PHILDEVFINANCE (old news)

Monday, August 15, 2011

BSP says banking system remains stable

BSP says banking system remains stable

BY JIMMY CALAPATI

DESPITE the impending risks brought by the latest financial crisis in the US and Europe, the Bangko Sentral ng Pilipinas (BSP) said that the country’s banking system remained stable "as banks continued to adhere to banking rules and regulations set by the BSP."

For the first four months of the year, the central bank said that lending, deposits, and profitability of the local banks sustained their healthy growth.

"Credit quality in the system also continued to improve, with banks posting lower non-performing loans (NPL) and higher loan-loss provisioning ratios," BSP said.

In its latest report, BSP said that savings and time deposits remained the primary sources of funds for banks as banks’ total deposits as of end-April 2011 reached P3.7 trillion, 8.5 percent higher than the year-ago level of P3.4 trillion.

"The continued growth in deposits reflected sustained depositor confidence in the banking system," BSP said.

Savings deposits registered a 10.8 percent growth and continued to account for nearly half of the funding base while demand deposits expanded 12.9 percent year on year. Time deposits posted a moderate growth of 1.3 percent.

The central bank also said that the total resources of the banking system had risen 8.4 percent to P7 trillion as of end-April 2011, adding that the "increase could be traced to the growth in currency and deposits, indicative of the public’s continued trust in the banking sector."

Universal and commercial banks accounted for the bulk, almost 90 percent of the total resources of the banking system.

The report also showed that the banking system’s asset quality further improved as the NPL ratio declined to 3.7 percent as of end-April 2011 from 4.0 percent registered a year ago.

The central bank said that banks’ continued adoption of prudent lending standards helped minimize the incidence of problem loans.

The low NPL ratio was maintained as the 10.0 percent expansion in the industry’s total loan portfolio outpaced the 1 percent growth in NPLs.

The total loan portfolio had expanded to P3.3 trillion as of end-April 2011 from P3 trillion during the same period last year, while the NPL level had grown to P121.6 billion during the period from the previous year’s P120.5 billion.

The NPL ratio of universal and commercial banks had dropped further to 2.9 percent as of end-April 2011 from the 3.3 percent posted in the same period in 2010, but was broadly unchanged relative to the ratio posted at end-December 2010.

The Philippine banking system’s NPL ratio of 3.7 percent was higher compared with the NPL of neighboring countries, like Indonesia’s 2.8 percent, Malaysia’s 2.1 percent and Korea’s 2.3 percent, but lower than Thailand’s 3.9 percent.

The BSP explained that the lower NPL ratios of Malaysia and Korea could be attributed to the creation of publicly-owned asset management companies (AMCs), which bought the bulk of their NPLs, a practice not implemented in the Philippines.

Also, the loan exposure of banks remained adequately covered as the banking system’s NPL coverage ratio had improved to 98.9 percent as of end-April 2011 from 92.1 percent in the preceding year.

The ratio was indicative of banks’ continued compliance with the loan-loss provisioning requirements of the BSP to ensure adequate buffers against unexpected losses.

Meanwhile, the average capital adequacy ratio (CAR) of the banking system had risen to 16.0 percent on a solo basis and 17 percent on a consolidated basis as of end-September 2010 compared with the quarter-ago ratios of 15.2 percent and 16.2 percent, respectively, resulting from the growth in qualifying capital due mainly to the robust net profits reported by banks and issuances of capital instruments during the period.

The industry’s CAR continued to exceed both the statutory levels set by the BSP and the BIS at 10 percent and 8 percent, respectively.

The Philippine banking system’s CAR remained slightly higher than those of Malaysia (14.5 percent), Korea (14.6 percent) and Thailand (16.4 percent).

Indonesia posted the highest CAR in the region at 17.6 percent.

As of end-March, the number of banking institutions (head offices) had fallen further to 746 from the quarter and year ago levels of 758 and 779, respectively, "reflective of the continued consolidation of banks as well as the exit of weaker players in the banking system."

By banking classification, banks (head offices) consisted of 38 universal and commercial banks, 73 thrift banks, and 635 rural banks.

Meanwhile, the operating network (including branches) of the banking system increased to 8,870 in the first quarter of 2011 from 8,869 in the fourth quarter of 2010 and 8,663 during the same period last year, due mainly to the increase in the number of branches/agencies of commercial and rural banks.

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Sunday, August 14, 2011

The Truth in Lending Act explained

The Truth in Lending Act explained
Published by Atty. Fred October 8th, 2007
in Banking and Corporate and Investments. 0 Comments

What is the “Truth in Lending Act”?

It is Republic Act No. 3765, which is an act requiring the disclosure of finance charges in connection with the extension of credit.

What is the policy behind the Truth in Lending Act?

The declared policy behind the law is to protect the people from lack of awareness of the true cost of credit by assuring full disclosure of such cost, with a view of preventing the uninformed use of credit to the detriment of the national economy.

Who are covered under the Truth in Lending Act?

The law covers any creditor, which is defined as any person engaged in the business of extending credit (including any person who as a regular business practice make loans or sells or rents property or services on a time, credit, or installment basis, either as principal or as agent) who requires as an incident to the extension of credit, the payment of a finance charge.

In that definition, what is meant by “credit”?

It means any loan, mortgage, deed of trust, advance, or discount; any conditional sales contract; any contract to sell, or sale or contract of sale of property or services, either for present or future delivery, under which part or all of the price is payable subsequent to the making of such sale or contract; any rental-purchase contract; any contract or arrangement for the hire, bailment, or leasing of property; any option, demand, lien, pledge, or other claim against, or for the delivery of, property or money; any purchase, or other acquisition of, or any credit upon the security of, any obligation of claim arising out of any of the foregoing; and any transaction or series of transactions having a similar purpose or effect.

In the same definition, what is meant by a “finance charge”?

A finance charge includes interest, fees, service charges, discounts, and such other charges incident to the extension of credit as may be prescribed by the Monetary Board of the Bangko Sentral ng Pilipinas through regulations.

What are the information required to be furnished to the debtor or borrower?

(1) the cash price or delivered price of the property or service to be acquired;
(2) the amounts, if any, to be credited as down payment and/or trade-in;
(3) the difference between the amounts set forth under clauses (1) and (2);
(4) the charges, individually itemized, which are paid or to be paid by such person in connection with the transaction but which are not incident to the extension of credit;
(5) the total amount to be financed;
(6) the finance charge expressed in terms of pesos and centavos; and
(7) the percentage that the finance bears to the total amount to be financed expressed as a simple annual rate on the outstanding unpaid balance of the obligation.

When and how should these information be furnished to the debtor or borrower?

The information enumerated above must be disclosed to the debtor or borrower prior to the consummation of the transaction. The information must be clearly stated in writing.

What is the effect on the obligation in case of violations to the Truth in Lending Act?

The contract or transaction remains valid or enforceable, subject to the penalties discussed below.

What are the penalties in case of violation?

1. Any creditor who violates the law is liable in the amount of P100 or in an amount equal to twice the finance charged required by such creditor in connection with such

transaction, whichever is the greater, except that such liability shall not exceed P2,000 on any credit transaction. The action must be brought within one year from the date of the occurrence of the violation.

2. The creditor is also liable for reasonable attorney’s fees and court costs as determined by the court.

3. Any person who willfully violates any provision of this law or any regulation issued thereunder shall be fined by not less than P1,00 or more than P5,000 or imprisonment of not less than 6 months, nor more than one year or both.

However, no punishment or penalty under this law shall apply to the Philippine Government or any agency or any political subdivision thereof.

(Here’s the full text of the Truth in Lending Act)

REPUBLIC ACT No. 3765

AN ACT TO REQUIRE THE DISCLOSURE OF FINANCE CHARGES IN CONNECTION WITH EXTENSIONS OF CREDIT

Section 1. This Act shall be known as the “Truth in Lending Act.”

Section 2. Declaration of Policy. It is hereby declared to be the policy of the State to protect its citizens from a lack of awareness of the true cost of credit to the user by assuring a full disclosure of such cost with a view of preventing the uninformed use of credit to the detriment of the national economy.

Section 3. As used in this Act, the term

(1) “Board” means the Monetary Board of the Central Bank of the Philippines.

(2) “Credit” means any loan, mortgage, deed of trust, advance, or discount; any conditional sales contract; any contract to sell, or sale or contract of sale of property or services, either for present or future delivery, under which part or all of the price is payable subsequent to the making of such sale or contract; any rental-purchase contract; any contract or arrangement for the hire, bailment, or leasing of property; any option, demand, lien, pledge, or other claim against, or for the delivery of, property or money; any purchase, or other acquisition of, or any credit upon the security of, any obligation of claim arising out of any of the foregoing; and any transaction or series of transactions having a similar purpose or effect.

(3) “Finance charge” includes interest, fees, service charges, discounts, and such other charges incident to the extension of credit as the Board may by regulation prescribe.

(4) “Creditor” means any person engaged in the business of extending credit (including any person who as a regular business practice make loans or sells or rents property or services on a time, credit, or installment basis, either as principal or as agent) who requires as an incident to the extension of credit, the payment of a finance charge.

(5) “Person” means any individual, corporation, partnership, association, or other organized group of persons, or the legal successor or representative of the foregoing, and includes the Philippine Government or any agency thereof, or any other government, or of any of its political subdivisions, or any agency of the foregoing.

Section 4. Any creditor shall furnish to each person to whom credit is extended, prior to the consummation of the transaction, a clear statement in writing setting forth, to the extent applicable and in accordance with rules and regulations prescribed by the Board, the following information:

{mosgoogle}(1) the cash price or delivered price of the property or service to be acquired;

(2) the amounts, if any, to be credited as down payment and/or trade-in;

(3) the difference between the amounts set forth under clauses (1) and (2);

(4) the charges, individually itemized, which are paid or to be paid by such person in connection with the transaction but which are not incident to the extension of credit;

(5) the total amount to be financed;

(6) the finance charge expressed in terms of pesos and centavos; and

(7) the percentage that the finance bears to the total amount to be financed expressed as a simple annual rate on the outstanding unpaid balance of the obligation.

Section 5. The Board shall prescribe such rules and regulations as may be necessary or proper in carrying out the provisions of this Act. Any rule or regulation prescribed hereunder may contain such classifications and differentiations as in the judgment of the Board are necessary or proper to effectuate the purposes of this Act or to prevent circumvention or evasion, or to facilitate the enforcement of this Act, or any rule or regulation issued thereunder.

Section 6. (a) Any creditor who in connection with any credit transaction fails to disclose to any person any information in violation of this Act or any regulation issued thereunder shall be liable to such person in the amount of P100 or in an amount equal to twice the finance charged required by such creditor in connection with such transaction, whichever is the greater, except that such liability shall not exceed P2,000 on any credit transaction. Action to recover such penalty may be brought by such person within one year from the date of the occurrence of the violation, in any court of competent jurisdiction. In any action under this subsection in which any person is entitled to a recovery, the creditor shall be liable for reasonable attorney’s fees and court costs as determined by the court.

(b) Except as specified in subsection (a) of this section, nothing contained in this Act or any regulation contained in this Act or any regulation thereunder shall affect the validity or enforceability of any contract or transactions.

(c) Any person who willfully violates any provision of this Act or any regulation issued thereunder shall be fined by not less than P1,00 or more than P5,000 or imprisonment for not less than 6 months, nor more than one year or both.

(d) No punishment or penalty provided by this Act shall apply to the Philippine Government or any agency or any political subdivision thereof.

(e) A final judgment hereafter rendered in any criminal proceeding under this Act to the effect that a defendant has willfully violated this Act shall be prima facie evidence against such defendant in an action or proceeding brought by any other party against such defendant under this Act as to all matters respecting which said judgment would be an estoppel as between the parties thereto.

Section 7. This Act shall become effective upon approval.

Approved: June 22, 1963

BAP backs tighter rule on loan interest

BAP backs tighter rule on loan interest

Published : Saturday, August 13, 2011 00:00 Article Views : 513 Written by : Lailany P. Gomez, Reporter

THE Bankers’ Association of the Philippines (BAP) supports the central bank’s move to tighten the rules of the Truth in Lending Act.
“That is good. I think that’s been happening already in many ways. The only thing that has to be changed, which is fairly easy, is to change the communication,” Aurelio Montinola 3rd, BAP president, said.

According to the Bangko Sentral ng Pilipinas, the use of so-called flat interest rates show contractual rates for loans that substantially differ from the effective interest rate.

The BSP also observed hidden charges and deliberate quoting of lower interest rates with higher up-front charges to enhance loan product marketability. As a result, the public may be misinformed or misguided about the true cost of their borrowings.

“Because what’s happening there, the people know that the interest rates are always based on the remaining principal. That’s been the industry practice for the longest time. What’s happening is that when you communicate to show it’s a little bit lower they’re using the add-on,” Montinola, who is also BPI president, said.

Under the new rules, banks are required to charge interest on the outstanding balance only of a loan at the beginning of an interest period.

This rule “effectively prohibits” charging “flat” interest rates and other methods that mislead lower contractual interest rate than the EIR.

The EIR is defined in accordance with the Philippine Accounting Standards as the rate that exactly discounts estimated future cash flows through the life of the loan to the net amount of loan proceeds.

This EIR, whether quoted annually or monthly, shall be the only rate quoted in all loan documents including the marketing materials, the BSP said.

The new rules likewise define finance charges to include interest, fees, service charges, discounts, and such other charges incident to the extension of credit and that require a uniform way of disclosing such information.

The new transparency rule will take effect on July 1, 2012 or a year after publication to allow mounting of a comprehensive information campaign and facilitate smooth implementation.

Friday, August 12, 2011

BIR wants public to use e-filing

BIR wants public to use e-filing

TUESDAY, 09 AUGUST 2011 19:05 PIA

BUREAU of Internal Revenue (BIR) Deputy Commissioner Celia King encouraged taxpayers to enroll in the Electronic Filing and Payment System (eFPS) which allows taxpayers to file tax returns and pay taxes online.

In dzRB Radyo ng Bayan’s Talking Points program, King said the eFPs is mandatory to large taxpayers and BIR offices, but that it could also be used by private individuals. According to the BIR website, the eFPS is a system that the BIR created for filing tax returns, including attachments, and paying taxes through the Internet.

All qualified taxpayers can use the system in filing and paying their taxes through e-filing or electronically filing returns and e-payment, electronically paying a tax liability online through the banking facilities of authorized agent banks.

A filing reference number generated by the system will be given to the payer to serve as proof for each successful filing transaction.

As an added bonus, the deadline for e-filing of tax returns is five days later than the one set for manually filing tax returns. However, the five-day extension will not apply to certain returns whose deadlines are set by law. For example, the deadline for the Quarterly VAT Return is set by section 114 (A) of the National Internal Revenue Code of 1997 as within 25 days following the close of each taxable quarter prescribed for each taxpayer.

Currently, the users of the eFPS are large taxpayers, local government units, volunteering BIR national office employees, top 20,000 companies, bidders, bank borrowers, stockbrokers, and volunteering taxpayers, among others.

LWUA - Unholy mixing of water and banking

LWUA - Unholy mixing of water and banking

THURSDAY, 21 JULY 2011 20:01 ZOILO ‘BINGO’ DEJARESCO III / FREE ENTERPRISE

PROSPERO “Butch” Pichay, chairman of the Local Water Utilities Administration (LWUA), and two underlings were sacked recently and forbidden to ever hold public office by the Office of the Ombudsman.

This stemmed from a highly irregular use of LWUA funds to buy a losing thrift bank in Laguna called Express Savings Bank. The bank was also ordered closed last week by the Philippine Deposit Insurance Corp. (PDIC) as it could no longer honor deposit withdrawals of its over 2,000 clients.

Our banking sense tells us the bank sale conjures images of corruption.

For why indeed should LWUA—which already provides financing to water districts—still have to buy a bank to do the same function? Why buy a losing bank whose branches (four) are all in Laguna when LWUA’s constitutency is nationwide?

The amount of LWUA funds used is huge: P80 million to buy 60 percent of the bank’s common shares. Worse, the LWUA sank in P300 million for bank deposits and another P400 million as investment in the same bank. All in all, a stupendous P780 million in taxpayers money paid for a small bank in 2009.

In less than two years, the bank was run to the ground. Allegedly, Express Savings Bank lent to “friendly borrowers” who later refused to pay their loans to the point that the bank could no longer service deposit withdrawals of clients, as a consequence.

Pichay, a prosperous honcho who reportedly owns newspaper Remate and station dzME in Quezon City, was defending his acts over media, like the world owed him a living.

Red in the face, he said acting Ombudsman Orlando Casimiro has been doing nothing lately but filing graft cases against the Arroyo allies. Casimiro, we think, is just doing what former Ombudsman Merci Gutierrez has NOT been doing through all these years.

The former congressman has been defending his fort dismally and erroneously.

One, he said the P780 million was not government money (in the national budget sense) since it was LWUA’s internally generated funds.

Two, the bank made a P40-million net income in 2010 so the P80 million was a good investment.

Three, he had the approval of former President Arroyo (GMA) in buying the bank through LWUA funds.

Four, Express Bank was able to help water districts get loans for water projects from the bank.

First, from an accounting standpoint, the “profits” or Pichay’s so-called internally generated funds become part of the equity of LWUA if undeclared as dividend to the national government, the LWUA being a government entity. The LWUA board cannot unilaterally decide on the use of those funds like they were its own.

Second, the total investment of LWUA in the bank is P780 million, not P80 million as Pichay likes the public to believe. Moreover, the last PDIC audit showed that Express Bank owes depositors some P600 million. Technically, that means the P700 million cash (P300 million plus P400 million) could not be totally recovered since only P600 million will be serviced by the PDIC (those accounts above P500,000).

The P80-million equity investment, of course, went to the lucky original Express Savings owners, who sold 60 percent of their shares to LWUA. That money will never be retrieved by LWUA ever. Neat?

Third, Pichay never had the categorical approval of GMA. Her signature, according to former GMA Cabinet Secretary Ignacio Bunye, “was subject to the consent of the Monetary Board.” According to Bunye, the Monetary Board disapproved Pichay’s request not once but twice.

Fourth, the water districts and borrowers never faithfully paid their loans which caused the bank’s collapse, in the first place. Not “sweetheart” deals between the controlling bank shareholders and the favored water districts and borrowers?

There is no doubt that Pichay was one of the most favored lieutenants of the past administration, so close was he to the Palace that in Congress, he was chairman of the Committee of the National Defense and then the powerful Commission of Appointments. In charge of the AFP budget, he was accused by whistle-blower Col. George Rabusa of receiving P500,000 three times, the same number of times he allegedly visited the AFP headquarters.

Worse, during the Senate hearings to dig into the “corruption issue” at the DPWH and the banned Philippine contractors (fingered by the World Bank), together with First Gentleman Mike Arroyo, former Public Works Sec. Florante Soriquez and “broker” Boy Belleza, Pichay was one of the two congressmen supposedly alluded to as part of the “collusion cartel” pointed by the World Bank for road projects. The other was reportedly Negros Oriental Congressman Jacinto Paras.

So, the history of Pichay in matters of transparent governance is murky-clear as mud.

In his alchemy of making money out of his various businesses, this was one concoction-mixing water with banking that didn’t seem to work well. He will be lucky if the charge ends up with his just being administratively sanctioned.

BSP warns lenders vs flat-interest rates

BSP warns lenders vs flat-interest rates

SUNDAY, 07 AUGUST 2011 18:59 JUN VALLECERA / REPORTER

THE Bangko Sentral ng Pilipinas (BSP) is scandalized that quite a number of credit providers still get away with interest extractions that have since been identified as irregular when borrowers are charged with so-called flat interest rates for loans and credit accommodations.
The seven-member Monetary Board, the policy-making body at BSP, has passed a resolution mandating the banks initially to make it clear to clients that loan charges are based on the effective interest rate rather than on a flat-rate charge that gives the impression a particular loan was cheaper than it actually was.

The practice of charging flat-interest rates or one that continues to charge borrowers the full interest on a loan no matter that repayments have been made on the original amount has since been banned and still the practice persists.

While the mandate covers only the banks at the initial stages, the ban on flat-interest charges should cover all credit providers eventually.

Deputy BSP Gov. Nestor A. Espenilla Jr. stressed this point in a group interview on Friday, saying current lending practices do not tell the whole unvarnished truth and often mislead the more unsophisticated borrowers.

At present, borrowers are often told of interest charges computed on the basis of a flat-charge method which effectively doubles the amount actually charged on the borrower.

Other credit providers, however, charge interest based on the outstanding balance. These lenders, Espenilla said, have the respect of the monetary authorities since they do not prey on the unsophistication of their borrowers.

He said Monetary Board Resolution 1018 dated July 7, 2011 approved the updated rules implementing the Truth in Lending Act aimed at enhancing loan-price transparency and improving disclosure practices for better consumer protection down the line.

Under the resolution, there should only be one method of computing interest charges which must be based on the outstanding loan balance rather than on the original loan amount.

Other more advanced jurisdictions have since banned the use of flat-rate charges on credit but local-credit providers have persisted by presenting loan rates in a manner that make it look cheaper than they actually are.

So-called voodoo math by banks and other credit providers often presents hapless borrowers with monthly interest charges that on the surface, seem cheaper than the competition that extends the same credit on the basis of the outstanding balance.

What the unsophisticated often do not appreciate is that they pay more with flat-interest charges but do not realize this because regulations did not fix the problem of how such things should be computed and presented in the past.

In about a year, however, such charges will no longer be allowed and punitive sanctions await those that break it, Espenilla said.

“Right now, there is an adjustment and training period. Credit providers should now start pilot testing and explaining to their customers the changes. This is a long-standing practice so people need to prepare,” he said.

He also stressed it is not just the banks that must refrain from flat-rate charging but all other lending units including financing companies and even pawnshops.

“We will also request the Securities and Exchange Commission and the Insurance Commission as well to issue the same set of rules for their regulated entities. The idea is all credit providers, whether bank or non-banks, will be covered,” Espenilla said.

He also said there are monetary-penalty provisions spelled out in the Truth In Lending Act and that the BSP may impose administrative sanctions against violators down the line such as suspending one’s capacity to extend credit guarantees as these and similar measures are finalized.

“We are not trying to emphasize the fear factor. We are encouraging banks and non-banks to do it because it is the right thing to do,” Espenilla said.

Zamboanga City soon to have cooperative bank

Zamboanga City soon to have cooperative bank

WEDNESDAY, 10 AUGUST 2011 20:05 BONG GARCIA JR. / CORRESPONDENT

ZAMBOANGA CITY—This city will soon have a cooperative bank, the first banking institution that will cater to the needs of the different cooperatives in the region.

This developed as the construction of a building to house the Banco Cooperativa de Zamboanga has started following the groundbreaking ceremony on Monday afternoon.

The cooperative bank is being constructed at a city government-owned 200-square meter lot inside the Sta. Cruz Commercial Complex along Veterans Avenue.

The cooperative bank will be a one-floor building with an area of 116 sq m. It is projected to cost P2.2 million. Its construction is expected to be complete within 75 working days.

The groundbreaking and construction came after the city government, through Mayor Celso Lobregat, forged a usufruct agreement allowing the cooperative bank to use the city-owned lot for a period of 25 years and renewable for another 25 years.

The Bangko Sentral ng Pilipinas (BSP) has formally approved on November 25, 2010, the proposal of the 15 multi-purpose cooperatives in this city to establish a bank devoted to serve the banking needs of the cooperative sector in Zamboanga.

“This is a realization of our dream. It was in 1999 when we started pushing for the establishment of this bank,” Lobregat said.

The cooperative bank’s prospective manager is Ric Cabato Jr., who will be assisted by a staff of seven.

Amelita Lachica of the Zamboanga Social Welfare and Development Multipurpose Cooperative is interim board chair, while Edmund Que of the PPA Employees Multipurpose Cooperative is the interim vice chair of the bank's cooperators.

GSIS expands LBP partnership to cover active members

GSIS expands LBP partnership to cover active members

THURSDAY, 11 AUGUST 2011 20:13 VG CABUAG / REPORTER

THE Government Service Insurance System (GSIS) said that starting this month, its members may choose to have their loan proceeds and other benefits credited to Unified Multipurpose Identification (UMID) eCard issued by the Land Bank of the Philippines.

By choosing the state-owned bank, GSIS members will benefit from LandBank’s network of 327 branches and more than 900 automated teller machines (ATMs) nationwide.

With the UMID eCard, members can withdraw their loan proceeds and other benefits in any Expressnet, BancNet or Megalink ATM nationwide.

The LandBank-issued UMID eCards also serve as a debit card in more than 20,000 accredited merchants nationwide and as a discount card for GSIS corporate partners such as Pfizer and STI.

The card is free with no maintaining balance required for members transferring to LandBank.

The pension fund for government workers, which has about 1.4 million members, renewed its partnership with LandBank in December last year in a move to give its more than 300,000 pensioners the choice to receive their monthly pension and other benefits through a LandBank ATM or through their eCard.

“This renewed partnership with LandBank makes it easier for our members and pensioners, especially in the provinces, to access their benefits and other loans,” Robert Vergara, GSIS president and general manager, said in a statement.

To transfer to LandBank, members can visit the GSIS web site (www.gsis.gov.ph) log on to the eCard member transaction page and click the “Choose LandBank as your servicing bank” icon. Members can also go to the nearest GSIS field office or e-mail their name, date of birth, and UMID Common Reference Number to eservices@gsis.gov.ph.

Thursday, August 11, 2011

The Philippines Mobile Banking Market Handles $10b in Transactions

MICROCAPITAL BRIEF:
The Philippines Mobile Banking Market Handles $10b in Transactions

by MicroCapital on Thursday, August 11, 2011 at 1:03pm

Bangko Sentral ng Pilipinas (BSP), the central bank of the Philippines, reportedly has indicated that the number of mobile banking transactions in the country has reached an aggregate of 150 million, totaling PHP 440 billion (USD 10.4 billion) through December 2010. The Philippines was recently recognized by the GSM (Global System for Mobile Communications) Association, an association of 800 mobile operators and approximately 200 related companies, as “among the most advanced mobile money markets in the world.” Mobile banking is defined as “performing balance checks, account transactions, payments, credit applications and other banking transactions through a mobile device such as a mobile phone.”

GSMA cited three contributing factors for the success of mobile banking in the Philippines: 1) the high SMS (short-message service, also known as text messaging) literacy rate of Filipino mobile users; 2) the involvement of BSP in supporting mobile banking, such as through BSP Circular 649, which established a regulatory framework for e-money and e-money issuers; and 3) actions taken by two of the country’s telecommunications companies – Smart Communications (SMART) and Globe Telecom.

In 2001, SMART partnered with Banco de Oroa, a Filipino commercial bank, to launch “SMART Money,” a service that enables users to transfer money both domestically and internationally via mobile and to pay for goods using a card. In 2004, Globe Telecom launched an SMS-based mobile wallet service called “GCASH” that offers functions similar to that of SMART Money via mobile phones. In 2010, Globe Telecom launched an automatic teller machine card linked to a mobile wallet, called “GCASH Card,” which gives its subscribers access to GCASH day and night.

By Carol Kim, Research Associate

About the Bangko Sentral ng Pilipinas (BSP): BSP is the central bank of the Republic of the Philippines. Established in July 1993 under the provisions of the 1987 Philippine Constitution and the New Central Bank Act of 1993, BSP took over from the Central Bank of Philippines as the country’s central monetary authority. Headquartered in Manila, BSP has three regional offices performing cash operations and eighteen branch offices. BSP participates in advocacy programs concerning microfinance, financial education and consumer protection.

About Smart Communications (SMART): Smart Communications Incorporated (SMART) is a wireless service provider in the Philippines that was founded in 1991. SMART provides postpaid and prepaid plans; broadband Internet services; and Smart Money, a debit card linked mobile phone service for users to pay bills, purchase goods, and transfer funds. SMART operates as a subsidiary of Philippine Long Distance Telephone Company. As of June 30, 2010, the Philippine Long Distance Telephone Company reports total assets of PHP 264 billion (the equivalent of USD 5.98 billion).

Sources and Additional Resources:

Malaya Business Insight: “More Filipinos turning to mobile banking”, August 2011, http://www.malaya.com.ph/aug01/busi5.html

Rural bank ONB deposits near P10-B level in first semester

ONB deposits near P10-B level in first semester

By Ted Torres (The Philippine Star) Updated August 09, 2011 12:00 AM Comments (0)

MANILA, Philippines - Total deposits of One Network Bank (ONB) is nearing the P10-billion level while total loans is approaching the P7-billion mark.

At the end of the first semester of 2011, the biggest rural bank in Mindanao reported total deposits amounting to P9.9 billion, or an approximate 34- percent growth rate from the P7.381 billion in the same period last year.

The rate of growth mimics the previous record high growth of 37 percent in deposits achieved last year versus previous year of 2009.

Total resources likewise ballooned to P12.3 billion in the first six months of 2011, or 30 percent higher than P9.48 billion recorded in the same period last year.

According to ONB president Alex V. Buenaventura, the huge increase in deposits was due to an increase in number of branches from 75 to 81 that widened the base of low-cost current accounts-savings account (CASA) depositors.

“Attractive time deposit interest rates brought in large depositors who are also commercial bank clients, and an increase in number of ATMs (automated teller machines) from 93 units to 107 units, generating a 26-percent increase in ATM active cardholder base from 251,000 in June 2010 to 316,000 end of the first half of 2011,” Buenaventura said.

ONB has a total depositor base of 525,000 accounts end June this year.

Meanwhile, loan portfolio quality improved as the non-performing loan (NPL) ratio declined to four percent end June 2011 from the six percent NPL ratio in the same period last year.

Likewise, the non-performing asset (NPA) ratio fell to just two percent in the same period from the four percent last year.

Buenaventura said that the improved collection through payroll deduction billings under the DepEd-APDS Salary Loan Program contributed to lower bad debts.

Likewise, the restructuring of its Banana Development Loan program, which utilized better time matching of farmers’ seasonal banana production cash flow and their restructured loan amortization schedule, also helped improve loan portfolio quality.

However in terms of net income in the first half of 2011, ONB reported that it remain similar to the same period last year.

Net earnings amounted to P136 million or exactly the same as the net income generated in same period last year.

Buenaventura said that the main reason for this zero growth in net income is that the bulk of loans came in the latter part of the second quarter, thus accrued interest income was minimal.

Still another reason for the flat growth rate is that treasury income on the bank’s almost P3.5 billion in liquid assets arising from the big surge in deposits are earning lower interest rates on investments in deposit instruments in commercial banks and in government securities.

“Though the net income represents zero growth versus last year, income level is still a profitable amount representing 27-percent annualized return on private investment and a 2.2-percent annualized return on assets,” the bank president added.

Risk-based capital adequacy ratio (CAR) stood at strong 25 percent, likewise unchanged from the same period last year.

Tuesday, August 9, 2011

Rural banking sector to pursue consolidation

Rural banking sector to pursue consolidation

By: Michelle V. Remo
Philippine Daily Inquirer
8:50 pm | Sunday, August 7th, 2011

The rural banking sector is inclined to pursue the consolidation of small industry players in a bid to gain financial strength and attract foreign investors.

Rural banks are currently prohibited by law to have foreign shareholders, but the Rural Bankers Association of the Philippines (RBAP) is convincing Congress to pass a bill that will allow its members to accept foreign equity.

RBAP president Ian Pama, in a speech last week, said the group would focus on the consolidation of the industry and on pushing for the proposed law allowing foreign shareholders in rural banks.

There are more than 600 rural banks in the country. By average, the rural banking sector has capital adequacy ratio of 19 percent, which is more than the 10 percent minimum requirement by the Bangko Sentral ng Pilipinas.

The group, however, admits they have some weak members and that consolidation will help address their capitalization woes.
RBAP believes that foreign investors would bring the necessary resources to support the expansion of the services of rural banks.

“As we continue to merge, consolidate and gain momentum, I believe it will only be a matter of time that will be allowed to welcome foreign equity that will make our individual banks even more relevant to our customers. Under my term, we will work with Congress and industry regulators to achieve this for our organization,” Pama said in his speech during an induction ceremony for new RBAP officials.

The Bangko Sentral ng Pilipinas is supporting the call for the opening up of the rural banking sector to foreign investments.
BSP Governor Amando Tetangco Jr. said the additional capital from foreign investors would help rural banks invest in technology that would help improve and expand their financial services.

Tetangco said the expansion of rural banks was consistent with the aim of industry regulators to improve the accessibility of financial services, especially in remote areas of the country where commercial and universal banks do not operate.

In response to the industry’s request, Congressman Sergio Apostol filed a bill that will allow rural banks to have as much as 40 percent foreign equity.

House Bill No. 4805 seeks to amend the Rural Bank Act of 1992, the existing law that prohibits foreign ownership in rural banks.
“Foreign equity investments would without doubt fill this gap and be a major stimulus for microfinance, micro-enterprise and agriculture sectors, and will therefore be catalysts in countryside development,” the bill says.

Monday, August 8, 2011

Rural banks prepare for entry of foreign investors

Rural banks prepare for entry of foreign investors

By Lawrence Agcaoili (The Philippine Star) Updated August 08, 2011 12:00 AM Comments (1)

MANILA, Philippines - The rural banking industry is preparing for the possible entry of foreign investors once the proposed bill of Leyte Rep. Sergio Apostol that would allow foreigners to buy a 40 percent stake in rural banks is passed into law.

Rural Bankers Association of the Philippines president Ian Eric Pama said rural banks operating in the country intend to surpass the current capital adequacy ratio of the industry currently pegged at 19 percent to attract foreign investors.

“We need to ensure that all our members are healthy and viable in order to welcome in the possibility of having foreign partners,” he stressed.

The industry’s capitalization is way above the 10 percent requirement of the BSP and the international standard of eight percent under the Basel Accord.

Pama, who is also president of Iloilo-based Valiant Rural Bank Inc., said the 2011-2012 board of directors of RBAP would work closely with Congress and the Bangko Sentral ng Pilipinas (BSP) to pave the way for the entry of foreign capital into rural banks.

Apostol, chairman of the committee on banks and financial intermediaries of the House of Representatives, filed House Bill 4805 seeking to amend Republic Act 7353 or the Rural Bank Act of 1992 to allow 40 percent foreign ownership for rural banks.

“As we continue to merge and consolidate and gain momentum, I believe that it will only be a matter of time when we shall be allowed and welcome foreign equity that will make our individual banks even more relevant to our customers,” he added.

Pama believes that foreign equity would help rural banks expand their operations to become a major stimulus for microfinance, micro-enterprise or small and medium sized enterprises (SMEs), and agriculture sectors thereby serving as catalysts in countryside development.

“I also believe that we must focus on providing innovative services and loans for the SME’s and the micro entrepreneurs to invigorate business activities in our provinces. We cannot continuously depend upon the National Government to invigorate local economic activity,” Pama said.

He pointed out that the industry releases approximately P2.7 billion loans every month as working capital for micro-entrepreneurs compared to a loan portfolio of P8 billion for the microenterprise sector as of end-2008.

The BSP is supporting the infusion of foreign capital into the rural banking industry in order to boost the competitiveness and financial muscle of rural banks.

“We support that for them to acquire additional capital and technology,” BSP Governor Amando M. Tetangco Jr. said earlier.

The total number of banks operating in the Philippines went down by 33 to 746 in the first quarter of the year from 779 in the same quarter last year after the BSP stepped up its campaign against problematic banks while major players in the banking industry continued to consolidate.

Data showed that the number of universal and commercial banks was steady at 38 while the number of thrift banks was also unchanged at 73.

However, the number of rural banks decreased to 635 in the first three months of the year compared to 667 in the same period last year and 647 as of end-December due primarily to the closure of weaker banks.

The BSP reported that the number of branches of universal and commercial banks, thrift banks, and rural banks increased by 240 to 8,124 in the first quarter of the year from 7,884 in the same period in last year.

Sunday, August 7, 2011

BSP to rural banks: Take lead in loan transparency

BSP to rural banks: Take lead in loan transparency

By Lawrence Agcaoili (The Philippine Star) Updated August 07, 2011 12:00 AM Comments (0)

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) has urged rural banks to take the lead in complying with the tighter rules on loan transparency to ensure the protection of consumers and promote healthy competition among credit providers.

BSP Governor Amando Tetangco Jr. said in his speech during the induction of the new board of directors of the Rural Bankers Association of the Philippines (RBAP) that the industry should practice integrity and transparency in doing business.

Tetangco said the central bank’s Monetary Board has approved a resolution last July 7 updating the rules implementing the Truth in Lending Act or Republic

Act 3765 passed in 1963 aimed to enhance loan price transparency and improve disclosure practices, thereby ensuring better consumer protection.

The new guidelines, he said, added a new subsection of the Manual of Regulations for Banks concerning the method of computing interest wherein banks now would only be allowed to charge interest based on the outstanding balance of a loan at the beginning of an interest period.

“Its objective is to ensure better consumer protection by enhancing loan price transparency and improving disclosure practices. In particular this circular prescribes a uniform way of computing interest based on the outstanding balance of the loan at the beginning of an interest period,” Tetangco stressed.

This rule effectively prohibits charging “flat” interest rates and other methods that misleadingly feature a markedly lower contractual interest rate than the actual effective annual interest rate (EIR) which is defined in accordance with the Philippine Accounting Standards (PAS) as the rate that exactly discounts estimated future cash flows through the life of the loan to the net amount of loan proceeds.

“This issuance which covers all credit providers whether bank or non-bank institutions effectively prohibits practices like the use of the so called flat interest rates or rates that substantially differ from the effective interest rate,” he said.

Furthermore, all loan-related documents should show repayment schedules as well as marketing materials and presentations should be consistent with the new regulation.

A standard format of disclosure is provided to ascertain that every borrower is provided with information that he or she needs to know about his or her loan in a manner that is simple and easy to understand.

“It is important to keep a public’s trust by making the true cost of their borrowing truly transparent,” Tetangco explained.

Current practices of some credit providers, particularly the use of so-called “flat” interest rates, show contractual rates for loans that substantially differ from the EIR.

The BSP has been receiving complaints about hidden charges and deliberate quoting of lower interest rates with higher up front charges to enhance loan product marketability.

The new transparency rule would take effect on July next year or one year after publication to allow mounting of a comprehensive information campaign and facilitate smooth implementation.

Saturday, August 6, 2011

Experts: Widen MSMEs’ finance support to achieve Asean common market goal

Experts: Widen MSMEs' finance support to achieve Asean common market goal

THURSDAY, 04 AUGUST 2011 20:28 ESTRELLA TORRES / REPORTER

FINANCE experts from the Association of Southeast Asian Nations (Asean) on Thursday urged governments to increase the access of micro, small and medium enterprises (MSME) to financing which, they stressed, is a critical part of establishing a single market for Asean members by 2015.
The experts from the regional bloc and counterparts from Japan and South Korea discussed in Bali, Indonesia, the mechanisms in providing access to financing of MSMEs and exchange of good practices with Japan and South Korea.

The meeting introduced credit guarantee to overcome difficulty of MSMEs in providing collateral. Experts also explored on enabling MSMEs on venturing capital to start up enterprises, as well as providing orientation and/or education in finance to increase access to commercial banks.

I.Wayan Dipta, deputy minister of Indonesia's Ministry of Cooperatives and Small and Medium Enterprises said  MSMEs serve as the backbone of economic development of Asean as these account an average of 96 percent of the total number of enterprises.

He said the biggest barrier to MSMEs is the lack of access to financing, particularly loans from commercial banks.

These SMEs also generate 50 percent to 98 percent of employment among the member-countries and contribute around 30 percent to 57 percent to gross domestic product and 19 percent to 31 percent of exports.

"To be competitive, the enterprises need to invest in innovation and improve operational efficiency and productivity. Without adequate financing, the enterprises cannot innovate and be competitive in the regional and global economic climate," said I.Wayan Dipta.

Asean finance experts are eyeing mechanisms such as public-private partnership, either in the forms of government-to-government, business-to-government and business-to-business in providing access to financing.

The 10 member-countries of Asean are the Philippines, Thailand, Indonesia, Malaysia, Vietnam, Singapore, Burma/Myanmar, Laos, Cambodia and Brunei.

SSS slashes interest rates on business loans

SSS slashes interest rates on business loans

The Social Security System (SSS), the pension fund for private-sector employees, has lowered the interest rate and relaxed its requirements to make it easier to firms to tap its business and social loans.

"The agency revised its loan guidelines to give companies easier access to credit, boost employment and expand SSS membership," SSS President and Chief Executive Officer Emilio S. de Quiros, Jr. was quoted as saying in a statement.

"Members have long been requesting SSS to lower its interest rates," Guillermo M. Urbano, Jr. told BusinessWorld in a phone interview on Friday.

The interest rate on a loan with tenor of less than a year has been slashed to 7.5% from 10.5%. That of a one- to three-year loan has been cut to 9.75% from 11.25% while loans with a tenor of three to five years has been lowered to 10.25% from 12%. Loans with tenor of more than five years and up to 15 years has been brought down to 11.25% from 13.5%.

Mr. Urbano said that the pension fund expects the number of loan applications to increase as a result of the move.
SSS launched its corporate loan facility in 1988.

Firms that tap the loans may use these to buy existing structure, expand or diversify businesses, and fund projects on forest development and sustainable energy. SSS has also opened the facility to companies engaged in mining, dredging, oil and gas exploration; companies engaged in these extractive industries, however, must present an environmental compliance certificate from the Department of Environment and Natural Resources.

"We now also allow schools, hospitals and tourism businesses to use the loan as working capital to tide them over during the lean months, which was not possible in the past," Mr. De Quiros also said. "It eases financing needs of hospitals waiting for payments of patients using health cards or credit cards."

Other eligible borrowers include owners of businesses engaged in agribusiness, food processing, manufacturing, services, commercial production, real estate development, utilities, transportation and communication.

Companies that wish to apply for business and social loans with SSS may course their loan applications through the pension fund’s accredited financial institutions such as the Development Bank of the Philippines, the Land Bank of the Philippines, the Philippine Veterans Bank and Planters Development Bank, among others.

The SSS business loan programs include:

• Financing for Tourism Projects;

• Financing for Industry Loan Program;

• SSS Special Financing Program for small and medium enterprises (SMEs); and

• SME Unified Lending Opportunities for National Growth (SULONG) Program also for SMEs.
Social loan programs, meanwhile, include:

• Special Financing Program for Vocational and Technical Schools; and

• Financing Program Educational Institutions.
SSS said it has released more than P23 billion to fund 5,072 projects that have generated 99,300 jobs, created 4,125 hospital beds and provided school facilities for almost 168,000 students.

BSP relaxes rules on small banks’ interbank deposits

BSP relaxes rules on small banks' interbank deposits

Small banks may deposit higher amounts in other banks after the central bank relaxed the limit on their interbank deposits.
The Bangko Sentral ng Pilipinas (BSP), in a statement on Friday, said: "The Monetary Board... recently approved the amendment to regulations on single borrower's limit (SBL) related to interbank exposures of small banks."

Small banks, usually located in the countryside, may deposit funds equivalent to 25% of their net worth or P100 million, whichever is higher.
"The ceiling of P100 million will benefit banks with net worth of less than P400 million as banks with a higher net worth will already be covered by the 25% limit," the BSP explained.

The SBL, imposed on the lending bank, is intended to limit exposure to a borrower or group of borrowers, including banks.
Small banks -- rural, cooperative and some thrift banks -- the BSP said, faced a unique problem with respect to their interbank deposits.
"These banks, especially those located in far flung municipalities, need to deposit sufficient funds in the nearest banks to be able to avail services such as deposit pick-up and delivery, and for security purposes," it said.

"Banks that will benefit from the amendment are small banks that play an important role in the government's efforts to promote comprehensive rural development by making needed credit available and readily accessible in the rural areas not being served by bigger banks," the BSP said.

These banks are required, however, to "exercise proper due diligence in selecting a depository bank..."

Friday, August 5, 2011

BSP’s New Rules on Loan Interest Promote Transparency

BSP's New Rules on Loan Interest Promote Transparency

by Mabs Phils on Friday, August 5, 2011 at 4:46pm

The new rules by the Bangko Sentral ng Pilipinas (BSP) (Circular No. 730, Series of 2011) seeks to promote transparency in loan prices by requiring all banks to charge interest based on the outstanding balance of a loan at the beginning of an interest period, and to quote the effective interest rates of loan products in their loan documents and marketing materials. The new rules will take into effect on 1 July 2012.

According to BSP, loan pricing transparency will protect consumers, promote healthy competition, and enable smooth and orderly functions of the entire financial system. This new policy will be applied to all institutions that offer credit in the Philippines including credit NGOs, credit cooperatives, lending investors, pawnshops, as well as banks.

To allow banks and other microfinance institutions to better understand their effective interest rates, MicroFinance Transparency has launched a Transparent Pricing Initiative for the Philippines. The aim of this initiative is to provide an opportunity for rural banks and other microfinance institutions to exchange information, standardize pricing practices and demonstrate their commitment to transparent and responsible pricing.

This opportunity allows banks to submit their data and obtain a comprehensive analysis of their effective interest rates and to graphically determine their rates in relation to other institutions in the market place. Rural banks will clearly benefit by participating in the initiative because by doing so they will obtain access to the details of pricing of the rest of the players in the market prior to their prices being made public. With the full knowledge of the position of their products relative to others in the market, rural banks and other microfinance institutions will be able to compete effectively and fairly in the microfinance market. This will also provide a more standardized method for clients to compare interest rates among various institutions.

Participating rural banks will enjoy other benefits by participating in the initiative as well. Banks that participate in the initiative will be certified as internationally-recognized transparent microfinance institutions by MicroFinance Transparency. They will also receive a certificate which can be displayed in their offices as well as a seal of transparency that the bank may freely use in their marketing materials and website.

For more information on this intitiative please visit the Transparent Pricing Initiative in the Philippines.

Tuesday, August 2, 2011

RE: Number of ATMs continue to rise

Hi Caloy,

Thanks for the information. Actually there are 717 ATMs in Rural Banks and Cooperatives that are members of MegaLink and/or BancNet (ExpressNet have no RB or COOP members).

Of these 717 ATMs:

313 are of ENCASH and Partners.

404 are spread across 12 Institutions, if we count NationLink and their Partners as one.

Since the BSP do not have access to Network ATM Distribution information, their numbers are actually very much understated.

Thanks,

Eric.

From: CARLOS ANI [mailto:carlosani@gmail.com]
Sent: Sunday, July 31, 2011 9:15 PM
To: Posterous (phildevfinance); post-PHILDEVFINANCE-tumblr; phildevfinance-wordpress; CARLOS ANI MY CLIPPINGS; myclipps; Phildevfinance at Yahoo Groups; carlosani1.jubi4033@blogger.com; Eric J. Severino; Executive Committee at SeedFinance Corporation
Subject: 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

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Monday, August 1, 2011

Smart joins microfinance advocates

Smart joins microfinance advocates
(The Philippine Star) Updated May 24, 2011 12:00 AM Comments (0)

MANILA, Philippines - Smart Communications Inc. has joined forces with the Microfinance Council of the Philippines (MCPI) to help promote the rapid development of the country’s microfinance industry.

Smart becomes the first telecommunications company to become a member of MCPI.

Through the Smart Money platform, microfinance institutions (MFIs) are able to expand their geographical presence and to offer their financial services to a wider client base. They can disburse loan proceeds and collect loan payments simply and securely, all via mobile.

Smart Money also enables MFI members to send and receive funds through their Smart mobile phone, whenever, and wherever they may be.

Since 2000, Smart has been in the forefront of providing mobile finance services to Filipinos. Its award-winning mobile commerce platform, Smart Money, has enabled Filipinos with limited or no access to banking institutions to experience financial services using one of the most ubiquitous devices of today-the mobile phone.

At the moment, Smart’s key initiatives that have benefited the microfinance industry are the nationwide rollout of Smart Money Centers which has enabled Filipinos to send and receive cash in the absence of banks and remittance centers.

Smart’s Island Activations Program – an initiative supported by the GSM Association (GSMA), the alliance of nearly 800 of the world’s mobile operators in 219 countries – provides mobile financial services to remote, underserved communities in the Philippines.

Another Smart initiative that has benefited the microfinance industry is Hapinoy, the country’s first sari-sari store chain which empowers female micro entrepreneurs with additional livelihood opportunities via their Smart e-loading businesses.

“This collaboration with the Microfinance Council of Philippines reinforces Smart’s commitment to provide affordable, accessible and relevant mobile solutions to Filipinos,” Tricia Dizon, Smart Financial Services Department head, said.

1:48 PM 8/1/2011

Beneficiaries of gov’t cash scheme turn to loan sharks

Beneficiaries of gov't cash scheme turn to loan sharks
By Gil C. Cabacungan Jr.
Philippine Daily Inquirer
3:22 am | Monday, August 1st, 2011

Loan sharks are preying on beneficiaries of the government's P21-billion conditional cash transfer (CCT) program, pocketing 10 percent of the amount that the poorest of the poor get monthly, two lawmakers said on Sunday.

Ako Bicol Rep. Alfredo Garbin said a number of CCT beneficiaries in the Bicol region were willing to get just 90 percent of the cash in advance from the loan sharks so they could buy appliances and engage in gambling, such as "jueteng" and cockfighting.

Garbin and Eastern Samar Rep. Benjamin Evardone said they would block the plan of the Department of Social Welfare and Development (DSWD) to increase the CCT allocation by close to 90 percent to P39.5 billion in the 2012 budget unless Social Welfare Secretary Dinky Soliman could show that the money was not being spent on frivolous expenses.

The proposed fund increase for the CCT, or the "Pantawid Pamilyang Pilipino Program," would expand coverage by 30 percent, from 2.3 million to 3 million families. In 2010, the CCT program covered only 1 million households on a budget of P10 billion.

The poverty reduction program, a continuation of the scheme started by the Arroyo administration, aims to encourage mothers in poor communities to send their children to school and undergo regular vaccinations, and to have checkups at health centers.

Under the program, each household can get between P800 and P1,400 a month in health and education benefits, depending on the number of children (at most three per family).

ATM cards

The CCT beneficiaries get their cash transfers every two months through automated teller machine (ATM) cards issued by state-run Land Bank of the Philippines and other handpicked banks.

In Bicol, the region receiving the biggest CCT allocation at P2.2 billion this year, a large number of beneficiaries have turned to "rediscounters" and "5-6" operators (who charge a 20-percent interest on loans) to cash in on the poor's benefits ahead of schedule, Garbin said.

Risk-free lending

The microlenders pay the beneficiaries 90 percent of their monthly allowance and get the remaining 10 percent as profit, a lending scheme which Garbin and Evardone described as "risk-free," considering that the loan sharks had obtained the borrower's ATMs to ensure that they get their money back on time.

Garbin said the rediscounters were working in close coordination with DSWD officials who might be more motivated in ensuring that the ATM accounts were replenished every other month than seeing the beneficiaries go for checkups or send their children to school.

TV sets

The beneficiaries use their cash advance to pay for appliances, such as television sets and stereo components or gamble, according to the Ako Bicol lawmaker.

"It is not surprising that appliance stores and cockpits have been enjoying brisk business since the CCT (program) was expanded this year," Garbin said in an interview.

Evardone also reported a proliferation of loan sharks and illegal gambling operations in Eastern Samar because of the expansion of the CCT program.

Higher sales

While the CCT program has spurred economic activity (higher sales of restaurants, grocery stores and secondhand clothes shops, along with higher attendance in public elementary schools), this has been overshadowed by the rise of "5-6" operators and persistence of the culture of mendicancy, he said.

Evardone said that even before the DSWD demanded a bigger outlay in next year's budget for the CCT program, Soliman should first provide Congress with a comprehensive report on the distribution of the funds.

Fake names

Soliman should also report how the DSWD addressed complaints about fake names on its master list and the program's alleged bloated handling costs (P4 billion this year) in the first six months of the year, he said.

While he agreed with the CCT concept of providing direct cash to those who need it, Garbin said its distribution should be based on work output.

"Since the beneficiaries are getting money without doing anything, they tend to spend it on nonessentials. It's easy come, easy go," he said.
"What we need to teach the poor is how to earn a living. For starters, we can use part of the CCT funds to hire workers to dig ditches, clean roads and help in disaster relief operations," Garbin said.