PHILDEVFINANCE (old news): July 2011

Sunday, July 31, 2011

Microinsurance can hike insured in PHL

Microinsurance can hike insured in PHL

WEDNESDAY, 27 JULY 2011 18:45 VG CABUAG / REPORTER

MICROINSURANCE products may increase the number of insured individuals in the country but the government should help the insurance industry offer it to as many people as possible, a life insurance group said.

The Philippine Life Insurers Association (PLIA) said that since microinsurance was placed at the Aquino administration’s medium-term development plan as a means for poverty alleviation, the government should help the industry by waiving some of the taxes imposed on the product.

Eulogio Mendoza, one of PLIA’s officers and also a chief executive of the Asian Life and General Assurance Corp., told reporters that it would be a big help to the industry if the government could waive the 2-percent premium tax on microinsurance products and also the documentary stamp tax (DST).

“We are pushing for the removal of the premium tax for microinsurance,” Mendoza said.

The DST imposed is graduated to a maximum of P100 for policies with face values of P1 million, and as such it will translate to an insignificant amount for microinsurance products.

According to Insular Life’s president and chief operating officer Mayo Jose Ongsingco, the rule of thumb in offering a microinsurance product is that the price or maximum premium for each should not exceed 5 percent of the daily income of a worker.

“If the daily wage of the worker is P400 per day, your premium should not exceed P20 a day or P600 per month for microinsurance,” Ongsingco, who is also PLIA’s president, said.

Ongsingco said that since a company’s margins on selling the product to the public is very small, microinsurance cannot be sold by its regular agents.

“We were telling our members that when you roll out microinsurance, it could be a part of the company’s CSR [corporate social responsibility] since the margins are small,” he said.

Citing figures from the Department of Finance, Ongsingco said that insurance penetration in the country is only at 13 percent of the insurables or those people who can be insured. Of the said figure, only 3 percent were from individuals and the rest were from the group insurance such as companies providing it as a benefit to their employees.

“We need to work on increasing the penetration rate on individuals since there would always be demand for group insurance from the corporate sector. Microinsurance will help us push the individual penetration rate,” Ongsingco said.

The group is confident that microinsurance could help lift the number of insured individuals in the country as the terms for the said product is simple compared with the traditional products.

Ongsingco estimated that 60 percent of the insurable population can afford to buy a microinsurance product in the country, which includes laborers, vendors and public utility drivers. The 20 percent of the said insurable population are too rich that they do not need insurance, while the other 20 percent are so poor that they cannot afford it.

--
---------------------------------------------
CARLOS ANI - SEEDFINANCE Corporation - http://www.seedfinance.net
Email: carlosani@seedfinance.net
Landline: +63495010127 Cellphone: +639152919580
DEVJOBS - http://www.devjobsmail.com
PHILDEVFINANCE - http://phildevfinance.posterous.com http://phildevfinance.wordpress.com
CONSULTING - http://www.carlosani.com
My Clippings - http://www.myclipps.posterous.com
------------------------------------------

Number of ATMs continue to rise

Number of ATMs continue to rise

BANKS CONTINUED to add more automated teller machines (ATMs) to their networks to better service their clients.
Bangko Sentral ng Pilipinas (BSP) data as of March showed that total ATMs in the country rose by 2.4% to 9,592 as of March from 9,370 as of December last year.

BSP Deputy Governor Nestor A. Espenilla, Jr., in a recent interview, said the increase in ATMs could be attributed to banks responding to clients’ demand for convenient banking services. "The number of ATMs is indicative of banks… reaching out to their clients," he said.

Universal and commercial banks -- which accounted for the bulk of ATMs in the banking system -- reported an increase of 1.2% in newly installed machines to 8,227 in the first quarter from 8,072 in the previous quarter, central bank data showed.

Universal banks accounted for 78.76% or 7,555 of the total number of ATMs, while commercial banks accounted for 7% or 672.

Thrift banks reported having a total of 1,178 ATMs in the first quarter, up by 2.3% from 1,151 a quarter earlier.

Rural and cooperative banks’ number of ATMs grew the fastest by 27.2% to 187 from 147.

Mr. Espenilla said this meant that rural banks have become more responsive to the needs of clients as well as potential clients in the countryside. -- Antonio Siegfrid O. Alegado

PNB to extend franchise loans

PNB to extend franchise loans

LUCIO C. Tan-led Philippine National Bank (PNB) will begin extending "PNB Kabuhayan Loans" to individuals starting their own businesses via the franchising route.
The franchise loans, PNB said in a statement on Friday, show the bank’s "commitment to support the Filipino small and medium enterprises (SMEs)."

"Offering the loan would allow the bank to capitalize on the growing demand for funding of franchise businesses," the bank added.

A requirement for individuals tapping the franchise loans is the franchisor must be a member of the Philippine Franchise Association (PFA) and the Association of Filipino Franchisers, Inc. (AFFI).

PFA members include Aficionado Germany Perfume, HBC Home of Beauty Exclusives, The Generics Pharmacy and Philippine Seven Corp. AFFI members, meanwhile, include Aquabest, Brothers Burger, Figaro Coffee Company, Reyes Haircutters and SEAOIL Philippines, Inc., among others.

A Kabuhayan loan ranges from P500,000 to P10 million; it is payable up to five years.

Borrowers can avail of a fixed rate of 8% for a one-year term loan, 8.5% for a two-year loan, 9% for a three-year loan, 9.5% for a four-year loan and 10% for a five-year loan.

PNB can lend as much as 75% of the capital needed for a franchise. PFA and AFFI will evaluate the amount needed by a franchisee for his or her business.

Individuals, however, must present to PNB a guarantee before they will be lent the money. The loan amount will depend on the collateral.

This is the first time that PNB will offer loans tailored to the franchise business.

It was preceded by BPI Family Savings Bank, the thrift banking arm of the Bank of the Philippine Islands (BPI), which began extending "Ka-Negosyo Franchising Loans" in February after striking a partnership with AFFI and PFA

PNB shares closed at P59.05 apiece on Friday, up slightly from P59 apiece a day earlier. -- ARRG

Friday, July 29, 2011

Financial Inclusion and the Morality of Thrift

July 27, 2011
Financial Inclusion and the Morality of Thrift
by Daniel Rozas

Expansion of financial inclusion through savings has grown immensely as a focal point in microfinance policy and leadership circles over the past couple of years. Recent market crises where overindebtedness played a major role have only increased the urgency of this objective.

The focus isn’t unwarranted. As Tim Ogden points out in an earlier post, the upside of asset accumulation is obvious, while there’s no comparable risk of over-saving as there is with over-indebtedness.

Much research has been done to examine the savings practices of the world’s poor, with the implicit objective of developing better savings services. Some of the most enlightening findings come from Portfolios of the Poor, and from Stuart Rutherford’s work with SafeSave in Bangladesh. One interesting finding from this line of research suggests that expanding financial inclusion through savings doesn’t end with offering opportunities to save, but also requires creating obligations to save.

These studies show that poor savers greatly demand commitment savings products, through which they commit to save specific amounts over a given period. Not surprisingly, informal savings vehicles, such as ROSCAs, function in exactly that way, by obligating participants to save specific amounts at each rotation.   None of this should be surprising – it is human nature to discount future demands in favor of current ones. We have a word for this: procrastination. People intuitively understand this tension and seek out artificial mechanisms to turn those challenging long-term demands into a series of short-term ones.

Yet there is one major mechanism that seems largely missing in today’s environment: the morality of thrift. Anyone with a living relative who grew up during the turbulent economic period of the 1930s will immediately recognize what such thrift means. The most thrifty of this generation appear to be downright allergic to any kind of spending, and examples abound of frugal widows with simple backgrounds leaving behind fortunes upon their deaths.

During the time of financial inclusion expansion in today’s industrialized countries, the language of thrift predominated. Like today, the founders of the savings movement of 200 years ago were charitably-inclined persons, but unlike their counterparts today, they saw it their mission to educate the toiling masses in desired behavior:

Henry Duncan, one of the progenitors of today’s savings banks (1816): “It is distressing to think, how much money is thrown away by young women on dress unsuitable to their station, and by young men at the alehouse, and in other extravagances, for no other reason, than that they have no safe place for laying up their surplus earnings.”

Rowland Burdon, a prominent author on savings (1797): “The great desideratum, with respect to the maintenance the poor, has always appeared to me to be the encouragement of habits of economy, and of a system of periodical subscription towards their own subsistence.”

Priscilla Wakefield, founder of the world’s first savings bank (1805): "It is not sufficient to stimulate the poor to industry unless they can be persuaded to adopt habits of frugality... [F]or those of intemperate habits [e.g. drinking -DR], ready money is a very strong temptation to the indulgence of those pernicious propensities."

(Hat tip to David Roodman, for his invaluable coverage of this history.)

Though the result of their efforts was largely the same as with today’s advocates of expanding financial access – namely, the establishment of various savings services for the poor – it is unimaginable that organizations like CGAP or FAI might make statements such as these. After all, to encourage thrift among the poor is to acknowledge that by not being thrifty, they are in some way deficient. We may talk of financial education, but exhortations towards thrift would be seen as simply bad form, reminiscent of colonial missionaries.

And yet, seemingly inappropriate as it might be for today’s sensibilities, such general morality can be a great motivator. After all, the very purpose of morality is to protect us against harmful impulses, and impulse spending falls very much in that category. And the value for such morality is as present today as it was 200 years ago. Though it is rarely spoken out loud, it is widely known that drinking and gambling by men continues to consume large amounts of poor households’ earnings in many countries. This is also one reason why women are often seen as the preferred customers for microfinance. No less importantly, widespread adoption of the morality of thrift would help reduce the need for what are after all inconvenient mechanics of commitment savings.

Our predecessors 200 years ago were highly successful in expanding financial inclusion. In theory, we too could encourage thrift. Yet aside from our discomfort from teaching morality, we are also hampered by another obstacle – microfinance today is a story of credit first, savings second. Whether it collects deposits or not, every MFI today started as a credit-granting institution. No less critically, microcredit portfolios contribute the core of MFI earnings, without which few if any MFIs would be able to survive. The result is then an emphasis on marketing credit, providing sales officers with incentives to make loans, and so on.

Unfortunately, the spend-now-pay-tomorrow ethos of credit isn’t just inconsistent with thrift – it directly undermines it. In a prescient essay on the slippery slope of debt, Thomas Dichter refers to research in a French village in the 1950s, where within ten years of the advent of formal credit, villagers who earlier had viewed debt as something shameful and best avoided, came to see such notions as something old fashioned and outright foolish. Many a microfinance practitioner can relate similar transformations of villagers in today’s developing economies.

Yet the traditional notions of debt as something negative form the very social fabric that underpins thrift. In general, the greater the social acceptability of debt, the lower the net saving rates. Thus, for organizations whose existence is predicated on credit, turning around and advocating thrift is inconceivable. Even if an organization could resolve the internal contradictions, it would take marketing gymnastics to communicate both messages at once, resulting in confusion at best and derision at worst.

There are organizations that in theory could adopt the strategy of exhorting thrift – village saving schemes, savings and postal banks, and credit unions that are the modern-day inheritors of the savings revolution in the 19th century. But in reality, they too are unlikely to take up the challenge. The notion of thrift is simply too outdated.

Having played the feature role in the first wave of financial access expansion, thrift has retired to become little more than a historical curiosity for today’s onlookers, as quaint and incomprehensible as a frugal 90-year-old widow worth millions. Yet it doesn’t mean we shouldn’t at least strive to learn from its lessons.

Daniel Rozas currently works as a microfinance risk specialist based in Brussels. In addition to extensive knowledge of microfinance, he brings with him nearly a decade of experience in mortgage finance in the U.S.

Wednesday, July 27, 2011

Globe, PSBank forge GCASH partnership

Globe, PSBank forge GCASH partnership
By EMMIE V. ABADILLA
July 27, 2011, 2:50am

MANILA, Philippines — Globe Telecom has partnered with over 70 banks across the country, the most recent being the Philippine Savings Bank (PSBank) and its electronic money transactions has surpassed the P5-billion mark so far.

The telco’s most recent partnership with the thrift banking arm of the Metrobank Group will enable Globe subscribers with registered PSBank accounts to access PSBank’s electronic banking service anywhere they are, anytime of the day.

They can enjoy doing various financial transactions such as payments, account inquiries and reloading from their PSBank account to their enrolled GCASH wallet and vice-versa.

PSBank account holders who have enrolled for subscription, on the other hand, can also receive bank alerts for debit transactions, below-minimum-balance advisories, and bills payments, among others. Account holders will also receive relevant and up-to-date information and important announcements through text from PSBank.

The partnership will also enable Globe subscribers and PSBank account holders to use the prepaid service of PSBank for reloading their Globe Prepaid or TM accounts. This service is available through www.psbank.com.ph, over 400 PSBank ATMs, and over 180 PSBank branches nationwide. Very soon, it will also be available through its mobile banking service.

This is in response to customers’ demand for speed in delivery, efficiency, convenience and reliability of banking services. Through this partnership with Globe, PSBank will be able to offer more value-added services to all its clients while they are on the go, anytime, anywhere.

“We are proud to have PSBank as a partner in the expansion of its mobile banking channel and we value the opportunity to offer relevant services to thousands of PSBank and Globe customers,” remarked Ernest Cu, President & CEO of Globe, “PSBank’s network of ATMs nationwide also gives Globe and TM subscribers another means to reload their prepaid numbers anytime they want.”

In addition, strong retail partnerships and compelling offers have prompted a surge in service revenues for Globe Telecom. The company posted service revenues of 16.5-billion in the first quarter of 2011, up 8% year-on-year. Total prepaid subscribers in the 1st quarter, which include Globe Prepaid and TM, grew 14% year on year to 26.173-million subscribers.

Globe, PSBank in e-banking partnership

Globe, PSBank in e-banking partnership

By: Daxim L. Lucas
Philippine Daily Inquirer

10:52 pm | Tuesday, July 26th, 2011

Globe Telecom Inc. and Philippine Savings Bank have entered into a “strategic partnership” that would result in electronic banking services being made available to more mobile phone users in the country.

In a statement, the Ayala-controlled telco and the thrift banking arm of the Metrobank Group said they would jointly offer electronic banking for PSBank clients who are also Globe subscribers.

Under the scheme, Globe users with registered PSBank accounts can access the bank’s electronic banking service anywhere they are, anytime of the day to do various financial transactions such as payments, account inquiries and reloading from their PSBank account to their enrolled G-Cash wallet and vice-versa.

PSBank account holders who have enrolled for subscription will also receive bank alerts for debit transactions, below-minimum-balance advisories, and bills payments. They will also receive relevant and up-to-date information and important announcements through text from PSBank.

“We are proud to have PSBank as a partner in the expansion of its mobile banking channel and we value the opportunity to offer relevant services to thousands of PSBank and Globe customers,” said Globe president and CEO Ernest Cu. “PSBank’s network of ATMs nationwide also gives Globe and TM subscribers another means to reload their prepaid numbers anytime they want.”

The partnership will also enable Globe subscribers and PSBank account holders to use the prepaid service of PSBank for reloading their Globe Prepaid or TM accounts. This service is available through the bank’s website, its more than 400 ATMs and about 180 branches nationwide.
It will also be available through the mobile banking service in the near future.

With more than 70 partner-banks across the country, Globe’s G-Cash service has bridged a number of communities in the Philippines by making financial transactions secure, faster and easier with just a text message. So far, G-Cash transactions with accredited banks have already exceeded the P5-billion mark.

Monday, July 25, 2011

Proof of President Aquino's performance

Proof of President Aquino's performance
By THE PHILIPPINES NEWS AGENCY
July 25, 2011, 2:17am

MANILA, Philippines (PNA) – The best way to measure President Benigno S. Aquino III’s performance during his first year in office is to show proof of investors' confidence, which is manifested in the economic indicators in terms of trade, investment inflows, and the robustness of the stock market.

Investments registered with the Board of Investments (BOI) in the first half of 2011 increased by 20.27 percent to P204.175 billion over the same period last year, which the agency attributed to the bullish sentiments pervading in the country that "draw businessmen to pour money where their mouths are."

“Because everything is bullish,” BoI managing head Cristino L. Panlilio said. He noted that the government is undertaking a “double checking analysis” on the FDI (foreign direct investments) which he said would prove the bullish atmosphere going on in the country.

“Ninety percent of business people are investing and putting their money where their mouths are, and if you are part of the 10 percent who are doing analysis paralysis, you will be left behind,” Panlilio said.

Panlilio cited the booming construction sector, the ongoing expansions of multinational corporations such as Coca-Cola, Nestle, the robust business process outsourcing (BPO) sector and the growth of the microfinance firms.

“The commercial banks have grown, the past dues of banks have gone down to a historical low of 3 percent while the stock market is on an all-time high,” he pointed out.

“My advice to all serious investors is don’t get left behind by pondering too much on the negative, but look at the Philippines as half full, not half empty,” he added.

“Believe me, I am a businessman and I’m putting my money where my mouth is,” he said.

There were 148 projects approved by the BoI for the first semester of the year or 64 percent more than the year-ago level.

The number of jobs to be created once these committed projects go on full commercial operation also significantly increases by 128 percent to 31,899 versus 14,021 in 2010.

With the robust investment inflows, Panlilio said the BoI is now setting its eyes over revising upward its growth target this year.

"Hitting P302 billion investments this year is possible," Panlilio said.

Already, Trade and Industry Secretary Gregory L. Domingo has called for a re-computation of the country’s foreign direct investments (FDIs) on strong suspicion the current measure of FDIs failed to capture the entire FDI inflows into the Philippines.

Domingo explained that the small FDI figure only creates a negative perception among foreign investors on the country’s competitiveness in attracting foreign investments.

Domingo said that based on initial consultations with the Bangko Sentral ng Pilipinas (BSP), which tracks the FDI inflows, and various industries have fueled his belief that the FDI report of the BSP may not actually represent the correct FDI picture.

“There maybe several things not being captured by the system because the BSP inflows only record the dollars poured in through the banking system... Based on my talks also with the various industries, they said that the $ 1.7 billion FDI level reported by the BSP last year was actually very low,” Domingo said.

Domingo believed that the country’s reported FDI figure failed to capture all of its three components – equity capital, intra company loans, and reinvestment of earnings.

He suspected that the BSP data did not capture the re-investments of earnings and capital investments for imported new machineries and equipment. He noted that FDI represents increased in working capital, fixed assets and capital expenditure.

“Right now, it is just cash. So, we feel the $ 1.7 billion FDI level last year and going forward do not accurately reflect the true picture,” he said.

Domingo has stressed the need to correct the system because the FDI report has a big impact on the perception of investors, who looked at FDIs as a crucial indicator of a country’s competitiveness as an investment destination.

“When investors look at our FDIs as just one-third of Vietnam’s, their perception is that we are attracting very low FDIs so they create a wrong impression and that affects our competitiveness perception in a very significant way,” he said.

Having a correct FDI computation, he said, should also be for the benefit of the government to be able to see the true picture of investment inflows into the country.

For his part, Panlilio explained that the BSP has a liquidity or cash management mindset when it tracks FDI inflows.

“BSP is looking at net cash flow, but us from a development economic point of view we look at gross inflows, what really entered and created economic activity. For us, net cash inflow is not a factor,” he said.

He noted that 20 percent of foreign inflows of overseas Filipino workers (OFWs) are spent on consumer durables and 50 percent of those buying new housing units are OFWs. "These investments create economic activities," he said.

Panlilio explained that FDI, which is also defined by one economist to represent cross border financial flows, does not mean that the money that flows in and goes out of the country did not create economic activity.

From the trade side, the DTI has aggressively pursued and taking advantages of its trade agreements with ASEAN, China, Japan, Korea, Australia, New Zealand, and recently, India. This has resulted in robust exports growth.

The DTI has been conducting seminars and conferences under its Doing Business in Free Trade Areas (DBFTA to increase utilization of free trade agreements (FTAs) in the Philippines.

Close to 1,200 exporters benefited in the DBFTA sessions held from November to December last year. More than 40 DBFTA sessions are scheduled nationwide for 2011.

The most visible economic indicator though is the performance of the stock market.

“The bullish local stock market is a good indicator of how the domestic economy should be judged,” said Philippine Stock Exchange chairman Jose T. Pardo.

“The stock market is the barometer of economic confidence. There is nothing more to say because the stock market has spoken and risen beyond expectation,” Pardo said as various business organizations have been trying to grade the Aquino administration’s performance on its first year in office.

“The best way to grade the administration is to show proof and the stock market has shown proof,” he added.

Pardo said that their expectation is that the market will further grow this year, especially once the implementing rules and regulations of the REIT (Real Estate Investment Trust) gets implemented.

“There is enthusiasm and interest in the Philippines,” Pardo said, noting that he met with Goldman Sacks for the planned meeting with 20 fund managers.

The Philippine stock market is generally in a bull trend and it is hard to stop it from moving higher given the optimism among investors, an analyst said. Even if the Asian and the US markets are mixed, there is nonetheless so much liquidity in the Philippine market. Foreign investors are also pushing the index higher, perhaps optimistic of the potential of the country moving forward.

The continued 7 percent growth of the Philippine economy in the past two quarters is largely keeping investor sentiment buoyant, along with other signs of economic recovery. (PNA)

Regulator issues clearer rules on bank financing

Regulator issues clearer rules on bank financing
Philippine Daily Inquirer
9:29 pm | Sunday, July 24th, 2011

MANILA, Philippines—The Bangko Sentral ng Pilipinas has issued new rules on transparency in the lending activities by banks, citing the need to protect the public against hidden charges placed by some creditors.

Monetary Board Resolution 1018 will take effect in July next year. Under the new rules, banks are prevented from imposing hidden charges on loans and charging misleading interest rates.

For instance, the new rules will require banks to cite the effective interest rate (EIR) on a loan and to charge interest on the outstanding balance of a loan only at the beginning of the interest period.

Under the new rules, banks will also have to disclose to borrowers clear definitions of the terms “interest,” “fees,” “service charges,” and “discounts,” among others.
Moreover, the new rules also provide a standard format for loan cost disclosure that banks must give to their clients.
In a statement, the BSP said it was forced to issue the new rules after it received complaints that some banks had been charging borrowing costs that were higher than what the borrowers understood.
“Current practices of some credit providers, particularly the use of flat interest rates, show contractual rates for loans that substantially differ from the EIR,” the BSP said.
According to the regulator, there have been reports that some banks have been imposing hidden fees and charges, quoting low interest rate but imposing high upfront payments, effectively misleading the borrowers.
“As a result, the public may be misinformed or misguided about the true cost of their borrowings,” the central bank said.
The new rules will take effect a year from now to give ample time for banks to make adjustments to their loan practices and to ensure that the rules are disseminated to all institutions.
The BSP said that the new measures would only cover banks, but an additional set of rules on transparency will also be prepared to cover nonbank financial institutions, savings and loan associations, and other institutions engaged in lending.
The BSP said it would coordinate with other concerned regulators, including the Securities and Exchange Commission, Insurance Commission, and the Cooperative Development Authority so that they would be able to issue their own sets of rules complementing those of the BSP.—Michelle V. Remo

Sunday, July 24, 2011

Non-banks dominate PHL finance

Non-banks dominate PHL finance

SUNDAY, 17 JULY 2011 18:28 JUN VALLECERA / REPORTER

NONBANK financial institutions dominate the financial landscape in the Philippines, totalling 6,516 in all at end-March this year, far more than banks of all kinds numbering only 746, data from the Bangko Sentral ng Pilipinas (BSP) show.

Nonbanks with quasibanking functions, essentially the investment banking units of parent banks, total only 15 but nonbanks without quasibanking functions are far too numerous at 6,501.

The latter pertains simply to such entities as pawnshops which number 6,381 at present; to 69 nonstock savings and loan associations; and 51 other nonbanks without quasibanking functions registered with the BSP.

Then there are only five offshore-banking units, or OBUs, which act more as listening posts for their overseas banking parents as they are prohibited from engaging in activities that regular-banking units do such as accepting deposits or giving out loans.

Expanded license banks or so-called universal banks, regular commercial banks and the various thrift and rural banks number only 746, which means there is only one bank for every 8.7 NBQBs in existence today.

The numbers help explain in part the urgency of the need for financial inclusion to flourish in the Philippines, which is in essence an advocacy program espoused by BSP Governor Amando M. Tetangco Jr. Tetangco wants as many Filipinos as possible to have access to the various financial services available.

The bulk of some 90-odd million Filipinos are considered financially illiterate with no appreciation of the impact of keeping one’s savings in mattresses and piggy banks when such funds are better off kept in banks to fund more productive long-term programs that benefit the country overall.

Monetary Board member Alfredo Antonio, one of seven who help decide the direction of domestic-interest rates at BSP deliberations every six weeks, dreams of achieving a more inclusive financial system “by utilizing multiple channels to deliver a wide range of financial services to the unbanked and underserved population.”

“We recognize the potential of the micro, small and medium enterprises to boost economic growth and create employment opportunities especially if we improve their access to credit,” Antonio said at the launching of the BSP awards and appreciation ceremonies in Cebu City on Friday. The awards and appreciation ceremonies aim to recognize the role played by various stakeholders in making financial inclusion a reality.

One such program includes the establishment so-called credit-surety funds (CSF) in various Philippine provinces, some 16 in all at last count, making possible for people to obtain bank loans even in the absence of collateral or leverage. Such collateral often reaches up to 10 times what they put up as security.

Ordinarily, a borrower gets to borrow up to 70 percent or 80 percent of the value of security or collateral he brings before a bank.

But with the credit-surety fund, a security worth P1 million could help the borrower raise up to P10 million from participating banks under the CSF program, the BSP said.

Experts rate P-Noy's first year

Experts rate P-Noy's first year

By ELLSON A. QUISMORIO

July 23, 2011, 7:59pm

MANILA, Philippines — Experts from the Movement of Good Governance (MGG) filled in President Benigno “Noynoy” Aquino’s virtual report card just days before the latter delivers his second State-of-the-Nation Address (SoNA).

The verdict – passed on to a handful of reporters Friday night at Ateneo’s Bernas Law Center in Rockwell, Makati City – was an average rating of 4.69 out of a possible 10.

Chaired by Prof. Solita “Mareng Winnie” Monsod, the MGG said the President’s rating for his rookie year indicates that “there have been accomplishments, but more need to be done.”

The score was justified in 36-page document titled, “A needs assessment study of the country under the Aquino administration.”

The Aquino administration was assessed using a 10-point scorecard that benchmarked the Chief Executive’s performance based on what he promised to do during election campaign against what he has actually accomplished during his first year in office.

Formulated by MGG experts, the ratings system was qualified by seven indicators, namely Corruption, Public Finance, Governance, Environment, Education, Health, and Economy.

Each indicator was further broken down into smaller items, such as “zero-based budgeting” for Corruption and “no new taxes” for Economy in order to facilitate non-subjective grading.

The weighted scores for each item under every indicator were peer-reviewed, often sparking hot debate among themselves, Monsod shared during the hour-long presentation.

“We tried our best to use as much hard data as possible. The ratings are transparent…the analysis is there,” the MGG chair said, referring to the document which can be downloaded from the group’s website.

The results showed that Aquino garnered above-average scores in Public Finance (5.8) and Education (6.25), and while his performance in Health was dismal (3), the President was given barely-passing scores in Corruption, Governance, Environment and Economy (4.8, 4.5, 4.7, 4.4, respectively).

The President was particularly lauded for delivering on his promise of zero-based budgeting and no new taxes, although the MGG panel cased doubt on the latter’s overall positive impact, saying it may have stunted economic growth.

One of the sticking points on Health – the big dampener on Aquino’s overall rating – was the fact that a majority of Filipinos is still outside the health insurance system, with only 42 percent covered.

Dr. Milwida “Nene” Guevera, MGG convener and former undersecretary of the Department of Finance (DoF), stressed that the assessment was done to support Aquino and his government, allowing him to “fill in the gaps,” so to speak.

Among those who graded the president were Monsod, Guevara, former Department of Health (DoH) Secretary Jaime Galvez Tan and former DoF secretary Bobby de Ocampo.

Established in 2008, the MGG is a coalition that promotes transparent, participatory and accountable governance.

Meanwhile, a brewing storm east of Mindanao will likely intensify into a cyclone, triggering rains in Metro Manila, Southern Luzon, Visayas, and Mindanao during President Benigno S. Aquino III’s State-of-the-Nation Address (SoNA) Monday, the Philippine Atmospheric, Geophysical and Astronomical Services Administration (PAGASA) said.

PAGASA weather forecaster Aldczar Aurelio said the low pressure area (LPA) embedded along the intertropical convergence zone was estimated 640 kilometers east-northeast of Surigao City on Saturday morning. (With a report from Ellalyn B. de Vera )

Banks' NPL ratio improves to 2.8%

Banks' NPL ratio improves to 2.8%

By LEE C. CHIPONGIAN

July 24, 2011, 8:00am

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) reported that the banking industry's non-performing loans (NPL) ratio at the end of May improved to 2.8 percent, down by 0.15 percentage points from the same period last year of 3.31 percent.

Compared to April, NPL ratio was also lower by 0.15 percentage points, indicating the banking sector's declining NPL, which are unpaid loans for more than 90 days. Based on BSP data, total NPL in the first five months amounted to P81.91 billion, lower than April's 83.44 billion and May 2010's P84.94 billion.

In a statement released Friday, the BSP said May is the fourth month this year that NPL ratio has remained below the three percent level, with the lowest being the December 1996 level before the 1997 Asian financial crisis.

Beside the lower NPL and the expansion in total loan portfolio, which grew by 3.48 percent to P2.929 trillion also contributed to the lower NPL ratio.

Net of interbank loans, the NPL ratio also went down to 2.99 percent from April's 3.16 percent and last year's 3.7 percent ratio, said the BSP. On a month-on-month comparison, the ratio declined as the reduction in NPLs was complemented by the 3.49 percent increase in regular loans to P2.735 trillion.

The press release also stated that banks' restructured loans to total loan portfolio ratio fell to 1.39 percent from April's 1.48 percent and year ago's 1.63 percent ratio. The month-on-month decline in the ratio was due to the expansion of total loan portfolio combined with the 2.48 percent tapering of gross restructured loans to P41.16 billion.

As for the real and other properties acquired to gross assets ratio, this reached 1.99 percent, slightly higher than last April's 1.98 percent yet still better than year ago's 2.29 percent ratio, said the BSP. ROPA increased to P124.45 billion in May.

The non-performing assets (NPA) to gross assets ratio improved to 3.31 percent from April's 3.35 percent and year ago's 3.79 percent ratio. NPAs also rose to P206.36 billion.

The BSP said banks provisioning against potential credit losses remains adequate. The NPL coverage ratio improved to 123.31 percent compared to last year's 110.17 percent. However, the NPA coverage ratio (NPA reserves to NPAs) slightly narrowed to 62.54 percent than April's 62.88 percent but it was higher compared to May 2010's 56.70 percent ratio.

Saturday, July 23, 2011

P-Noy to name Alip as adviser on microfinance

P-Noy to name Alip as adviser on microfinance

By Iris C. Gonzales (The Philippine Star) Updated July 23, 2011 12:00 AM

MANILA, Philippines - President Aquino is expected to announce soon the appointment of Aris Alip as presidential adviser for microfinance and lending, Finance Secretary Cesar Purisima told editors and reporters of The STAR in a roundtable discussion Wednesday night.

The move is part of efforts to improve the public’s access to financing, Purisima said.

Alip is known in the agricultural sector. He was founder and managing director of the Center for Agriculture and Rural Development (CARD) Mutually Reinforcing Institutions.

CARD started as financial institution in the Philippines which extends microcredit and the largest of its kind in the country, started as a nongovernmental organization in 1986 and was licensed as a bank in 1997.

Alip established the NGO with the aim of helping the poor get access to financing to start a business.

He was also a former staff member of the Philippine Business for Social Progress. He promoted micro-financing in rural areas similar to the Grameen Bank in Bangladesh.

In 2010, he was also considered by Aquino to head the Agriculture portfolio.

Purisima said Aquino believes in improving the poor’s access to financing to help them benefit from the cash-rich domestic market.

BSP enhances transparency in loans

BSP enhances transparency in loans

By LEE C. CHIPONGIAN

July 23, 2011, 12:37am

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) has revised rules implementing provisions of Republic Act No. 3765 or the Truth in Lending Act by “enhancing” transparency in banks’ loan transactions.

The BSP’s Monetary Board approved Circular No. 730 last Wednesday, updating policies implementing RA 3765 to improve loan transactions between banks and borrowers through disclosure of information and other loan documents.

In the circular memo signed by BSP Governor Amando M. Tetangco Jr., the revised rules which the BSP said is still consistent with the law, will take effect next year, July 1.

One of the changes implemented to the Manual of Regulations for Banks (MORB) is in the method of computing interest charges to loans, especially to consumer loans. The circular added a new subsection to the MORB, which states that banks may only charge interest based on the outstanding balance of a loan at the beginning of an interest period.

The BSP said that if the loan will be paid in installments, the interests will be calculated at the beginning of the installment period. All loan documents will have to show all loan repayment schedules for transparency.

As part of the enhanced transparency provisions, the new circular also updated the disclosure of the loan and payment information.

For small business/retail/consumer credit, the minimum required information includes the total amount to be financed, finance charges, net proceeds of the loan and the percentage of the finance charges to the annual rate of the loan.

“Banks are required to furnish each borrower a copy of the disclosure statement, prior to the consummation of the transaction,” said the BSP.

A new format for disclosure of information has been released along with the circular. Banks are specifically instructed to notify clients of the disclosure statement as a required attachment to loan contracts, which clients/borrowers have the right to demand.

According to Tetangco, the revised disclosure statement reflects the present industry practices and the updated rules are specifically targeted to SME loans.

Friday, July 22, 2011

DSWD, Landbank fortify partnership for 4Ps

DSWD, Landbank fortify partnership for 4Ps

The Department of Social Welfare and Development (DSWD) and the Land Bank of the Philippines (Landbank) last week signed a memorandum of agreement (MOA) to further fortify the on-going implementation of the Pantawid Pamilyang Pilipino Program (4Ps), the National Government’s flagship program on poverty reduction and social development.

The agreement provides for additional payment and distribution modes of the cash grants to beneficiaries.

Aside from Over-the-Counter transactions and the Landbank Cash Card, cash grants can now be claimed via countryside financial institutions such as rural banks, cooperative banks, and thrift banks; cooperatives and Non-Government Organizations (NGOs), and telecommunication companies.

Another major component of the MOA signed today by DSWD Secretary Corazon J. Soliman and Landbank president Pico is the creation of a National Coordinating Committee to oversee the successful implementation of the Program, and a National Action Center and Regional Action Centers to ensure the program’s widest coverage nationwide.

4Ps is administered by the DSWD that provides cash grants to extremely poor households.

Landbank serves as the depository and disbursing bank of the Program.

As of June 30, 2011, LANDBANK has disbursed a cumulative total of P20.05 billion cash grants, reaching 1.6 million beneficiaries nationwide.

Becoming more aggressive in its lending activities especially to its priority sector, Landbank earlier said that its total regular loans expanded by 9.4 percent from P195.2 billion in 2009 to P213.5 billion in 2010.

Pico attributed the expansion of Landbank’s loan portfolio to the strategic efforts taken by the bank to further strengthen its support particularly for key sectors and projects with high development impact.

These include food and agri-commodity exporters, farmers and fisherfolk cooperatives, water and environment projects as well as microenterprises and SMEs, countryside financial institutions and local government units.

"The expansion in Landbank’s loan portfolio is also reflective of the aggressive focus on credit outreach and the gains achieved in countryside development," Pico said.

For 2011, Landbank is targeting to expand loans by 8 to 9 percent primarily for agribusiness, agri-infrastructure, LGUs and other development projects.

Thursday, July 21, 2011

G-Xchange to push GCASH to more banks, gov’t agencies

G-Xchange to push GCASH to more banks, gov't agencies

G-XCHANGE, Inc., the wholly owned mobile phone commerce subsidiary of Globe Telecom, Inc., is aggressively pushing its GCASH service this year among banks and government agencies to increase the number of its existing users, an official said yesterday.

"This year, it's more of utilizing the platform [through] payments [services] and interfaces with banks. We're now embarking on new applications for GCASH... and develop other businesses," Paolo Eugenio J. Baltao, G-Xchange president, told reporters as the company and the Union Bank of the Philippines, Inc. launched their partnership.

The GCASH service allows users to transfer money using their mobile phones.

G-Xchange's partnership with UnionBank will allow the bank's clients to transfer funds to and from their GCASH wallets.

Mr. Baltao said that including the partnership with UnionBank, G-Xchange now has tie-ups with 76 rural and commercial banks including the Bank of the Philippine Islands, Philippine National Bank, Rizal Commercial Banking Corp., Metropolitan Bank & Trust Corp. and Asia United Banking Corp.
Earlier this month, the firm also inked an agreement with Department of Social Welfare and Development and Land Bank of the Philippines for the use of the GCASH platform to disburse funds under the government's cash conditional transfer scheme.

"We will soon be launching a partnership with another government agency soon," Mr. Baltao added.

Ultimately, the goal of G-Xchange is to increase its current one million active users to 26 million, the number of Globe Telecom subscribers.

"That is the ultimate target -- to have all subscribers use GCASH wallet," Mr. Baltao said, declining to say how many active users they are targeting by yearend.

Current transactions being coursed through GCASH service averages to "more than $100 million" a month, Mr. Baltao said, from an average of "almost $100 million a month" in the past two years.

"Previously, we focused more on international business remittance units," Mr. Baltao said, adding the firm has 1,000 outlets worldwide in 33 countries.

Locally, G-Xchange has 18,000 GCASH registered outlets, but only about 9,000 are active.

"We plan to increase the 9,000 active [outlets] to 11,000 to 12,000 this year," Mr. Baltao said. -- Kathleen A. Martin

Strategies for lowering past due accounts: BEST practices of Katipunan Bank (Zamboanga del Norte) Inc.

Strategies for lowering past due accounts: BEST practices of Katipunan Bank (Zamboanga del Norte) Inc.

Published : Thursday, July 21, 2011 00:00 Article Views : 285 Written by : Severino Frayna

We consolidated our operations the past three years when we merged with the Plaza Rural Bank of Carcar, Inc. in 2008.

While it was no easy feat of fusing and merging 2 banks, we now take pride that we have become one of the most active players in microfinance, an activity that our regulator, the Bangko Sentral ng Pilipinas, had actively encouraged for more than a decade already. The late BSP Governor Rafael Buenaventura actively pursued the participation of countryside lenders like us in the micro loan space to empower more or our people in the financial sense and helps build a stronger, more inclusive financial system in the process.

Most of us have responded to that call with enthusiasm, the greater number of our colleagues having built a substantial microfinance loan portfolio that not only earned the praise of our regulator but empowered our clients at the same time as well.

The Key - Keeping Past Due down to a minimum

But success brought with it attendant problems in some of us. While some of our colleagues struggled with past due loans, for instance, we at the Katipunan Bank (zn), Inc. were spared the trouble. It is not as if we have zero incidence of past due loans but we certainly take pride that we have kept it to the minimum.

Our past due ratio, for both the regular loan portfolio and our microfinance operations, averaged only 2.32 percent at end-April this year. We performed better than our regular commercial as well as expanded license or universal bank colleagues whose past due ratio averaged 4.03 percent in April.

Our regular loan portfolio posted a past due incidence of only 0.96 percent while our microfinance portfolio sustained a 1.38 percent past due ratio. It must be said that Katipunan Bank (zn), Inc. has a regular loan portfolio amounting to P578.09 million and only P201.60 million in microfinance loan outstanding at end-April. We have 13,567 regular loan borrowers and nearly three times that number in micro loan borrowers totalling 39,574. Only 15 percent or P116.6 million of our loan portfolios are classified as secured loans with the greater bulk or 85 percent representing unsecured loans worth P663.07 million. Nevertheless, and like I said before, our regular loan portfolio sustained minimal past due loan ratio of only 0.96 percent and our micro loan portfolio a past due ratio of only 1.38 percent. It must also be said we have during the period total resources amounting to P955 million, total deposit liabilities of only P494.6 million and total equity of P136.2 million.

In all this time our loans-to-deposit ratio proved optimum at 157.6 percent and testament to our success in mobilizing interest-earning deposits to support our loan growth goals. We have had no trouble supporting the loan requirements of our clients as indicated by our liquidity ratio averaging 22.26 percent. Our fixed asset ratio has also proven just right for us as a microfinance-oriented lender at only 42.55 percent. The central bank, the Bangko Sentral ng Pilipinas, has also cited the sufficiency of our capital to meet operational requirements as we posted a capital adequacy ratio well above minimum at 14.29 percent against the floor of 10 percent imposed by regulation. As a result, we have been asked by colleagues in the industry as well as by clients themselves on many occasions as to how we managed to keep our past due rates to the minimum. Here is how we did it.

On the personnel level, we emphasized the impact of portfolio-at-risk as well as the impact of non-performing loans on their performance as employees of the bank. We raised the accountability of both field personnel and operations personnel and made it clear that any increase in portfolio-at-risk was in fact a reflection of their performance as employees. In line with this, we set up a task force whose mandate was to reduce the past due incidence by a significant degree within a six-month period. But while we frowned on any more past due loans, we encouraged our personnel to collect on outstanding accounts by giving them incentives to do so.

We made it a point to closely monitor all past due accounts from the unit level up to top management level so that everyone was involved in the fight to reduce past due loans to the bare minimum. We also instituted prompt reporting and action on all delinquent accounts as they are found. For those accounts that took a little more effort to collect than others we set up a small claims and litigation unit.

In addition, we began to write-off bad accounts twice a year but took care to reflect the written-off accounts on the performance of individual employees and branch. By this method we instilled the notion that past due loan are to be dealt with as swiftly and efficiently as possible.

Teaching clients and employees to be responsible partners

At the client level, we gave our clients financial literacy lectures that oriented them properly on the responsibilities of borrowers. The broader goal was to instill credit discipline among them. We taught them about the impact of past due loans on our aggregate loan portfolio and why it was important that we have “zero tolerance” on delinquent accounts, particularly on our microfinance portfolio. We endeavored to closely monitor the business operations of our borrowers as well.

At the management level, we have an internal loan review system designed to fortify the policy on loan-loss provisioning because laxity or failure will reflect on the performance of both the branch and its personnel. We also incorporated a system for the aging of our loan accounts on both the regular as well as microfinance portfolios reflecting the buffer rates mandated by the BSP. This allowed us to quickly tell which of the accounts were problematic and for how long.

All the while we have internal auditors that make independent monthly assessments on loan loss provisioning for both regular and microfinance accounts. We provided incentive packages for the personnel and staff that met the standards and targets. What all these mean is that bank management promptly and efficiently acted on recommendations made to optimize the loan programs of the bank.

Part of the success may also be attributed to refresher courses for our personnel and customer surveys we conducted that let us know the satisfaction derived by our clients on services we rendered. All of these measures put together helped make us what we are today as financial services provider for our clients and competitor among peers in the field.

Philippine Banks stayed solvent through global financial crisis

Philippine Banks stayed solvent through global financial crisis

Published : Thursday, July 21, 2011 00:00 Article Views : 295 Written by : Lailany P. Gomez

THE Philippine banking system remained solvent last year, as capital adequacy ratios exceeded the minimum requirement despite the uneven phase of recovery of the global economy, the Bangko Sentral ng Pilipinas said on Wednesday.

In a statement, the BSP said the banking industry’s average CAR at end-December stood at 16.02 percent on solo basis and 16.97 percent on consolidated basis.

Similarly, the Tier 1 capital ratios stood at 13.64 percent and 13.69 percent on solo and consolidated bases, respectively.

Quarter-on-quarter, the banking system’s CAR hardly moved from 16.04 percent and 16.97 percent on solo and consolidated basis.

Qualifying capital grew by 3.93 percent to P27 billion on solo basis and by 3.72 percent to P28 billion on a consolidated basis.

Risk weighted assets increased by 4 percent to P171.1 billion on solo basis and 3.76 percent to P167.3 billion on a consolidated basis.

The universal and commercial bank’s’ solvency fell by 0.06 percentage point and 0.05 percentage point from the previous quarter’s 16.29 percent and 17.32 percent on solo and consolidated bases, respectively.

On solo basis, the CAR of the industry decreased from the previous quarter as the 3.94 percent growth in qualifying capital was offset by the 4.32 percent rise in risk weighted assets.

According to the BSP, the increase in the industry’s capital base was attributed to banks’ robust profits of P21.3 billion for the fourth quarter of 2010 and the P3.3 billion additional issuances of common shares by one commercial lender and one foreign bank subsidiary.

The increase in risk weighted assets stemmed from the general expansion of assets, the bulk of which was in the form of loans granted to various unrated counterparties, the BSP said.

The thrift banking industry’s CAR went up from 12.18 percent to 12.62 percent quarter-on-quarter, on both solo and consolidated bases.

The 0.44 percentage point improvement was due to the 7.61 percent growth in qualifying capital, which was higher than the 3.83 percent expansion in risk weighted assets.

The BSP said the increase in qualifying capital was sourced from the profits of thrift banks and issuances of common stock, while the growth in risk-weighted assets mainly came from the expansion of loan portfolios.

The rural and co-operative banking industry’s CAR stood at 19.16 percent at end-December, or 0.27 percentage point higher quarter-on-quarter.

By peer groups, the rural banking industry’s CAR was at 19.39 percent, while co-op banks’ CAR stood at 17.13 percent.

The improvement stemmed from the 3.31-percent decline in risk weighted assets vis-à-vis the lower decrease in qualifying capital of 1.94 percent.

The BSP and the Basel Accord require a standard ratio of 10 percent and 8 percent, respectively.

Globe to revive G-Pass for LRT, MRT

Published : Wednesday, July 20, 2011 21:54 Article Views : 146 Written
by : Darwin G. Amojelar, Senior Reporter

A WHOLLY owned subsidiary of Globe Telecom Inc. on Wednesday said it
plans to revive its ticket less entry service for Metro Manial's mass
rail transit systems.

In a briefing, Paolo Eugenio Baltao, president of G-Xchange Inc. told
reporters that the company is working with the government to bring back
ticket less entry for Light Rail Transit Lines 1 and 2 and Metro Rail
Transit Line 3 using GCash.

"We have the intention to implement it. It's in our radar, for possible
application for our GCash," Baltao said.

In 2006, GXI implemented G-Pass, an alternative way to enter the MRT 3
using a wireless radio frequency identification chip.

G-Pass is a stored value chip that is tapped on a sensor lodged at the
gates of the MRT 3. The RFID-equipped chip can be reloaded using GCash.

The G-Pass service was phased out in 2009 because of problems in the
platform.

Baltao said GXI will improve upon the G-Pass service.

"I assure you, you will like the experience because we learned from the
past," he added.

The Department of Transportation and Communications plans to bid out the
P1.73 billion Common Automatic Fare Collection System for the three
railway lines in Metro Manila.

The project involves the supply and installation of a contact less
collection system with an open platform for expansion to other rail lines.

The winning bidder will finance, install and maintain the AFCS for 10 years.

Baltao expects to increase GCash users once the company implements the
ticket less system for the three rail services "as soon as we can."

With a million active users, GCash is an "electronic wallet" that allows
remittance of cash and payments—including bills, donations and online
purchases—through text messaging.
GXI handles more than $100 million worth of GCash transaction a month.

Globe shares jumped to P928.50 apiece on Wednesday from P906 the day before.

Globe’s GCash grew 200% yearly average since 2004

Globe's GCash grew 200% yearly average since 2004

WEDNESDAY, 20 JULY 2011 19:39 JUN VALLECERA / REPORTER

G-XChange Inc. or GXI, the fully-owned subsidiary of Globe Telecom that operates the mobile platform GCash, reported growth of more than 200 percent every year for its remittance unit since Globe Telecom's electronic wallet or e-wallet service started in 2004.

The remittance unit accounts for just a small fraction of all GCash transactions but it already boasts of a million-strong cardholder base most of whom are overseas Filipino workers (OFWs), GXI president Paolo Balatao told in a press conference on Wednesday.

"We're catching up with the big boys but we are not here to compete but rather to complement what they are extending to our OFWs," he said.

He would not detail the growth claim lest he give away too much to his competitors, but his remarks underscore the diminishing importance of so-called informal remittance channels that used to grab 20 percent of the multibillion-dollar remittance business.

The Bangko Sentral ng Pilipinas (BSP) used to lament that a good portion of OFW remittance flows pass through high-risk and costly door-to-door mone transfer schemes, for instance.

Such flows, BSP Governor Amando M. Tetangco Jr. said, now account for only 3 percent or 5 percent of the annual remittance volume.

Globe Telecom's GCash announced its partnership with the Aboitiz-owned Union Bank on Wednesday under the eMoney XChange service that enable the bank's clients with EON, ePayCard and Union Bank regular savings and checking accounts to transfer funds to and from their GCash wallets through their Union Bank account via text or short messaging service.

With the service, one could engage in e-banking or electronic banking activities while in the Philippines using GCash or top up one's mobile phone using the EON card while abroad, for instance, it was explained.

"We are opening up more possibilities for our customers to further engage in online opportunities like online business, shopping and sending remittance. This partnership with GCash will also cultivate new customer relationships and strengthen existing connections," Ramon Duarte, senior vice president for retail product development at Union Bank, said.

EON's 2-million cardholder base come mainly from the online merchant community, while GCash's 1-million strong customers are mostly mobile-phone subscribers that use the service for remittance purposes.

GCash has also been tapped by the government as a conduit for its conditional cash transfer or CCT program serving some 500,000 of the 1.9 million CCT-eligible recipients around the country who otherwise could not be conveniently served by banks in the rural areas.

GCash helps disburse CCT recipients in some 400 of the 1,800 municipalities covered by the government cash-disbursement program.

Wednesday, July 20, 2011

Electronic banking gains more users

Electronic banking gains more users

MORE THAN half of transactions at the Bank of the Philippine Islands (BPI) are now made electronically, prompting the country’s third largest bank in asset terms to rethink its branching strategy.

“Over the past 10 years, financial transactions at BPI increased by almost 12% and a big portion was done through the electronic banking platform,” said Natividad N. Alejo, BPI senior vice-president and consumer banking group head, at the sidelines of BPI Express Online Open 24/7 Promo Grand Awarding Ceremony yesterday.

Manual transactions or those that are done over the counter, have gone down to 34% at present from 70% 10 years ago, while electronic banking transactions have ballooned to 66% from 30%, Ms. Alejo said.

Electronic banking covers transactions completed using automated teller machines, the internet, mobile phones and the customer transaction assist machines (CTA) at about 300 of 809 BPI branches nationwide.

Ms. Alejo said the increase in the number of electronic banking users -- which is projected to grow more in the coming years -- was due to its convenience, the variety of transactions can be completed, particularly through internet banking, and BPI’s growing number of “young clients.”

With BPI’s internet banking, clients can pay their bills, load their mobile phones, transfer funds from one BPI account to another, among others, without the hassle of going to bank branches.

In the first half of the year, BPI’s internet banking enrollees increased by 35% to 700,000 compared to the same period the year before.

Despite the marked shift to electronic banking, Ms. Alejo said BPI is still planning on expanding its branch network, but will be very particular about locations. “Due to clients’ shift to the electronic banking platform, we would have to rationalize the branch location and the market share we would get if we decide to open a branch,” she said.

She also noted out that a market segment will always seek person-to-person contact over electronic banking. “There would never be a time when nobody would go to branches as there is still a client segment that prefers person-to-person transactions, where there is a sense of personal touch from the bank, ” she said.

“Clients would always need to go to our branches to open accounts,” she added. -- Ann Rozainne R. Gregorio

Applications for MBOs hit 800 as of June

Applications for MBOs hit 800 as of June

BANKS HAVE continued to take advantage of the Bangko Sentral ng Pilipinas’ (BSP) move to ease bank branching, lodging 800 applications for micro-banking offices (MBOs) with the central bank.

“We have received 800 applications for micro-banking offices as of end-June, with 97 banks making the requests,” said Pia Bernadette Roman-Tayag, BSP head for financial inclusion, in her presentation during the 8th BSP Lecture Series for the Media held in Cebu last Saturday.

“More than half of these are already good to go,” she added.

The latest number of applications was higher by a hundred from the 700 received last May.

The central bank issued Circular 694 in October 2010 to allow banks to establish MBOs or MFOs (microfinance-oriented OBOs).

The new rules introduced a new variant of OBOs or other banking offices, which are permitted to do just non-transactional banking functions such as marketing, accepting of loan applications or hosting of automated teller machines.

MBOs or MFOs are allowed to do more, such as accept micro-deposits; disburse micro-loans and collect payments; sell, market and service micro-insurance products; and receive and pay out authorized remittance transactions.

The central bank hoped the new rules would encourage banks to expand -- particularly to unserved or underserved areas -- without shelling out the large sums they usually do for branches.

Ms. Tayag stressed that the applications for MBOs would help reach 1,635 unbanked municipalities in the country, noting that MBOs need not be attached to a microfinance bank or branch to be able to “offer a complete range of products.”

“This is significant as there are only 40-plus municipalities that are serviced only by OBOs,” she said.

The establishment of MBOs, among other initiatives, would ensure that the country’s financial system is more inclusive, she also pointed out. -- A. S. O. Alegado

Domestic banks strong enough to face fresh crisis

BY D. C. J. JIAO, Reporter

Domestic banks strong enough to face fresh crisis

PHILIPPINE BANKS are strong enough to weather a fresh global downturn that could arise from financial instability in Europe and the United States, Fitch Ratings yesterday said.

“Banks here have reasonable defensive capacity to negotiate downturns,” Fitch senior director Ambreesh Srivastava told reporters
Recent upgrades for local banks, he noted, were based on their “standalone performance,” unlike those in economies such as China, Japan and the United States who get sovereign support.

Fitch raised the credit scores of Ayala-led Bank of the Philippine Islands (BPI) and state-run Development Bank of the Philippines (DBP) last month on the back of an upgrade of the country’s sovereign rating to BB+, which is one notch below investment grade.

BPI and DBP’s support rating floors were also revised upward to BB from BB- along with those of Banco de Oro Unibank Inc., Metropolitan Bank & Trust Co. and Land Bank of the Philippines.

“The banks have strengthened their balance sheets. There is also a stable composition of deposits,” Mr. Srivastava said.

Philippine banks are also well-capitalized, he said, noting that the core Tier 1 capital adequacy ratio (CAR) rose to 12% last year from 11% in 2009, exceeding the central bank’s 10% minimum.

Basel 3, which sets additional capitalization requirements for banks, “won’t be as onerous” for Philippine banks, Mr. Srivastava added.
Fitch also conducted stress tests for the country’s banks and their performance was judged as “fairly satisfactory for the rating segment”. Any economic downturn would likely see only a moderation in the performance of banks, he said.

Fitch, however, noted a “concentration risk” as 70% of banks’ loans were to large and medium firms. Nonperforming loans could “spike” should “a few accounts turn bad together,” it said, although sufficient capitalization can mitigate these risks.

Fitch, which gave Philippine banks a “stable” outlook for the second half of the year and for 2012, identified stronger franchises and sustained good asset quality as triggers for a possible upgrade.

Aggressive expansion due to rapid loan growth and acquisitions, weakened capital positions and deterioration in asset quality could drag down the credit rating of local banks. These risks, however, “appear low at this stage,” Fitch said.