting and clearing, among
others.

“With this program, farmer cooperatives could get to own their modern rice
mills that will in turn greatly help their members because the recovery
rate from milling palay is higher,” Cachuela said.

He said many farmer cooperatives already have profitable operations, and
that these cooperatives are more than ready to provide their own
counterpart funds to acquire and operate multi-pass rice mills.
Cachuela said that there are still farmers who use the old kiskisan method
in milling palay, where the recovery rate is as low as 50 percent.
“It is high time that farmers adopt the latest technologies in postharvest
and milling, so they can achieve higher efficiencies and profitability in
their operations,” the official said.
James Konstantin Galvez

Monday, June 27, 2011

BSP bars bank execs from holding concurrent posts

BSP bars bank execs from holding concurrent posts
06/18/2011 | 12:42 AM

Bank executives are now prohibited from holding multiple positions in the banks that employ them, according to a new circular the Bangko Sentral ng Pilipinas released Friday.

Circular 725 also stops bank officers from occupying concurrent positions in their banks’ foundations and microfinance institutions.

BSP Gov. Amando Tetangco Jr. said the Monetary Board issued the new rules because “a concurrent officership in different financial institutions may present more serious problems of self-dealing and conflict of interest."

Tetangco also stated in the circular that multiple positions “may result in poor governance and unfair competitive advantage."

The circular clarified that “secondment" must be a “transfer/detachment of a person from his regular organization for temporary assignment elsewhere where the seconded employee remains the employee of the home employer, although his salaries and remuneration may be borne by the host organization."

Circular 725 prohibits bank officials from holding officership or getting involved in the daily microfinance operations of related non-government organizations (NGOs) and foundations.

Bank executives who happen to now be in these prohibited concurrent positions have been given until Sept. 30 this year to relinquish their concurrent posts or be disqualified from their present positions if they fail to comply.

The new circular also sets rules on the deposits of related NGOs and foundations in related lending banks. Among others, the depositors are now required to issue confidentiality waivers and enter into “hold-out agreements" with their banks. — Earl Rosero/VS, GMA News

Combined assets of Philippine banks exceed P7-t mark—BSP

Combined assets of Philippine banks exceed P7-t mark—BSP
by Roderick T. dela Cruz

Combined resources of Philippine banks hit the P7-trillion mark at the end of March this year, adding more than half a trillion pesos over a 12-month period when the economy expanded rapidly.

Bangko Sentral's data showed that the total resources of the more than 750 banks in the country reached P7.121 trillion as of March this year, up P614 billion, or 9.4 percent, from P6.507 trillion year-on-year.

The banks' total resources at 7.121 trillion were equivalent to more than 80 percent of the country's gross domestic product of P8.5 trillion in 2010. More advanced Asian economies such as Singapore have financial resources representing over 100 percent of their GDP.

Including the resources of non-bank financial institutions including insurance firms, the total resources of the financial system hit P8.932 trillion as of March, up 8.7 percent from P8.215 trillion a year ago.

Universal and commercial banks continued to account for the bulk of the banking system's total resources. The 38 universal and commercial banks in the country increased their assets by 10 percent to P6.351 trillion as of March from P5.774 trillion a year ago.

These banks included 11 domestic universal banks, five foreign universal banks, three government-owned universal banks, eight private commercial banks, nine foreign commercial banks and two state-run commercial banks.

Meanwhile, the 73 thrift/savings banks had total resources of P593 billion as of March, up 6.8 percent from P555 billion year-on-year. The rest of the amount was accounted for by rural and cooperative banks.

There were 607 rural banks, 40 cooperative banks, and 6,507 non-bank financial institutions, dominated by pawnshops, as of December 2010.

Meanwhile, the Bangko Sentral said it would collect P20 million as licensing fee per branch to be established by a universal or commercial bank in the previously restricted areas of Metro Manila. The licensing fee per branch of thrift bank was set at P15 million.

Sunday, June 26, 2011

Best practices fleshed out in RBAP meet

Best practices fleshed out in RBAP meet

“Best practices” was the byword in the recent 58th national convention of the Rural Bankers Association of the Philippines at the SMX Convention Center on May 25 to 26 to echo the call in the banking community—be it the regulators or the financial institutions themselves—for a stronger sector to weather external shocks such as the recent global financial turmoil.

At the event, a lineup of rural bank executives gave testimonies on the value of sound banking practices as an assurance to long-term success.

An impressive case was presented by Rural Bank of Hindang (Leyte) Inc. president Anacleta Dayola-Aboyme on the bank which maintained a CAMELS rating of 4 which is above par for a small community bank, meaning that bank’s capital is adequate to support its risk profile as the bank was able to maintain asset quality despite the rapid increase of its loan portfolio.

The formula of Rural Bank of Hindang was to keep its non-performing loans and non-performing assets to a minimum. Key to keeping the exemplary reputation of the bank was its board and senior management’s grasp of risk exposures to set up policies to manage risks that reflects on the positive results in the bank’s operations.

The bank, for instance, strictly adheres to the authority for loan approvals in which loans of up to P20,000 are handled by branch operations managers; up to P100,000, the bank’s CEO; up to P200,000, the Credit Committee for borrowing; and higher than P200,000, the bank’s board.

The success of the bank led to its growth to three branches and one extension office in Leyte and Southern Leyte aside from its head office at Rizal St. Poblacion 1 Hindang. The bank has its offices in Inopacan, Bato and Hilongos and in Sogod, Southern Leyte. The bank is now on its 33rd year of committed service in the countryside.

A different but nonetheless equally exemplary case was that of the Unlad Rural Bank of Noveleta Inc. in Cavite which recently was cleared of the prompt corrective action by the Bangko Sentral ng Pilipinas.

By 2004, as a result of slow movements in the sale of assets and funds outflow to consolidate ROPA, the bank’s capital account showed a negative balance that prompted notice from the BSP that consequently resulted in more pressure and workload for the bank’s management.

The monumental turn-around of the bank was achieved through the offering of lending products that eased liquidity problems and at the same time increase its operating income. Included in such loan products were microfinancing and salary loans with monthly amortizations. The bank also proceeded with the consolidation of its ROPA to speed up sale of properties and provide additional liquidity. It expanded its network of selling agents and undertook creative and innovative approaches in the sale of its real estate inventories to liquidate its assets.

Its ROPA to total resources ratio was reduced from 54 percent in 2005 to 15 percent in 2010. The bank’s bottom line experienced a complete turnaround from a loss in 2005 to a profit last year.

The return to healthy profitability prompted the BSP to remove the bank from the PCA status on February 14 indicating that it is again in its normal operating path. The Unlad Rural Bank’s experience again showed that best practices is the sure-fire way for a bank to be on the road to progressively growing profits. In the coming column pieces, more instances of success among rural banks will be highlighted along with the kind of able guidance being provided by regulatory and state financial institutions on strengthening the industry.
Watch out for it.

Thursday, June 23, 2011

Alleviating Poverty through Internet Microfinance: Interview with Kiva President

Alleviating Poverty through Internet Microfinance: Interview with Kiva President

By Annie Brown, Assistant Editor, Microfinance Focus

Microfinance Focus, March 29, 2011: This past January, I attended a presentation on Kiva, a web-based microfinance lending NGO and one of America’s most recognized microfinance brands. The presentation, which took place at The College of William and Mary in Williamsburg, Virginia included an informal meeting between Austin Choi, Kiva’s general counsel and aspiring professionals at William and Mary’s law school, followed by a presentation on Kiva’s mission and methods. Kiva strives to “connect people and help people,” said Choi during the presentation. Inspired by Kiva’s creative use of technology and modern business practices, I contacted Kiva President Premal Shah to discuss the story of Kiva’s success.

Kiva.org, based in San Francisco, California, addresses global poverty by enabling members of the online Kiva community to provide loans to potential small business owners in developing countries. On the main page of the Kiva website, the quote “Empower people with a $25 loan,” reads in large white letters against a green background. The Kiva network is user friendly, aesthetically pleasing and an impressive example of how the Internet can make the world a better place.

In an online poll, Kiva lenders said that they choose to loan through Kiva because “I can make a difference in someone’s life without spending a lot of money.” Kiva members can lend any amount between $25 and the total amount of the loan request of any borrower profiled on the network. The first seven Kiva loans were funded in 2005, for a total of $3,500. Today, there are over 565,079 Kiva lenders and the organization has raised nearly 200 million dollars for people wishing to start a business and strengthen their community.

The Kiva lending model is innovative, interactive, and allows a large number of loans to be funded without much overhead cost. First, Kiva partners with a microfinance institution (MFI), then Kiva’s field partners disburse loans and upload pictures and stories to the Kiva website. Online lenders browse stories and decide which loans they would like to donate to. According to the Kiva website, the last step in the process occurs when “the field partner uses the funds to replenish the loan they've already made to the entrepreneur.” Through the Kiva system, MFIs can afford to make more loans and people are connected for a cause.

Kiva met some controversy a few years ago when it was revealed that Kiva’s MFI partners were dispersing loans before loan requests were fully funded online. It was explained at the William and Mary presentation that Kiva’s field partners want to fund a loan request as quickly as possible, especially since borrowers cannot afford to wait. However, members believed their sponsorships determined whether or not a loan request would be funded and complained to Kiva management about the lack of transparency between Kiva and the Kiva community.

Kiva says it did not intend to mislead its lenders, but was just taking the casual lender into account when creating KIVA’s “About” page. The correct information was located elsewhere on the website. When this controversy arose, Kiva quickly changed its “About Us” page to more accurately convey the Kiva lending process (see flow-chart below).

During this time of controversy and change, the microfinance industry can learn from Kiva’s ability to partner with the public, respond quickly to criticism and provide a transparent lending model.i Matt Flannery responded in an article that Kiva could “do better” and that “Although the ‘Make a Loan’ pages contained the disbursal date, the ‘How Kiva Works’ page was over-simplified to a fault. To address this, in the short term, we updated the page last week. It now contains more detail with regard to pre-disbursals.”

Tuesday, June 21, 2011

Bantayan’s first mobile money center unveiled

This news article is about a partner MFI - the FCCT - establishing the first SMART Money center in Bantayan Island. This is part of our project under SEEDFINANCE, working with SMART Communications, to propagate mobile banking services, even in remote areas and islands. - CARLOS ANI

Bantayan's first mobile money center unveiled

Cebu Daily News

8:06 am | Tuesday, June 21st, 2011

The first Smart Money Center was set up in Bantayan Island, a northern Cebu, so its residents could avail of mobile financial services.

Smart Money platform—the world's first reloadable payment card linked to a mobile phone—was recently launched in the island, known for its crystal-clear waters and long stretch of powdery white sand.

Smart partnered with the First Consolidated Cooperative Along Tañon Seaboards (FCCT) to put up Smart Money Centers in far-flung areas of Cebu, including Madridejos and Bantayan Island.

Bantyayan Island is a two-hour land trip and an hour's ferry ride from Hagnaya Port away from Cebu City.

The long trips to and from the island, however, have restricted the exploration of its beauty and other offerings.

But that situation is fast changing now that Smart Money Center provides island residents with a safe, accessible and affordable way to send and receive cash remittances, only after a few clicks on a Smart mobile phone. Today, Bantayan folk need not take boat and bus rides to remit cash through mainland banks and remittance centers.

FCCT Smart Money Center will send money to their friends and loved ones anywhere in the Philippines. They may also receive cash transfers from another Smart Money account holder or from the wide network of Smart remittance partners here and around the world.

Through the Smart Money Center, island residents may also settle bills and do mobile payments through their Smart mobile phones.
All transactions are through text messaging.