PHILDEVFINANCE (old news): August 2011

Wednesday, August 31, 2011

Bangladesh microfinance lacks product innovation – BDI Review

Microfinance Focus, August 26, 2011: The pre-eminence of Bangladesh in
the microfinance world has been diluted by its MFIs' relatively slow
adaptation of microcredit products to serve the needs of clients more
effectively, says the 'Bangladesh Microfinance Review' released by BRAC
Development Institute (BDI) in Dhaka recently.

Its diversification from the predominance of credit to an increase of
deposit services has been hesitant and the adoption of other financial
services has been slow relative to markets such as Kenya and the
Philippines in the case of payments and to South Africa and India in the
case of microinsurance.

Prepared by Sanjay Sinha, M-CRIL, the report highlights that the active
borrower numbers and portfolio have increased steadily over time at an
average annual growth rate of 11.6% from 2005 to 2008 consisting of a
spurt to 2007 (beginning in 2003) and a slowdown to 3.7% in 2008. This
was followed by a decline of 9.5% in the borrower accounts serviced by
the largest 3 MFIs (L-3) in 2009.

The greatest fall in active borrower accounts is in the case of ASA with
a drop of 32% between 2008 and 2009 on account of a rationalisation to
establish the real number of unique clients. The other two large MFIs,
Grameen and BRAC also reported minor changes in their client numbers.

The contribution of microfinance to financial inclusion is substantial.
The $2.72 billion credit of the microfinance sector amounts to 7.33% of
the $37.1 billion outstanding in the country's financial system.

The report points out that the (almost) equally large Indian
microfinance sector contributes just 0.64% to the Indian financial system.

Average loan balance has increased in real terms over the years from $71
per borrower account in 2005 to $115 in 2009 increasing steadily from
15% of GNI per capita in 2005 to 20% in 2009, thereby making a greater
contribution to the economic lives of their clients than five years ago.

However, the savings balance per depositor has, until recently, been
very low (less than 8% of GNI). Over the past couple of years, however,
this has grown fast largely on account of an increase in the deposits of
Grameen Bank to $152 per depositor, whereas average deposits in the
other sample MFIs have actually gone down from $44 in 2005 to $31 in 2009.

MFIs are diversifying through the provision of micro-insurance services,
with 40% providing insurance cover for various purposes. A little more
than half (55% )of the insurance policies had death cover, another 43%
were loan insurance and the remaining 2% were for varied purposes such
as livestock, health and accident cover.

MFIs provide employment to 242,000 people and, thereby, sustenance to
over a million with a high staff productivity of 252 accounts per staff
member for the L-3 while the other seven (O-7) have 131 borrower
accounts per staff member. This compares with the MIX Asia benchmark of
163 accounts per staff member. The gross loan portfolio of the L-3 has
increased steadily over the last five years while their staff numbers
have gone down. BRAC staff productivity in particular has increased by
over 60% over the past two years.

Cost per borrower is one of the lowest worldwide and operational
efficiency is high. Bangladesh ($14) along with India and Nepal have
among the lowest costs per borrower in comparison with the global MIX
benchmarks of $139 and the Asian median of $51 in 2008 and $27 in 2009.
The average Operating Expense Ratio (OER) of the L-3 is around 11% and
is comparable only to the average for MFIs in India and Nepal and much
lower than the rest of the world.

The portfolio yield, has reduced from nearly 26% to just over 23% over
the past few years while OER has been 11.5-13.5%. The average yield of
MFIs in Bangladesh is much lower than the Asian and Global MIX medians
of 29.1% and 31.1% respectively and also in comparison with the Indian
weighted average yield of the order of 27%. Excluding Grameen Bank
(19.6% yield in 2009) the consolidated yield for the leading MFIs
increases to 25.1% but even that is well within the interest cap
announced by the MRA.

The cap is 27% calculated on a declining balance basis with a minimum of
50 weekly instalments. Since MFIs in Bangladesh have traditionally
charged on a flat basis, this translates to an interest cap of nearly
14.5% flat – not 13.5% as is commonly assumed – with a couple of weekly
rests in payment resulting from festival holidays; depending on when the
2 or 3 rests are taken. The financial cost ratio reflects the cost of
deposits (and borrowed funds in a few cases). Without the relatively
high interest paid by Grameen Bank on deposits, this reduces to under 7%
for the leading MFIs.

But portfolio quality is not so impressive by international standards
with a high and variable long term performance of Bangladesh MFIs around
the 5-6% level. The higher PAR for O-7 in 2007 is mainly attributable to
Cyclone Sidr and the major floods which affected the country during that
year. The apparently lower PAR for the largest MFIs in 2007 is mainly
attributable to the rescheduling and additional disbursements undertaken
by them as a result of the disruption caused to their clients by the
cyclone.

The Loan Loss Reserve (LLR) is a provision made from income in order to
mitigate the effects of credit risk for MFIs. The adequacy of the
reserve must, therefore, be related to the level of risk in an MFI. The
largest MFIs have reserves that either exceed or nearly equal their
portfolio at risk. Generally, LLR at 75% of PAR is sufficient to cover
all possible risks including both the risk posed by natural calamities
and the risk of over-indebtedness resulting from multiple lending.

Member deposits and internal accruals play a huge role in the financing
of MFIs. At their high level of maturity, the large MFIs in Bangladesh
have substantial cumulative client (member) deposits and internal
sources of financing for their credit activities. This is in complete
contrast to MFIs in India, where there has been a substantial focus on
debt financing and other countries such as those in Africa where donor
funds still play a significant role in microfinance.

Member deposits have historically been accumulated in Bangladesh as a
mandatory condition of a microfinance loan and, as a result, have
reached nearly 47% of total funds. In recent years, however, Grameen
Bank has offered a voluntary deposit facility as well, thereby
generating a substantial volume of funds.

The aggregate numbers (above) however hide important differences. The
segmentation of MFIs in 2009 on the basis of size shows that the L-3,
particularly Grameen Bank, now rely more on deposits as funding sources
whereas the O-7 raise their funds chiefly from external sources such as
commercial banks and PKSF.

The largest Bangladesh MFIs use their assets in a relatively efficient
manner compared to international norms. The net loan portfolio of O-7 is
73% of total funds, which is much higher than that of both Grameen Bank
and BRAC, while ASA also has a high proportion of funds in portfolio.
The main under-utilization is by Grameen that has just over 50% in
portfolio with as much as 39% in cash (albeit partly because of the
higher liquidity required for servicing its voluntary savings
products). Cash holdings of 16.5% and above, however, are high by
international standards.

During 2005 and 2006, the MFIs in the sample were running very
profitable microfinance operations. However, there was a drastic
reduction in return on assets (RoA) for the Top3 MFIs from an average of
6.3% to 2.4% in 2009. As expected, a dip in returns occurs in 2007 for
both L-3 and O-7. While the profitability of the O-7 recovered to 2.3%,
almost pre-calamity levels, the L-3 MFIs have not recovered their
profitability to pre-2007 levels.

From the detailed breakdown of the cost and return structure by
component it is clear that Grameen has a substantial portfolio deficit
due to its high financing cost. The two other MFIs in the L-3 as well
as O-7 MFIs actually have surpluses in their 2009 microcredit portfolio
operations but these are lower than their returns on assets indicating
that investment income has a significant impact on profitability; an
impact that is substantial in the case of Grameen Bank.

The efficiency and profitability of MFIs in Bangladesh suffered a
setback in 2007 and 2008 due to Cyclone Sidr. Subsequently the L-3 MFIs
took prudent measures including high loan loss provisioning to cope with
high portfolio risk. So the profitability performance of the leading
MFIs in Bangladesh appears to be reasonable, and so does the interest
rate cap (27% on declining balances equivalent to 14.5% flat) now
imposed on the microfinance sector; though its impact on the
availability of microfinance services in less well served areas and its
impact on loan size (relative to the needs of the poorer sections of the
potential microfinance client group) remains to be seen.

In the context of current developments in the political economy of
microfinance in Bangladesh and the government's action against Prof
Yunus, however, the future remains uncertain, the report concludes.

--
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LBP income up 24% to P6.2B as of end-July

By: Michelle V. Remo
Philippine Daily Inquirer

11:54 pm | Tuesday, August 30th, 2011

Land Bank of the Philippines generated a net income of P6.2 billion as
of July, growing by 24 percent from P5 billion in the same period last year.
LBP is thus confident that it would be able to exceed its net income
target of P8.5 billion for the whole of 2011.
"Definitely, we [the bank] will exceed that," said Landbank president
Gilda Pico.
Ms. Pico said Landbank's income growth in the first seven months was
driven mainly by its lending activities, particularly to the
agricultural sector and enterprises in the rural areas.
Pico said loans extended to small farmers and fishers in the seven
months to July reached P16.6 billion, up by 33 percent from only P12.5
billion in the same period last year.
She said the bank was also generating income from its other businesses,
such as remittance services.
The bank recently forged a partnership with Italian post office Poste
Italiane to expand the coverage of its remittance service.
Under the partnership, Filipinos based in Italy may send their
remittances to the Philippines through any of the 14,000 branches of
Poste Italiane.
Once a remittance is sent, the money may be withdrawn by recipients here
through Landbank, which has 900 automated teller machines all over the
country.
The partnership is aimed at servicing Filipinos working in Milan, Rome
and other key cities in Italy, where many Filipinos live and work.

Tuesday, August 30, 2011

DBP to tap cooperatives for lending to farm sector

Published : Monday, August 29, 2011 00:00 Article Views : 306 Written by
: LAILANY P. GOMEZ REPORTER

DEVELOPMENT Bank of the Philippines said it will boost support to the
agricultural sector with a lending program through conduit banks.

The Agricultural Credit Policy Council-DBP Cooperative Agricultural
Lending Program Facility will fund stable cooperative banks and
cooperatives that would extend agricultural loans to small farmers and
fisherfolk in the countryside, the state lender said in a statement.

The credit facility will provide production and agricultural
microfinance loans for production of crops, livestock, poultry, and
fisheries. It will also provide financing for on- or off-farm/non-farm
activities of agricultural households using the household cash flow
lending approach,Francisco Del Rosario Jr., DBP president, said.

Eligible borrower-retailers for this facility are cooperatives and
cooperative banks with at least two years profitable operations.

Small farmers and fishermen or their household members engaged in
farming no more than seven hectares of land, or engaged in backyard
poultry/ livestock raising, may avail themselves of loans under this
program.

Similarly, eligible end-borrowers include those working in agricultural
lands and projects, operating fishing vessels of no more than three tons
capacity, operating fishponds of less than five hectares or fish cages
of less than 400 square meters, working in fishing boats, fishponds or
fish processing establishments and those who are engaged in small-scale
fish and other aqua production, processing, and distribution.

Loan term will run for three years while the loan amount will be based
on the amount established and proposed by the retailer and approved by DBP.

Monday, August 29, 2011

Manulife leverages investment-linked products

MANULIFE Philippines is seeking to make its investment-linked insurance
products more competitive against the options offered by other insurers
and even banks by removing its medical requirements.

"There is a growing number of people looking for investments. We are
offering them not just investments, as banks can provide, but these come
with insurance protection as well, without the hassle of the medical
requirements," Manulife Chief Operations Officer Margarita B. Lopez said
in a phone interview on Friday.

Insurers require clients to answer medical questionnaires and comply
with health requirements in order to get life insurance. This allows the
company to build in the risk to the cost of the insurance policy, as
well as identify high-risk individuals who are uninsurable.

Investment-linked products, however, have a small insurance component,
Ms. Lopez pointed out.

"A small portion of the premium goes to insurance, and most of it goes
to the investment vehicle. For most of our clients who purchase these,
their primary reason is they want to invest," she said.

"This is us listening to our clients who don't want to be hassled or who
are not comfortable with submitting their medical records and going to
check-ups," Ms. Lopez explained further.

The guaranteed insurability endorsement (GIE) program, which removes
these health requirements, cover Manulife's single-pay investment-linked
insurance products, Affluence and Affluence Max.

These policies allow clients to invest their premiums in their choice of
equity or fixed-income funds and in life insurance.

According to Manulife's latest figures, these investment-linked products
comprise close to a quarter of the company's business, Ms. Lopez said.

The GIE is expected to boost Manulife's competitiveness, now that it is
easier for clients to do business with the insurer, Ms. Lopez said.

"We hope this can increase people's understanding of the financial
instruments we have on offer. A large portion of the people who
hesitated from buying insurance before can now reconsider," she explained.

However, Ms. Lopez assured that the GIE program will not unnecessarily
expose Manulife and its policyholders to risk, with the medical
requirements of certain products removed.

"We have studied the trends over the years, and we saw that if we offer
the products to everyone, not all of them will be high-risk. It's just a
game of balancing the risks," she said.

In addition, Manulife also modified the death benefits of the Affluence
products under the GIE program to take into consideration the cause of
death and the time of death from the policy issuance date.

"If the insured passes away during the first two years of the policy, he
or she will have scaled-down benefits. The policy has not been in-force
for very long," Ms. Lopez said.

"But if the death occurs after the two-year mark, the chances are the
insured was not a high-risk individual, and he or she would get more
benefits," she explained.

Under the GIE program, clients aged 0 to 50 can pay up to P4 million in
premiums for their investment-linked insurance products. Clients aged 51
to 70 can invest up to P2 million.

Manulife Philippines is the country's seventh largest life insurance
company, with P3.975 billion in premium income last year, according to
the latest data of the Insurance Commission.

It is a wholly-owned domestic subsidiary of Manulife Financial, a
Canadian-based financial services group operating in 22 countries and
territories worldwide. -- Diane Claire J. Jiao

Green Bank official to steer EastWest’s rural bank

Green Bank official to steer EastWest's rural bank

EAST WEST Banking Corp. (EastWest Bank) has appointed Joseph Omar O.
Andaya, former president and chief executive of Green Bank, Inc. as
chairman of the rebranded rural bank through which it will enter the
microfinance business.

"We requested Mr. Andaya to be the chairman of the rebranded rural
bank," EastWest Bank President and Chief Executive Officer Antonio C.
Moncupa told BusinessWorld in an email last Wednesday.

Mr. Andaya, in a separate e-mail, said: "I accepted the offer as this
would give me the opportunity to be part of the team that would provide
direction to the bank as it moves to the next level of serving Filipinos
in the countryside and market segments such as microentrepreneurs, small
and medium enterprises, farmers and fisherfolk."

Mr. Andaya began to serve as chairman last Aug. 25 during the election
of new directors.

EastWest Bank, the banking arm of the Gotianun's Filinvest Development
Corp., last Tuesday said it had obtained the central bank's approval for
the purchase of Butuan City-based Green Bank.

Filinvest, in a disclosure to the stock exchange last Thursday, said
EastWest Bank would pay a total P175 million to acquire the rural bank.

The principal consideration for the price -- P7.52 for each of the
bank's 23.3 million shares -- was Green Bank's net asset value as well
as its 46 branches and 94 micro banking offices, it said.

Green Bank would add P3 billion to EastWest Bank's P83.1 billion in
consolidated assets as of end-June.

As of Thursday, EastWest had paid Green Bank P148 million for an 85% stake.

"EastWest Bank will do a tender offer at the same price for the
remaining shares of stock it does not own yet," Filinvest added.

Mr. Moncupa said Green Bank would be rebranded and some of its branches
would be turned into EastWest Bank branches.

He did not say what Green Bank's new name would be or how many of the
rural bank's branches would be turned into EastWest branches, although
the central bank has given it the green light to convert 41 of the 46 of
the rural bank's branches.

Mr. Moncupa also said EastWest Bank would retain Green Bank's 700 employees.

EastWest would venture into microfinance -- a business other large banks
also have ventured into to take advantage of high returns -- through the
rebranded rural bank. Its more than one hundred branches nationwide
could serve as "payment centers" for the microfinance business.

"For this year, we don't expect any material contribution from Green
Bank as we will devote the remainder of the year to fine-tune our plans
and to the integration of branches into EastWest," Mr. Moncupa said,
when asked how Green Bank would contribute to EastWest's earnings.

Asked about his plans for the rural bank, Mr. Andaya said the rural bank
would "focus on providing more access to affordable financial services
in the countryside."

Green Bank is the largest rural bank in the Caraga region in asset
terms. It was founded as the Rural Bank of Nasipit in 1975.

The Rural Bank of Nasipit was saddled with soured loans, until it was
acquired by Ismael E. Andaya -- Joseph Omar's father -- and nursed back
to financial health. Its headquarters was moved to Butuan City and it
was renamed as the Green Bank of Caraga.

Joseph Omar took over as bank president in 1999 and the Green Bank of
Caraga was renamed Green Bank, Inc. in 2006.

Green Bank is EastWest Bank's first acquisition after snagging the local
subsidiaries of the American International Group, Inc. (AIG) in 2009.

EastWest acquired AIG Philam Savings Bank, Inc., Philam Auto Finance and
Leasing, Inc., and PFL Holdings, Inc. when these units were put up for
sale to help pay for the lifeline the US government extended AIG during
the financial crisis.

Prior to this, EastWest Bank bought Ecology Savings Bank, Inc. from the
Equitable PCI Bank in 2003. -- from a report by Ann Rozainne R. Gregorio

DBP, ACPC set up new credit facility

IN A bid to increase its assistance to farmers and fisherfolk, state-run
Development Bank of the Philippines (DBP) has set up a new P200-million
loan facility together with the Agricultural Credit Policy Council.

The Cooperative Agricultural Lending Program (CALP), which will run for
two years, will extend loans to cooperatives and cooperative banks,
which in turn, will extend microfinance loans to qualified farmers and
fisherfolk.

"DBP is eyeing to release P147 million under the loan program before the
end of the year," a bank official, who requested anonymity, said in a
text message yesterday.

Cooperatives and cooperative banks that want to apply for loans under
CALP must have notched at least two years of profitable operations.

Farmers and fisherfolk -- or their household members -- who wish to
borrow from these institutions must have the following qualifications:
• farming a plot of land smaller than seven hectares;

• engaged in backyard poultry or livestock raising;

• operating fishing vessels with capacity of not more than three tons;

• operating fishponds of less than five hectares or fish cages of less
than 400 square meters;

• working in fishing boats, fishponds, or fish processing
establishments; and

• engaged in small-scale fish production, processing and distribution.

"[The loan facility] will provide production and agricultural
microfinance loans for the production of crops, livestock, poultry and
fisheries. It will also provide financing for the activities of
agricultural households," DBP President and Chief and Executive Officer
Francisco F. Del Rosario, Jr. was quoted as saying in a statement.

A loan can run from one to three years and the amount will depend on the
amount proposed by a cooperative or cooperative bank and approved by
DBP's Small and Medium Enterprises unit.

DBP has conducted briefings in DA-DAR-DENR (Department of Agriculture,
Department of Agrarian Reform, Department of Environment and Natural
Resources) convergence areas, including Quezon Province, Camarines Sur,
Iloilo City, San Jose in Antique, Cauayan in Isabela and Ormoc City.

Already, eight cooperatives and 21 cooperative banks have expressed
interest in tapping-- funds under CALP. -- A. R. R. Gregorio

Bill to extend state bank’s life by 50 yrs

Bill to extend state bank's life by 50 yrs

A BILL filed at the Senate seeks to extend the corporate life of
state-run Land Bank of the Philippines, the country's fourth largest in
terms of assets, by another 50 years after this expires two years from now.

Landbank branch in Makati City -- Jonathan L. Cellona

Senator Sergio R. Osmeña III, chairman of the committee on banks,
financial institutions and currencies, has filed Senate Bill (SB) No.
2944 that will extend Landbank's corporate life by 50 years and extend
this further by another 50 years.

SB 2944 seeks to amend Section 74 of Republic Act (RA) No. 3844 or the
Agricultural Land Reform Code that created the bank. It read: "… The
legal existence of the Bank is extended for a period of fifty (50) years
from the expiration of its original term on 8 August 2013, renewable for
another fifty (50) years."

RA 3844 was approved on August 8, 1963.

Mr. Osmeña, in a text message yesterday, explained it is important to
extend Landbank's corporate life as the bank "not only funds the
agrarian reform program but is also the depository bank of government
entities and agencies. "

"Like any corporate entity, it signs long-term contracts with various
lenders and borrowers. These must be respected. When corporate life
ends, it loses authority to transact business and existing clients
suffer," he added.

He also said he chose 50 years "to afford [the bank] the flexibility to
sign long-term loans or to issue long-term bonds, and also, to signal to
the public that this institution will be [in] business indefinitely."

In SB 2944's explanatory note, Mr. Osmeña also pointed out that Landbank
also collects taxes and fees for government agencies and is the
principal disburser of funds under the government's conditional cash
transfer program.

Most importantly, it "provides development financing to farmers,
fisherfolk cooperatives, microenterprises, small and medium enterprises,
banks and local government units."

Mr. Osmeña said he expected the bill to be passed early next year.

At the House of Representatives, party list Rep. Cresente C. Paez,
representing the COOP NATCCO, has filed House Bill No. 4621, a parallel
bill aiming to extend the corporate life of Landbank by 50 years.

Messrs. Osmeña and Paez's bills are pending at the committee level.

Landbank earned P5.52 billion in the first half, 15% more than in the
same period last year. -- Rouchelle R. Dinglasan

Banks’ resources up to P7.07T

Banks' resources up to P7.07T

By: Michelle V. Remo

Philippine Daily Inquirer

12:10 am | Monday, August 29th, 2011

The resources of the country's banking sector grew further in May,
bolstered mainly by rising deposits that mirrored the improving savings
capacity of Filipino households and enterprises.

According to the central bank, the combined resources of universal,
commercial, thrift and rural banks in the country amounted to P7.07
trillion as of the end of May this year, rising by nearly 7 percent from
P6.61 trillion a year ago.

The Bangko Sentral ng Pilipinas said individuals and corporations were
placing more deposits in banks, mainly due to rising income and
confidence of the public in the banking sector. The bulk of the
resources were owned by universal and commercial banks. These amounted
to P6.32 trillion, up by 7.7 percent from P5.87 trillion a year ago.

With their growing resources, universal and commercial banks were urged
by the government to help the economy grow by funding big-ticket, public
infrastructure projects being pushed by the government under the
Public-Private Partnership (PPP) framework.

Under the PPP, the government invites private corporations to invest in
the projects and the banks to provide the financing.

The thrift banking sub-sector accounted for P580 billion of the total
resources as of end-May. This was higher by 3.9 percent from P558
billion in the same period last year.

Lastly, the rural banking group registered P178.21 billion in resources,
about the same as the level a year ago.

Earlier, the Bankers Association of the Philippines (BAP), the umbrella
organization of universal and commercial banks, said there was strong
interest among its members in lending more to individual borrowers and
enterprises.

BAP president Aurelio Montinola III had said the banking sector had a
favorable outlook on its financial performance and ability to expand
credit largely because of a generally well-behaved economy.

The central bank earlier reported that the outstanding loans of
universal and commercial banks in the country amounted to P2.54 trillion
as of end-May, up by 18.8 percent from P2.14 trillion as of the same
period a year ago.
The credit growth rate in May was the fastest since April 2009.

Sunday, August 28, 2011

BSP files 95 cases against directors, officers of erring banks

By LEE C. CHIPONGIAN

August 28, 2011, 8:00am

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) has filed a
total of 95 cases against directors and officers of banks placed under
receivership and liquidation as of the end of the first quarter this year.

Documents submitted to the Monetary Board show that the most common and
virulent cases are syndicated estafa, estafa through falsification of
commercial and public documents, and violations of Republic Act No. 7653
or The New Central Bank Act. Of the 95 cases, 50 were cases filed with
courts and 44 with the Department of Justice.

With the exception of Urban Bank and Orient Bank, most of the filed
cases were against rural banks and savings and loans associations. Cases
slapped on recently padlocked Banco Filipino Savings and Mortgage Bank
were not included in the list of 95 cases.

In 2010, the BSP has P1.05 billion worth of assets and liabilities under
its administration from all the closed banks, non-banks, and other
closed financial institutions.

In a liquidation process, the administrator has to dispose or sell the
assets to pay off the closed banks, non-banks and financial
institutions' creditors. A bank was considered insolvent when its
liabilities exceed assets. The shortfall was addressed by selling the
assets.

The Philippine Deposit Insurance Corp. (PDIC) was the liquidator for
regulated banks and the liquidation courts for other closed financial
institutions.

In some cases, the BSP appoints another liquidator pending court cases.
PDIC has the mandate as the statutory receiver and liquidator of closed
banks.

PDIC assistance to closed banks was in the form of liquidity assistance,
purchase of assets and assumption of liabilities. If it could not
provide or if it has no available funds for these purposes, PDIC could
apply for loans from BSP to finance assistance to banks.

Last May, the BSP started a review on a new set of policies on how
problematic banks will be placed under receivership.

Thursday, August 25, 2011

BPI offers high-tech client-assist service

SATURDAY, 20 AUGUST 2011 17:12 RIZAL RAOUL REYES / CORRESPONDENT

INNOVATION is part of the corporate culture of the Bank of the
Philippine Islands (BPI). As part of its tradition in innovative
banking, BPI recently introduced an innovation with a very classy
name—BEA, otherwise known as the BPI Express Assist (BEA).
Natividad Alejo, BPI senior vice president and head of the consumer
group, said the bank has rolled out BEA as early as the first half of
2010 initially with 10 branches nationwide. After first rollout, 30 BPI
branches received their own BEAs.

At the end of 2010, a total of 100 BPI branches have received their own
BEA systems.

She said BPI is aiming to install BEA to 500 branches this month in line
with the bank's 160th anniversary.

"BPI has always been known for being a step ahead in terms of innovative
banking technologies and pioneering best practices that have become the
standard in local banking. BEA was out of BPI's aim to provide an easier
and more convenient banking experience for our clients," she said.

According to BPI, BEA is the country's first fully automated transaction
assist platform that allows bank customers to enter transaction data and
needed service on touch-screen machines to a wide range of transactions
including cash and check deposits, withdrawals, bills payments, Bureau
of Internal Revenue and Social Security System payments. After finishing
the transaction procedures at the BEA, a queue number is generated and
customers can sit and relax while waiting for their turn at the teller
counter. The transaction is automatically transmitted to the teller,
ensuring accuracy as well as reducing processing and waiting time. The
queue number is called in an electronic manner, with the number
appearing in television screen and showing which teller should the
customer go.

Alejo said the bottom line of introducing BEA is to enable customers to
conduct transactions in an easy manner.

"BEA not only automates standard bank transactions but, more important,
streamlines processes and cuts transaction time for customers. With
this, BEA provides customers with a much better banking experience by
eliminating long queues at the banking counter, as well as eradicating
the need to use deposit, withdrawal and payment slips," she said.

The introduction of BEA has brought a high degree of convenience to the
customers and, at the same, provided the bank a bigger time to
cross-sell several BPI products. "This award-winning innovation
complements BPI's thrust to be more flexible, efficient and
environment-friendly, as it continues to lift industry standards in the
local banking sector today," she said.

Wincor Nixdorf is the technology partner of BPI in the BEA project.

In Photo: Bank of Philippine Islands officials, led by (from left) Mita
Gozar, VP and head of personal interface; Ron Bello, Unibank branches
support department head; Nabbie Alejo, SVP and head of consumer-banking
group; Jojo Alejo, SVP and chief marketing officer; Dada Trillo,
division/southLuzon branches and preferred banking head; and Olga Ang,
Makati central area business director, show off the BEA terminals during
the launch event held recently. (Roy Domingo)

Banks boost kids’ savings project

Banks boost kids' savings project

THURSDAY, 25 AUGUST 2011 19:14

SEEING the importance of what saving up can do in building their future,
12 of the country's major banks have teamed up to support the Kiddie
Account Program (KAP) jointly promoted by the Bangko Sentral ng
Pilipinas (BSP) and the Bank Marketing Association of the Philippines
(BMAP).

The KAP was designed to encourage children 12 years and below to develop
the habit of saving money regularly via easy access to the participating
banks' deposit facility.

BDO Unibank Inc., the Bank of the Philippine Islands, Allied Bank, China
Bank Savings Inc., Development Bank of the Philippines, East West
Banking Corp., Maybank Philippines Inc., Philippine National Bank,
Philippine Savings Bank, Philippine Veterans Bank, RCBC Savings Bank,
and Security Bank Corp. have all committed to assist children with at
least P100 to open savings accounts with them.

BSP Gov. Amando M. Tetangco Jr. lauded the banks' action, saying that
with their combined network of about 3,000 branches, the KAP makes the
opening of savings account affordable and convenient in many parts of
the country.

The BSP is actively working together with the Department of Education to
integrate the concept of savings and money management in the latter's
elementary education curriculum.

BDO president Nestor V. Tan said this effort is part of the ongoing
campaign of the bank to provide products for small depositors. Even
before the KAP, BDO has been offering, among others, the Junior Savers
Club, a fixed interest-bearing savings deposit for kids 12 years and below.

Attending the launch of the banks' joint program were advocates of the
KAP. These included Mai Sanggalang, Bennett Zerrudo, Lon Fernandez,
Emmanuel Tuazon, Maricris San Diego and Mike Villareal, and Jude
Montinola, BMAP directors; Mary Jean Ibuna, BMAP vice president; Allied
Bank president Anthony Chua; BDO president Nestor V. Tan; Philippine
Savings Bank president Pascual Garcia III; Philippine Veteran's Bank
president Ricardo Balbido Jr.; Security Bank president Albert Villarosa;
RCBC Savings Bank president Rommel Latinazo;

DBP senior executive vice president Ma. Theresa Quirino; BPI president
Aurelio Montinola III; China Bank Savings Bank president Alberto Ramos;
BSP Gov. Amando Tetangco Jr.; BMAP president Allan Tumbaga; East West
Bank president Antonio Moncupa Jr.; Maybank president Ong Seet Joon; and
PNB president Carlos Pedrosa.

EastWest Bank enters microfinance business

EAST WEST Banking Corp. (EastWest Bank) is acquiring the Green Bank of
Caraga, gaining an entry into the lucrative microfinance business.
In a statement, EastWest Bank said it has obtained the approval of the
Bangko Sentral ng Pilipinas for the purchase. It still needs to get the
green light of the Securities and Exchange Commission.

"This is another a milestone for EastWest Bank as this acquisition marks
our full entry into the small and microfinance arena," EastWest Bank
President and Chief Executive Officer Antonio C. Moncupa was quoted as
saying in the statement.

EastWest, seventeenth largest in asset terms as of the first quarter,
said it "plans to pursue the successful microfinance model of Green Bank
even as it plans to integrate most of Green Bank's branches into EastWest."

Mr. Moncupa told BusinessWorld through a text message yesterday, "At
this point, we don't know yet the exact number of Green Bank branches
that will be converted to EastWest Bank branches, but we have the
approval [from the BSP] to convert up to 41 of the 46 Green Bank branches."

EastWest, the banking arm of the Gotianun's Filinvest Development Corp.,
is focused on the consumer banking business while Green Bank, as most
rural banks, is engaged in microfinance, which involves the entension of
loans to the poor.

The acquisition of Green Bank will add P3 billion to EastWest Bank's
P83.1 billion in consolidated assets as of end-June and 46 branches in
Luzon, Visayas and Mindanao to its 117 nationwide.

Green Bank, based in Butuan City, is the largest rural bank in the
Caraga region in asset terms. It will be EastWest Bank's first
acquisition after snagging the local subsidiaries of the American
International Group, Inc. (AIG) in 2009.

The bank acquired AIG Philam Savings Bank, Inc., Philam Auto Finance and
Leasing, Inc., and PFL Holdings, Inc. when these units were put up for
sale to help pay for AIG's debts from the US government. AIG, then the
parent firm of the Philippine American Life and General Insurance Co.,
got a lifeline from the US government at the height of the financial crisis.

Prior to this, EastWest Bank bought Ecology Savings Bank, Inc. from the
Equitable PCI Bank in 2003.

Other big banks have entered the field of microfinance, noting the
massive returns. The Rizal Commercial Banking Corp. bought Pres.

Jose P. Laurel Rural Bank, Inc. based in Tanauan City and Merchants
Savings & Loan Association, Inc. in Mindanao (renamed into Rizal Micro
Bank) while the Bank of the Philippine Islands set up the BPI Globe BanKo.

EastWest Bank's net income rose by 3% to P884 million in the first
semester despite a slide in trading gains.

Agri-Agra guidelines out

BANKS WILL need to set aside at least 25% of their total funds for
lending to farmers, fisherfolk and agrarian reform beneficiaries
beginning next month after the government issued the implementing
guidelines of the Agri-Agra Reform Credit Act yesterday.

The rules state that banks should allocate at least 25% of their total
loanable funds to the agriculture sector, of which 10% should go to
agrarian reform beneficiaries.

"Excess compliance in the 10% agrarian reform credit may be used to
offset a deficiency, if any, in the 15% other agricultural credit in
general, but not vice versa," the rules read.

The implementing rules and regulations (IRR) drafted by the Bangko
Sentral ng Pilipinas (BSP), the Department of Agriculture (DA) and the
Department of Agrarian Reform (DAR) will take effect 15 days after its
publication yesterday.

Republic Act (RA) 10000 or the Agri-Agra Reform Credit Act of 2009,
approved by then Pres. Gloria Macapagal-Arroyo on February 23, 2010,
amended Presidential Decree 717 signed by then President Ferdinand E.
Marcos on May 29, 1975.

The rules also state the BSP, in consultation with the DA and the DAR,
will prepare the guidelines on the computation of total loanable funds
and how banks can comply with the law on a consolidated or group-wide basis.

BSP Deputy Governor Nestor A. Espenilla, Jr. said in a text message
yesterday the circulars covering the computation of total loanable funds
and banks' consolidated compliance will be released "by Friday."

The rules state that banks can directly comply with the requirements of
RA 10000 through the actual extension of loans to qualifed borrowers or
the purchase of eligible loans on a "without recourse" basis from other
banks.

Alternative modes of compliance are also available:

• investment in bonds issued by the Development Bank of the Philippines
and the Land Bank of the Philippines that have been declared eligible by
the DA, the proceeds of which should be used for lending to the
agriculture and agrarian reform sectors;

• investment in other debt securities that have been declared eligible
by the DA or any agency authorized by the DA;

• subscription to shares of stock in accredited rural financial
institutions (preferred shares only), the Quedan and Rural Credit
Guarantee Corp. or the Philippine Crop Insurance Corp.

• investment in the special deposit accounts of rural financial
institutions that are accredited by the BSP;

• wholesale lending to accredited rural financial institutions;

• rediscounting by universal and commercial banks of agriculture and
agrarian reform credits;

• extension of loans for the construction and upgrade of infrastructure,
including farm-to-market roads and post harvest facilities; and

• grant of loans to warehouses or millers or wholesalers accredited by
the National Food Authority.

Banks that fail to comply with the requirements of the law will have to
pay a penalty equivalent to 0.5% of their non-compliance or
under-compliance, which will be computed on a quarterly basis.

"This is something we have to live with because it is the law," Chamber
of Thrift Banks Executive Director Suzanne I. Felix said in a text
message yesterday.

To be fair to the BSP, she said, banks were consulted in the preparation
of the IRR.

For his part, Banco de Oro Unibank Inc. President Nestor V. Tan said it
would be difficult to meet the required lending to the agriculture and
agrarian reform sectors.

"It is not for lack of trying. I don't think the loan demand from this
sector is big enough to accommodate 25% of the industry's loanable
funds," he said. -- Louella D. Desiderio

Wednesday, August 24, 2011

Branching out to where no bank has gone before

By: Michelle V. Remo
Philippine Daily Inquirer
1:06 am | Wednesday, August 24th, 2011

In a bid to widen people's access to banking services and support the
growing funding needs of the economy, the Bangko Sentral ng Pilipinas
has issued regulations that will effectively allow banks to open more
branches.
According to the central bank, the time has come to allow more
competition among banks to meet the twin objectives of meeting the
rising demand for banking services in wealthy cities and encouraging
banks to put up branches in lower-income areas to help spur economic
activities there.

No more restricted areas

Under the first regulation, the BSP lifted the restriction to put up
branches in the eight highest-income-earning cities in Metro Manila:
Makati, Mandaluyong, Manila, Parañaque, Pasay, Pasig, Quezon and San Juan.

The lifting of the restriction comes in two phases. Under the first
phase, universal and commercial banks with less than 200 branches as of
end-2010 may expand in the eight cities. Under the second phase, which
starts on July 1, 2014, all universal, commercial and thrift banks may
put up branches in the same areas.

BSP Governor Amando Tetangco Jr. said the move is in response to the
growing needs of the eight key cities for more banking services as
economic activities in these areas increase.

The previous restriction on bank branching was meant to avoid excessive
competition among banks, which had a tendency to concentrate on
high-income areas to take advantage of income opportunities.

But Tetangco said that, as local economies expand further, so should the
supply of banking services.

In areas where more and more businesses are being put up and economic
activities are rising, there must be more banks to meet the demand for
loans and other financial services.

He said it's time to allow more competition.

"Liberalization will further improve the competitive environment, which
should translate to better financial services to the public. The new
policy also aims to encourage banks to further scale up and improve
their operations in order to be competitive," Tetangco said.
Liberalization for rural banks

Under the second regulation, rural banks, which are mandated to provide
services in the countryside, are now allowed to put up more than one
branch in Metro Manila to cater to the growing demand for microfinance
services in urban areas.

According to regulators, while there are quite a number of large banks
operating in urban areas, they do not cater to the funding needs of
microenterprises. Most commercial banks tend to focus on large companies
and small and medium enterprises (SMEs).

The BSP believes that, to sustain robust growth of the economy, it will
be necessary to boost the micro-business sector, which accounts for bulk
of the number of enterprises in the country.

Providing microenterprises with adequate financial and technical support
is one of the most effective ways to reduce poverty incidence, which has
remained significant even though the economy has been growing over the
past decade.

It appears that only the middle-and high-income earners are the ones
benefiting from the economic upturn to the detriment of the poor.
The BSP said that with more rural banks providing financial services to
microenterprises, it would be easier to attain the goal of broad-based
growth of the economy.

More countryside services

The move of the BSP to allow rural banks to expand to urban areas is
complemented by its move to encourage large banks to operate in rural
communities.

Under the third regulation, the central bank has cut by half the
processing fee charged on universal/commercial banks or their subsidiary
thrift banks to put up branches in third-to sixth-class municipalities.

Industry players welcome the liberalization of bank branching, saying
that this will give them opportunities to take advantage of the growing
economy and generate more income.

Alex Buenaventura, president of One Network Bank, one of the biggest
rural banks in the country based in Mindanao, said the liberalization
would encourage rural banks to expand outside their usual areas of
operation.

He said rural banks would appreciate a level playing field, gaining the
chance to serve not only microenterprises but bigger corporate clients.

Tuesday, August 23, 2011

EastWest gets BSP OK to acquire rural bank Green Bank

08/23/2011 | 11:55 AM

Gotianun-owned EastWest Bank has received approval from the Bangko
Sentral ng Pilipinas for the acquisition of rural bank Green Bank of Caraga.

EastWest told the Philippine Stock Exchange on Tuesday that the
acquisition of Green Bank will add about P3 billion to its consolidated
assets. The lender said most of Green Bank branches will be integrated
into EastWest, but its "successful micro finance" model will still be
pursued.

"We intend to create synergies in the branch channel by finding areas of
cooperation between the two banks within the regulatory framework.

We think that over time, it will be optimal to integrate most of the
Green Bank branches into EastWest even as Green Bank continues to pursue
its focus to serve small and micro enterprises," said Antonio C. Moncupa
Jr., EastWest president and chief executive officer.

Green Bank's 46 branches located nationwide will also add to EastWest's
existing network of 117 branches.

The acquisition of Green Bank is the third acquisition of EastWest. It
acquired Ecology Savings Bank in 2003, and then AIG Philam Savinngs Bank
in 2009.

As of the first semester of this year, EastWest has assets of P83.1
billion and capitalization of
P9.7 billion. Its return-on-equity ratio is at 18.1 percent. --CMA/OMG,
GMA News

BPI offers high-tech client-assist service

SATURDAY, 20 AUGUST 2011 17:12 RIZAL RAOUL REYES / CORRESPONDENT

Natividad Alejo, BPI senior vice president and head of the consumer
group, said the bank has rolled out BEA as early as the first half of
2010 initially with 10 branches nationwide. After first rollout, 30 BPI
branches received their own BEAs.

At the end of 2010, a total of 100 BPI branches have received their own
BEA systems.

She said BPI is aiming to install BEA to 500 branches this month in line
with the bank's 160th anniversary.

Alejo said the bottom line of introducing BEA is to enable customers to
conduct transactions in an easy manner.

Wincor Nixdorf is the technology partner of BPI in the BEA project.

Sunday, August 21, 2011

'CCT report reaffirms goal to improve lives'

'CCT report reaffirms goal to improve lives'

By Aurea Calica (The Philippine Star) Updated August 21, 2011 12:00 AM Comments (5)

MANILA, Philippines - Malacañang welcomed yesterday the joint report of the World Bank (WB) and the Australian Agency for International Development (AusAID) that the government’s conditional cash transfer (CCT) program for indigent families can raise their annual incomes by 12.6 percent, thus reducing poverty incidence by 6.2 percent.

In a statement, presidential spokesman Edwin Lacierda said the report reaffirms the belief of the administration that the program is a “solid foundation” for improving the quality of life of impoverished Filipinos.

The report, which was released on Friday, said the program can reduce overall food poverty in areas covered by 5.5 percent.

The CCT program, also known as the “Pantawid Pamilyang Pilipino Program,” provides cash grants to indigent families on condition that they send their children to school, have infants immunized from diseases, and that mothers visit community health centers.

“And while the increase in household incomes is indeed an intended objective of the program, the government’s overall social program involves much more in ensuring that beneficiaries remain healthy, educated, and productive, thus giving them the ability to raise their lot in life,” Lacierda said.

The CCT program is patterned after the cash transfer program in Brazil.

“Studies of various CCT programs worldwide have shown how such transfers are indeed directed toward prioritizing food on the table. If this is so, results suggest that the Pantawid Pamilya (program) can reduce food poverty among household beneficiaries by 13.3 percentage points. Consequently, it can reduce overall food poverty in program areas by 13.3 percentage points,” Lacierda said.                                                            He said the program seeks to produce skilled and educated citizens.

“This is in fact only one aspect of a wide-ranging strategy toward inclusive growth: the government is continuously working toward ensuring a level playing field that will encourage investors and generate jobs,” he said.

The Department of Social Welfare and Development (DSWD), which manages the program, said the beneficiaries who graduate from the program will also be given cash capital to start a business.

    In an interview during the CCT’s first convergence caravan held in Mandaluyong City yesterday, Social Welfare Secretary Corazon Soliman said the first set of beneficiaries will graduate from the program in 2013. These are indigent families covered by the program since 2008.

Soliman said her department is conducting a resurvey in 14 cities in the National Capital Region (NCR), starting in Mandaluyong, to eliminate unqualified recipients from the list of beneficiaries.

She said 400 families of the 150,000 recently removed from the DSWD list of covered families admitted they were not qualified to be beneficiaries of the CCT program.

Mandaluyong Mayor Benhur Abalos said the city government will provide one job per family to support the CCT program.

He said the local government has partnered with various companies that can provide carpentry, welding, and automotive jobs. Four hundred people have so far been provided jobs.

The city will also create a funeral parlor for the burial needs of city residents.

Mandaluyong Rep. Neptali Gonzales II told the city’s beneficiaries that an amount of P100,000 may be provided for each group to enable them to start their own businesses.

“(An) exit plan has to be prepared for all of you. Start your own business. So that when you graduate from this program, the CCT will be extended to other families who are also in need like you,” he said.

Beneficiaries testify

Melanie Encabo, a resident of Welfareville, Barangay Addition Hills in Mandaluyong has been a beneficiary of the CCT program since last year. She said the P1,400 cash grant she has been receiving each month from the government is a big help to her family.

“Now, I can buy the food and school needs of our children,” she said.

Another beneficiary, Marilyn Soria, said aside from being able to buy the needs of her children in her school she can also buy vitamins for them.

“My husband is working on and off as a mason. We hope that this program will continue,” Soria said.

A teary-eyed Colleen Nubia, a Grade 6 student, said she and her siblings are now going to school with allowance.

“We are very thankful to President Noynoy Aquino. We hope that he will continue this program,” she said.

Ederlyn Padias, principal of the Jose Fabella Memorial School in Welfareville, said there has been a drastic increase in enrolment because of the CCT program.

“The enrolment of pupils in our school increased from 700 last year to 900 this year. This is an indication that the recipients of the conditional cash transfer program are now going to school,” Padias said.

At present, there are 1,400 CCT beneficiaries in Mandaluyong. - With Jose Rodel Clapano, Evelyn Macairan

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BSP reviews business model on banks' savings, time deposit rates

BSP reviews business model on banks' savings, time deposit rates

By LEE C. CHIPONGIAN

August 19, 2011, 11:08pm

MANILA, Philippines — The Bangko Sentral ng Pilipinas is reviewing the business model used by banks in determining savings deposit rates and time deposit rates following the first two surveys conducted throughout the country to identify locations which show banks in the area relying "excessively" on high-cost deposits.

Under Bangko Sentral ng Pilipinas (BSP) Circular No. 640, a bank is considered offering high-cost deposits/borrowings if the effective interest rate paid on said deposits/borrowings and/or non-cash incentives is 50 percent over the prevailing comparable market median rate for similar bank categories, maturities, and currency denomination.

To discuss certain provisions of the circular, the BSP met with the Bankers Association of the Philippines (BAP), Chamber of Thrift Banks (CTB) and Rural Bankers Association of the Philippines (RBAP) to clarify the manner in which the BSP was enforcing the rules especially with respect to unsafe and unsound banking practices.

BSP then initiated a new survey called "Survey on Deposit Interest Rates Per Province" and the first survey was conducted in the last quarter of 2010, however the results were too rough from the raw data that the banks themselves provided the BSP.

Based on the most recent survey which was conducted in the first quarter of 2011, the BSP noted increased variability as monies are being shifted from savings to time deposits and from a lower to a higher deposit balance category. This suggests that while savings deposits are more homogenous, there are differences in time deposit rates across geographical locations, tenors and/or size of deposit balance, the report explained.

The survey also concluded that there are no statistical differences in interest rates provided by universal and commercial banks versus the small thrift banks, however there are some marked differences in the deposit rates offered by big banks versus rural banks, and thrift banks compared to rural banks.

The raw data used to calculate the median rates have been provided by the BAP, CTB and RBAP. While the BAP and CTB are providing data to meet survey deadlines, RBAP which have more members are encountering delays in

The BSP is still fine tuning the interest rates monitoring especially the response rate which officials found dismal. The first quarter survey methods needed to be improved upon.

Sources said the BSP plans to make the survey available to the Philippine Deposit Insurance Corp. and the public since the information will encourage competition and transparency in the banking industry. For the BSP especially, the survey will serve as a basis for initiating a problematic bank into the prompt corrective action framework, which is the first step in assisting bank recapitalize.

Friday, August 19, 2011

BSP relaxes rule on mobile automated teller machines

BSP relaxes rule on mobile automated teller machines

BANKS MAY begin operating mobile automated teller machines (ATMs) outside the vicinity of campuses, hospitals and commercial centers after the central bank eased restrictions on where they can bring them.

Bank officials welcomed the central bank’s move as this will give them greater latitude as to where to bring the mobile ATMs, which take the form of moveable steel kiosks or are transported on armored vans.

In Circular 735 dated Aug. 16, the Bangko Sentral ng Pilipinas (BSP) amended the Manual of Regulations for Banks that restricted mobile ATMs to centers of activity such as shopping centers, supermarkets, hospitals and university campuses.

The BSP removed the clause saying “mobile ATMs should be allowed to visit only centers of activity.”

“This is just a cleanup of an anachronistic rule,” BSP Deputy Governor Nestor A. Espenilla, Jr., explained in a text message yesterday.

The central bank, however, retained the rule that mobile ATMs can be set up only within Metro Manila.

“This circular shall take effect 15 calendar days following its publication either in the Official Gazette or in a newspaper of general circulation,” the BSP said.

In other countries, mobile ATMs, which come with wireless communication technology and on-site technicians, are available for rent.

Banks bring them during events such as expositions, conventions, sports events, pageants and concerts.

Local bank officials said the BSP’s relaxation of rules will not only give them more room, but will also encourage them to launch more mobile ATMs.

“It will allow banks to service particular centers... where banks have a significant number of clients,” Philippine Savings Bank (PSBank) President Pascual M. Garcia III said in a telephone interview yesterday.

“Now that BSP has lifted [the restriction], we will consider putting up more [mobile ATMs],” Mr. Garcia said.

Ismael S. Reyes, first vice-president and head of branch banking at PSBank, said a few years ago, the company launched one mobile ATM and this remains in operation.

“The lifting and easing of restrictions on mobile ATMs will definitely be an incentive for banks to deploy more ATMs,” Lamberto R. Villena, president of Sterling Bank of Asia, Inc., said in a separate text message.

“Generally, banks look at ATMs not necessarily for income generation since ATM fees are not really substantial enough to cover costs, but as a mechanism to increase awareness and advertising. They also serve as a efficient cash distribution channel to encourage deposits,” Mr. Villena added.

Moving forward, banks should be able to operate mobile ATMS outside Metro Manila.

Mr. Garcia said commercial areas in Cebu and Davao would welcome mobile ATMs.

BSP data as of March showed that universal and commercial, thrift and rural and cooperatives maintained a total of 6,252 on-site ATMs and 3,340 off-site ATMs. Mobile ATMs are classified as off-site ATMs. -- Neil Jerome C. Morales

BIR to probe companies selling fake receipts

BIR to probe companies selling fake receipts

by Ina Reformina, ABS-CBN News

Posted at 08/19/2011 1:24 AM | Updated as of 08/19/2011 1:24 AM

MANILA, Philippines - The Bureau of Internal Revenue (BIR) will investigate a modus operandi identified as one of the main reasons why the value-added tax (VAT) has been under-performing.

In a news conference at the Department of Justice(DOJ) on Thursday, BIR Commissioner Kim Henares said the bureau has identified at least 4 companies selling fake receipts to corporations and enterprises so that these corporations can substantially underdeclare their income and thus, evade the payment of correct taxes.

This developed as the BIR filed tax evasion charges against Gammon Metal Products, Incorporated, a duly-registered domestic corporation engaged in the manufacture of metal, plastic, electrical and industrial products.

Gammon's president, Joaquin Chua, was also charged.

Gammon was charged for willful attempt to evade or defeat tax and deliberate failure to supply correct and accurate information in its income tax returns (ITR) and VAT returns for taxable years 2007 and 2008.

The corporation's total tax liability is pegged at P1.7 billion, inclusive of surcharges and interests.

While Gammon filed its ITRs for said taxable years, it was discovered by the BIR that some of its suppliers did not file any tax return for 2007 and 2008 and, in fact, these suppliers were non-existent.

"Moreover, Gammon failed to substantiate its claim of purchases from said suppliers when asked by the BIR, prompting the latter to disallow the VAT input taxes claimed by the company from said purchases in question," the BIR's fact sheet on the Gammon case read.

"Said failure to substantiate purchases from simulated transactions with sham companies resulted to over-claim of VAT input taxes, and thus, substantial underdeclarations of taxable income in the years 2007 and 2008."

Henares said the BIR will coordinate with the Philippine National Police(PNP) and National Bureau of Investigation(NBI) in locating the companies/suppliers behind the sale of fake sales invoices.

"I'd like also to forewarn taxpayers [that] this is just the tip of the iceberg, this modus operandi. What we discovered is that there seems to be a syndicate of this type. They register with the bureau, they sell receipts. What the businesses do is buy the receipts, not the goods," Henares said.

"Ang pakiusap ko sa mga negosyante, wala naman kami problema na kumita sila, magbayad lang sila ng tamang buwis. Huwag nila i-defraud ang government... This is not just peanuts, we're talking about over P1 billion," she added.

"We're saying that because of this magnitude, I believe that the underperformance of VAT is because of all this. Other reasons for the underperformance are smuggling and non-issuance of receipts," Henares said.

The case against Gammon is the 60th case filed by the BIR under its revitalized Run After Tax Evaders(RATE) program under the Aquino administration.

Thursday, August 18, 2011

BIR to restrict grant of tax perks to cooperatives

BIR to restrict grant of tax perks to cooperatives

Published : Thursday, August 18, 2011 00:00 Article Views : 380 Written by : Katrina Mennen A. Valdez, Reporter

THE Bureau of Internal Revenue (BIR) on Wednesday said it is restricting the grant of fiscal incentives to cooperatives amid loopholes in the law, which has allowed for-profit enterprises to avoid tax and labor rules.
Commissioner Kim Jacinto-Henares told reporters that the bureau will expedite the screening of cooperatives seeking fiscal incentives under Republic Act 9520 or The Philippine Cooperative Code of 2008.

The implementing rules had been approved as early as February last year, but only 4,000 out of the 18,000 applications have been approved so far.

“I’m assuring you that we will be looking into the status of the application and where it is now and the implementation of the law,” Jacinto-Henares told legislators during a House hearing on the agency’s proposed budget for 2012.

“BIR has already issued 4,000 because so far these are the ones who have complied with our requirements,” she said.

“We’re finding out that there are a lot of cooperatives. The problem before of contractualization of labor, now they’re shifting toward cooperativizing their labor,” she said.

“Another problem arises since these cooperatives were shortchanging the labor movement because when you cooperatize you self-employ. And therefore, those hiring these people are not contributing to their SSS, Pag-Ibig, and Healthcare benefits. We’re seeing a lot of these things happening,” the BIR chief said.

Jacinto-Henares said some professionals are organizing themselves into cooperatives to claim tax exemptions.

“Therefore it’s a natural person; it cannot be juridical person. We’re thinking—I hope its not taken against the BIR—to put our foot down and say that we will not give tax exemptions to these kinds of cooperatives because you cannot use the law to do immoral against public policy, against constitution,” she said.

According to the Cooperative Development Authority, the country has 74,000 cooperatives but only 24,000 are active and seeking tax incentives.

Articles 60, 61 and 144 of the law state that duly-registered cooperatives that do not transact any business with non-members or the general public shall not be subject to any tax or fee imposed under internal revenue and other tax laws.

The law also provides that cooperatives with accumulated reserves and undivided savings of no more than P10 million will also enjoy tax incentives.

The law also provides that 74,000 cooperatives shall be relieved from paying taxes for the next five years starting 2010.

“I support the cooperative movement but it should be done for the right purpose and not for these types of purpose that would disadvantage the labor force. Otherwise, it is not only a tax erosion thing but it creates a social problems for our labor force,” Jacinto-Henares said.

BIR files P1.7B tax evasion suit vs metal manufacturer

BIR files P1.7B tax evasion suit vs metal manufacturer

Home Updated August 18, 2011 02:00 PM

MANILA, Philippines - The Bureau of Internal Revenue (BIR) filed today a P1.7-billion tax evasion case against a metal and products manufacturer for using sham companies and claiming fictitious deductions.

Charged was Gammon Metal Products Inc. (Gammon), a duly-registered domestic corporation engaged in the manufacture of metal, plastic, electrical and industrial products.

Names as respondent was Joaquin Chua, president of Gammon.

BIR Commissioner Kim Henares said in a press conference that Gammon was charged with tax evasion for its willful attempt to evade tax payment and deliberate failure to supply correct and accurate information in its income tax returns (ITRs) and value-added tax (VAT) returns in 2007 and 2008, which are in violation of Sections 254, 255 and 267 of the Tax Code of 1997.

Henares said that Chua was also charged in his capacity as president of Gammon who signed the income tax and VAT returns in question.

Investigation showed that Gammon filed its ITRs and VAT returns for 2007 and 2008. As a matter of procedure, investigators checked the suppliers of Gammon with the BIR's Integrated Tax System.

The random check made by the BIR showed that some of Gammon's suppliers did not file any ITRs for 2007 and 2008. The suppliers were in fact non-existent and thus considered as sham companies.

Moreover, Gammon failed to substantiate its claim of purchases from said suppliers when asked by the BIR, prompting the revenue collecting agency to disallow the VAT input taxes claimed by the company from said purchases in question.

Such failure to substantiate purchases from simulated transactions with sham companies resulted to over-claim of VAT input taxes and thus, substantial under-declarations of taxable income in the years 2007 and 2008.

The consistent and repeated acts of Gammon in using sales invoices from fictitious suppliers manifested its propensity to evade payment of taxes due to the government.

Henares said that Gammon was assessed an estimated total deficiency tax liability of P1.7 billion for the two-year period, including surcharges and interests such as P1.2 billion in income tax and P500 million in VAT.

The case against Gammon and Chua is the 60th filed under the BIR's Run After Tax Evaders (RATE) program.

Monday, August 15, 2011

Deposit Interest Rates Are Rising

Deposit Interest Rates Are Rising

BSP Monitoring Vs. Unsafe Practices

By LEE C. CHIPONGIAN

August 15, 2011, 12:31am

MANILA, Philippines — The banking industry’s deposit interest rates are increasing, triggering a shift of depositors from savings deposit to time deposit in the hope of preserving personal finances amid volatile global and local markets.

This can be gleaned from the Bangko Sentral ng Pilipinas’s (BSP) newest monitoring tool called “Survey on Deposit Interest Rates Per Province,” which has yet to be publicized.

The survey aims to confirm and validate the differences between the rates offered by banks in each province and the rates of time deposits than those for savings deposits. These rates, in fact, have not been decreasing for some time.

The other purpose of the survey is to help the BSP closely monitor any incidence of rising deposit rates, which could signal unsound and unsafe banking practices.

A bank is practicing unsafe and unsound banking by excessive reliance of large, high-cost or volatile deposits/borrowings to fund aggressive growth that may be unsustainable.

According to the report submitted to the Monetary Board, time deposit rates are found to be non-decreasing across categories of deposit balance amounts and across tenor buckets for a given amount of deposit balance.

Depositors, particularly those located in the provinces, have been transferring more of their saved funds to long dated time deposits.

“(This) simply re-state that clients with larger amounts of saving and willing to ‘set aside’ said funds for longer tenors will be rewarded with higher rates,” stated Managing Director Leny Silvestre of the BSP Supervision and Examination Sector in the report.

Based on the survey, banks located in the National Capital Region (NCR) offer savings deposit rate on the average of 0.75 percent for deposits less than P100,000 and 0.63 percent for deposits of more than P100,000.

Deposits of over P1 million also enjoy a 0.75 percent rate. Aurora province however offer the highest savings deposit rate at two percent for less than P100,000 deposits, 2.063 percent for over P100,000 amounts and 2.25 percent for deposits over P1 million.

Of the 46 provinces, which responded that out of a total 80 surveyed, 12 provinces have above one percent offered rates for all deposits. These are Nueva Vizcaya, Laguna, Marinduque, Occidental Mindoro, Oriental Mindoro, Camarines Norte, Aklan, IIoIlo, Negros Oriental, Sarangani, Agusan del Sur and Surigao del Norte. The survey showed no lower rate than 0.5 percent that some provinces offer, including Cebu, Ilocos Norte, Tarlac, Palawan and Sulu, among 15 other locations.

As for time deposits, NCR banks offer 1.6 percent rate for 30-days for deposits less than P100,000, gradually increasing to 3.625 percent for one-year tenors of higher deposits of over P1 million. Some provinces like Laguna, Quirino and Camarines Sur offer two percent rate for 30-day deposits of less than P100,000 but IloIlo and Negros Oriental will give short-term time depositors the highest rates with 2.4 percent and 2.15 percent, respectively.