THE BANGKO SENTRAL ng Pilipinas (BSP) has tightened requirements for
banks interested in offering micro-agri loans in a bid to weed out "weak
banks," according to the central bank's Circular No. 748 published
yesterday in this newspaper.
The circular, dated Feb. 13, amended the central bank's Manual of
Regulations for Banks.
Cleansing
A micro-agri loan -- involving amounts of as much as P150,000 and good
for 12 months -- is designed to support farming activities,
agri-business and other agriculture-related activities.
"Additional pre-qualifications on banks were introduced to screen out
weak banks from the program," BSP Deputy Governor Nestor A. Espenilla,
Jr., said in a text message yesterday.
According to the new circular, banks that plan to offer micro-agri loans
must comply with a number of new requirements, namely:
• CAMELS rating of at least "3" and a management score of at least "3";
• capital adequacy ratio of not lower than 12%;
• no major supervisory concerns that would warrant initiation of prompt
corrective action under existing regulations; and
• No arrearages on microfinance borrowings (bills payable) from BSP or
other creditors.
The CAMELS rating system measures a bank's capital adequacy, asset
quality, earnings, liquidity and sensitivity to market risk. Scores
range from 1 for best and 5 for worst.
Non-compliance
BSP said banks found non-compliant will be given a chance to submit a
"viable plan" to correct its deficiencies.
However, if non-compliant banks still fail to align with the new
requirements after examination, authority to offer micro-agri loans will
be suspended, BSP said in the circular.
Procedure
One examination cycle, BSP said, is defined as the period from the exit
conference of the last general examination until the exit conference of
the following general examination.
The central bank added that no other micro-agri products should be
introduced by banks without BSP approval.
In January 2010, the central bank introduced micro-agri loans in a bid
to facilitate access to financing by small famers and other agricultural
workers, a segment that was formerly deemed high credit risk by banks.
Those interested in applying for micro-agri loans for the first time
should have been involved in farming activities for at least two years
prior to application, while existing borrowers should have good track
record of payments, central bak regulations state. -- K. A. Martin
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