Other Requirements for Banks Offering Agricultural Microfinance Loans in
the Philippines
» Posted by Kristha Abores in Category: Asia,Regulation at 9:35 pm
The Monetary Board of the Bangko Sentral ng Pilipinas (BSP), the central
bank of the Philippines, recently released a circular amending the
minimum requirements for banks offering micro-agri loans [1]. In an
effort to ensure that banks offering micro-agri loans have adequate
financial capacity, managerial and technical capabilities to offer the
product, BSP now requires that the banks must have a CAMELS rating of at
least 3, a management score of at least 3 and a capital adequacy ratio
of at least 12 percent. (CAMELS ratings assess a bank's overall
condition through an evaluation of the following components: Capital,
Asset quality, Management, Earnings, Liquidity and Sensitivity to market
risk.) In addition, the banks must not be under the "Prompt Corrective
Action Program," which addresses capitalization problems or other
concerns. Banks must also have no arrearages on their
microfinance-related borrowings from the central bank or other
creditors. [2]
Micro-agri loans are short-term loans with tenor of up to 12 months and
weekly, semi-monthly or monthly payment terms. The loans, which have a
cap of PHP 150,000 (USD 3,500), are used primarily for farm activities,
agri-business or agriculture-related fixed assets. Loans are granted to
borrowers who have engaged in farm activities for at least two years but
also have non-farm income. [2].
Since 2007, when micro-agri loans were introduced through a three-year
testing phase, banks reportedly have lent approximately PHP 500 million
(USD 11.7 million) in micro-agri loans [1].
By Kristha Abores, Research Associate
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