Tuesday, September 13, 2011

You’ll get your money back, PDIC assures LBC bank depositors

You'll get your money back, PDIC assures LBC bank depositors

By: Michelle V. Remo
Philippine Daily Inquirer
5:53 am | Tuesday, September 13th, 2011

The Philippine Deposit Insurance Corp. (PDIC) has assured depositors of
LBC Development Bank, many of them families of overseas Filipino
workers, they will get back their deposits which were mainly the
remittances of their loved ones working abroad.

In a statement, PDIC said all deposits covered by insurance and
confirmed as valid shall be reimbursed immediately on completion of the
validation process.

"PDIC assures the public, particularly depositors of LBC Development
Bank, that the corporation will pay all valid accounts and deposit
insurance claims as soon as possible," the insurer said in a statement.

In a press conference, PDIC executive vice president Cristina Orbeta
said it was believed many LBC Development Bank depositors were OFW
families given the bank's tie-up with courier and remittance firm LBC
Express.

She said PDIC will soon announce the schedule of forums where depositors
would be oriented on the insurance claim process. Such forums are
normally held in the bank's branches.

Last Thursday, the Monetary Board of the Bangko Sentral ng Pilipinas
placed LBC Development Bank, the financial services arm of the LBC
Group, under receivership.

Nestor Espenilla, BSP deputy governor for bank supervision, said this
was because, for one thing, the bank had become insolvent—meaning the
bank's liabilities had exceeded its assets.

Espenilla said LBC bank was engaged in unsafe and unsound banking
practices, such as paying higher than average interest rates for deposits.
"High return means high risk," Orbeta said.

Espenilla said that prior to its closure, the LBC bank had been under
the Prompt Corrective Action (PCA) program of the BSP. Still, it failed
to improve its financial standing, he said.

Banks under PCA are subject to stricter monitoring and are given
recommendations on how to improve their financial standing in order to
comply with the liquidity requirements of the BSP.

"LBC Bank had been under the PCA, but it failed to improve and address
the concerns of the BSP," Espenilla said.

LBC Bank has its head office in Makati City and 19 branches nationwide.
The bank has 321,516 depositors holding P6.09 billion in deposits.
PDIC said that of the deposits, P3.73 billion was covered by insurance.
PDIC insurance covers deposit accounts of P500,000 and below. Bigger
accounts would have to wait until the bank's assets are fully liquidated
to see if they would get anything back.

In Batangas City, LBC Development Bank depositors were "outraged" and
"distraught" over its closure.

"There were a lot (of depositors that came), especially this morning,
that we didn't even have time to take breakfast," said a PDIC
representative in Batangas City.

"You could see some of them almost crying. An old woman was shaking, I
saw her hands. She said her deposit was over P500,000," the
representative, who requested anonymity for lack of authority to speak,
said by phone.

Maria Theresa Enojado, LBC bank manager in Naga City, said in a phone
interview that she was "shocked" over the closure.
Enojado said "everything was OK and running smoothly without any
problems of liquidity," as far as she knew.

"Our main concern now is to ensure that depositors get back all their
deposits and for us to get our jobs back," she said.

In Cebu, depositors trooped to the LBC bank branches in the city after
hearing the news.

The PDIC had taken over the LBC bank branch on Gorordo Avenue on Friday
evening, according to the guard outside the bank. With reports from
Maricar Cinco and Juan Escandor Jr., Inquirer Southern Luzon; and
Jhunnex Napallacan, Inquirer Visayas

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Monday, September 12, 2011

State insurer PDIC takes over LBC Bank

Published : Monday, September 12, 2011 00:00 Article Views : 175 Written
by : LAILANY P. GOMEZ

THE policy-making Monetary Board has placed LBC Development Bank under
the receivership of the Philippine Deposit Insurance Corp. (PDIC).

By virtue of MB Resolution 1354, state-run PDIC took over the bank on
September 9, 2011. PDIC shall gather, verify and validate all bank
records and administer and preserve LBC Bank's assets for the benefit of
all creditors.

PDIC assured depositors of LBC Bank that all valid accounts and deposit
insurance claims will be paid as soon as possible. The state deposit
insurer also said that updates will be issued as soon as examination and
validation of accounts are completed.

PDIC will conduct a series of depositors' forums in the localities where
branches of LBC Bank are located. The schedules of these forums will be
announced as soon as possible in the bank premises and in the PDIC
website, www.pdic.gov.ph. During the forums, PDIC representatives will
explain the requirements and procedures in filing deposit insurance claims.

The state deposit insurer also advised the depositors to await
announcements on the schedules of the forums.

LBC Bank is a 20-unit thrift bank, with head office in Poblacion, Makati
City.

It has 19 branches nationwide.

Data from the Bangko Sentral ng Pilipinas showed that as of June 30,
2011, LBC Bank had estimated total deposit liabilities of P6.09 billion,
comprising one tenth of one percent of the total deposits of the
Philippine banking system.

Insured deposits amounted to P3.73 billion.

Total number of accounts reached 321,516, of which 99.4 percent were
fully covered by deposit insurance.

Announcements on the schedule of claims servicing operations will be
posted on www.pdic.gov.ph and in the bank premises, the PDIC said.

Sunday, September 11, 2011

Business process outsourcing put in perspective

The Philippines' business processing outsourcing (BPO) sector is fast
developing into one of the pillars of the nation's economy, with both
earnings and employment levels soaring in recent years -- though there
are concerns that international competition, rising costs and staff
shortages could undermine future growth.

Last year, the Philippines' BPO sector posted growth of 26% and
generated export earnings of about $9 billion, according to the Business
Processing Association of the Philippines (BPA/P), giving the industry a
5% share of gross domestic product (GDP).

Estimates by the World Bank suggest that the BPO and associated IT
sector have the potential to generate export earnings of up to $55
billion by 2020, equivalent to about 11% of GDP and directly providing
employment for more than 1.8 million Filipinos.

While BPA/P's own projections are not quite so optimistic, the
association has said that, over the coming five years, the industry will
continue to expand at an average rate of 15% per annum, with the sector
expected to earn some $20 billion and generate roughly 1.5 million new
positions by 2016.

The strength of the BPO industry was one of the reasons cited by ratings
agency Standard & Poor's (S&P) for maintaining the Philippines' stable
outlook forecast and its BB foreign currency long-term bond rating. In
its latest appraisal of the Philippines' credit ratings, issued on July
29, S&P said that BPO revenue, along with earnings from remittances, was
offsetting the country's weak fiscal profile and high public debt.
"The stable outlook encapsulates our expectation that remittances and
BPO receipts will continue to drive current account surpluses, while
prevailing government debt and interest burdens and the weak fiscal
profile will take time to resolve," explained S&P credit analyst Agost
Benard.

Successive Philippine governments have seen BPO as having the potential
to become a major revenue earner and source of employment. To help
achieve this, the government has implemented a series of measures to
assist the sector's further development, most recently with President
Benigno S. C. Aquino III's announcement in mid-July that his
administration would strengthen the industry's favorable environment
with extended tax holidays on BPO-related investments of up to eight
years and a reduction in bureaucratic procedures.

However, there has been criticism that the government's enthusiastic
support for the BPO sector is coming at a cost, with claims that not
enough emphasis is being placed on the development of local industries
and that much funding intended for the science and technology sector is
instead being directed to strengthening the ICT backbone of the BPO
industry.

In late July, the UN Conference on Trade and Development (UNCTAD) warned
that there was a danger of countries such as the Philippines becoming
too dependent on non-equity modes (NEMs) of foreign direct investment
like BPO. While there are distinct advantages to NEMs, such as high
income and low investment requirements, by their nature they are easy to
establish but also easy to lose, UNCTAD said.

Though BPO and IT-related activities accounted for a growing slice of
GDP last year and provided employment for 525,000 people in the
Philippines, the UNCTAD report noted that more needed to be done to
maximize developmental benefits from NEMs so as to protect against what
it called their "footloose" nature.

Diwa C. Guinigundo, the deputy governor of the Bangko Sentral ng
Pilipinas (BSP), agrees, saying in late July that while increased BPO
investments have been advantageous for the economy by creating new
revenue streams and boosting employment, there is also an increasing
need to pursue investments in manufacturing and other industries.

"Let's get more NEM investments, but let us create an environment where
we can rely less on them and more on industries," Mr. Guinigundo said.

The Philippines also faces increasing competition in the global BPO
industry, with Asian powerhouses India, China and Malaysia increasingly
taking on more BPO business. Other regional rivals such as Vietnam,
Indonesia and Thailand are also gaining momentum, thanks in part to
their lower labor costs.

Another issue that the Philippines must address is the need to deepen
the pool of trained staff working in the sector. The industry has a high
turnover of employees, with some estimates putting the rate at close to
50% per year. Even considering BPA/P's low-end projected annual growth
rate of 15% for the sector, this translates into hundreds of thousands
of new personnel required each year.

The government has made clear its commitment to grow the BPO industry.
But without working with the private sector to create better tailor-made
training programs that meet the needs of industry, the sector may not
achieve the ambitious goals set for it. Still, should all the pieces
come together, the sector has the potential to generate significant
levels of revenue that can then be ploughed back into other areas of the
economy.

Charles A. Colón is the Philippines Editorial Manager of Oxford Business
Group.

Thrift banks have less ways to comply with agri-agra law

SUNDAY, 11 SEPTEMBER 2011 19:20

RECENT adjustments on loans the banks extend to the agriculture and the
agrarian sectors have made thrift banks pine for the old days when there
were more eligible avenues for compliance than those at present.

Chamber of Thrift Banks (CTB) president Patrick Cheng, also the chief
executive at HSBC Savings Bank, said earlier regulations provided CTB
member banks plenty of avenues for compliance to so-called agri-agra
rules, which prescribes stiff penalties for lenders who fail to allocate
a given portion of their loan portfolios to farmer borrowers and
agrarian- reform beneficiaries.

The 25-percent agri-agra loan rule compels the banks to set aside at
least 15 percent of loan portfolio for borrowers in the agriculture
sector and the balance of 10 percent for agrarian-reform beneficiaries
and their families.

"The old agri-agra law provided alternative modes of compliance. Now
there are less of those. Obviously, that is a big concern for our member
banks," Cheng said.

This pertained to more recent refinements in agri-agra lending rules
that effectively diminished the number of avenues by which the banks
comply on pain with the mandate on punitive sanctions.

Cheng said representations have been made before the influential Bankers
Association of the Philippines (BAP), the umbrella organization to which
the foreign lender HSBC, HSBC Savings Bank's parents, belongs.

"The idea of agri-agra lending is obviously good and important.
Agriculture is an important sector of our economy. But we can [still]
expand the definition of agri-agra lending because some of the
definition is narrow," Cheng said.

He said they have sought BAP assistance in drafting a wider, more
liberal definition of lending to the mandated sectors.

"We are in discussion with the BSP [Bangko Sentral ng Pilipinas] to help
us draft something more inclined to countryside lending, something
broader that will include [lending to] schools, tourism entities and
others. This will be a broader initiative that will be helpful to the
banking sector," he said.

Cheng said the broader goal was to leverage more the banks'
capabilities: "We want a wider coverage [of eligible agri-agra lending]
instead of a narrow one."

He also said that while focusing resources on the agri-agra sectors is
an important mandate, growth in the favored sectors was not the only
measure of economic development. 

"There are many ways by which the country can grow and benefit from. The
Department of Finance has cited investment in tourism ventures and
others like water services and similar infrastructures," Cheng said. --
Jun Vallecera

Purisima urges more lending for tourism

THE COUNTRY'S Finance chief on Friday urged thrift banks to back
entrepreneurs undertaking tourism projects, saying such support would
help spur economic growth.

"We need to work together, the government, the banks and other private
sectors to create an ecosystem for tourism," Finance Secretary Cesar V.
Purisima said at the quarterly membership meeting of the Chamber of
Thrift Banks (CTB).

Mr. Purisima challenged members of the CTB to aid the government in
developing "a more entrepreneurial future" by extending financing to
entrepreneurs who want to put up tourism-related businesses.

He said tourism can further spur economic growth.

The Tourism department has said it targets to have 3.74 million tourists
this year, higher than the 3.52 million foreign visitors last year.

The Aquino government is boosting tourism in order to produce more local
jobs.

As of the first semester, there were 1.91 million foreign visitors
mostly coming from South Korea, the US, Japan, China and Taiwan.

"Though we have overseas Filipinos who send in remittances that
supporting our economy, we want them to come back to the country," Mr.
Purisima said. "They can't be our growth drivers forever."

As for the business process outsourcing (BPO) firms, another source of
foreign exchange, Mr. Purisima they are not enough to fully sustain the
country's growth.

Putting up tourism-related businesses in the countryside, he said, would
create alternative activities for tourists and give them an "enhanced"
experience of the country.

"If they have a good experience in the country, they would keep on
returning and one tourist would result in one job for one Filipino," he
said.

CTB President Patrick D. Cheng welcomed Mr. Purisima's challenge.

"Banks are willing to lend to entrepreneurs, but it would still depend
on the viability of the project," he said.

"Enhancements in the country's tourism sector would be beneficial for
our members as well as a lot of them are in the countryside so reforms
in the countryside would be good for most of our members," he added.

The CTB has 53 members at present.

SSS salary loan releases jump by 51%

SOCIAL SECURITY System (SSS), the pension fund for private-sector
employees, said its loan releases in Luzon rose by 51% in the first half.
In a statement, SSS yesterday said it released P1.76 billion in salary
loans in the first six months of the year as the number of borrowers
rose by 38% to 126,000.

Bulk of the loans were released in the Southern Tagalog region, said SSS
President and Chief Executive Officer Emilio S. de Quiros, Jr.
"The huge amount of disbursements may be because the Southern Tagalog
region is an export processing zone, so there are many businesses there,
thus, there is a huge volume of employees and SSS members in the
region," he said.

There are 6.3 million SSS members in Luzon, about 36% or 2.3 million of
which are in Southern Tagalog.

The pension fund also said the salary loan collections increased by 22%
to P1.76 billion in the first semester from P1.45 million collected a
year ago.

A salary loan allows an SSS member to meet short-term needs.

On its Web site, SSS said a salary loan may be availed by a member who
had paid at least six monthly contributions in the past year, prior to
the month of loan application filing.

For a one-month loan, the borrower must have remitted at least 36
monthly contributions before the month of loan application filing. For a
two-month loan, the borrower must have remitted at least 72 monthly
contributions before the month of loan application filing.

The SSS member must also have no existing or overdue salary loans.

PhilHealth must withhold taxes on remittances: BIR

THE PHILIPPINE Health Insurance Corp. (PhilHealth) must withhold taxes
from remittances to accredited hospitals and medical practitioners, the
Bureau of Internal Revenue (BIR) stated.

While the state-run firm is exempted from income taxes, it is not
exempted from its responsibility as a withholding agent of the BIR,
Revenue Memorandum Circular No. 38-2011, dated Sept. 1, stated.

"Among the income payments being subjected to expanded withholding tax
(EWT) are its payments to hospitals and medical practitioners who
rendered medical services to [PhilHealth] members," it explained.

PhilHealth is required to levy a 10% EWT on medical practitioners with
annual gross incomes of P720,000 and below. A higher tax rate of 15% is
charged if the gross income exceeds P720,000 in a year.

Meanwhile, payments to hospitals for the medical services provided for
PhilHealth members are subject to an EWT rate of 2%.

"However, some field or regional offices of [PhilHealth] do not withhold
the prescribed tax on payments… since it is their opinion that such
payments are just reimbursements of the members' benefits and not
payments for services rendered to [PhilHealth]," the issuance read.

The BIR clarified that professional and talent fees paid for the
services rendered by professionals, including medical practitioners, are
subject to tax, "to be withheld by the person having control over the
payment," which in this case is PhilHealth.

Since PhilHealth has a table of benefits per member depending on the
medical case, it can determine the amount of payments to be made to
hospitals and medical practitioners. This will dictate the amount of
taxes to be withheld, the BIR stated.

The BIR, which accounts for some 70% of state revenues, is tasked to
collect P940 billion this year.

The BIR has brought in P531.785 billion as of July, an improvement of
more than a tenth from the P467.282 billion netted in the first seven
months of 2010. However, it still fell short of the P534.9-billion
target. -- D. C. C. Jiao

GFIs told to stick to mandates

Published : Saturday, September 10, 2011 00:00

Written by : Lailany P. Gomez

THE Department of Finance has instructed government financial
institutions to focus lending on underserved sectors shunned by the
private sector.

This after the 53-member Chamber of Thrift Banks complained that
state-owned Land Bank of the Philippines and Development Bank of the
Philippines (DBP) were encroaching into the industry's "niche markets."

Finance Secretary Cesar Purisima said GFIs should "stay out of" what the
universal, commercial and thrift banks are already serving.

He said officers of LandBank, which the DOF secretary chairs, have been
instructed to focus on agrarian reform and agriculture.

"I told them not to compete with what or has already been serviced by
the private sector. Meanwhile, DBP is a conduit of multilateral
companies to provide cheaper source of funding that are available from
other banks," Purisima said on the sidelines of the CTB's general
meeting on Friday.

The DOF chief said the government-owned and -controlled corporation
(GOCC) Commission would look into merging state-owned banks so they
focus more on supporting the country's development.

"Once the GOCC Commission is operational, I think they will have their
hands free to determine if a consolidation of the banks is something
that will be pursued. But I don't want to second guess the commission,
since there are at least 3 parties involved. But once it is in
operation, the law allows it to restructure these banks," Purisima said.

DBP had said it was crafting a feasibility study on a possible merger
with LandBank, but this would still be subject to a "lot of discussions
with the finance department and meetings with Congress."

This merger forms part of the Aquino administration's effort to
streamline the bureaucracy.

Analysts said combining DBP and LandBank would give the government more
leverage in pushing private sector banks to merge, adding that the
combination would set an example.

They said the balance sheet structures of DBP and LandBank are major
consolidation factors.

LandBank caters to the farming sector, while DBP is into developmental
lending.

The Bangko Sentral ng Pilipinas has been egging on lenders to merge and
strengthen their balance sheets in preparation for new international
capital adequacy standards.

According to BSP, a healthy financial system should have less than 10
lenders.

Friday, September 9, 2011

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Thursday, September 8, 2011

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Wednesday, September 7, 2011

The challenging billions of people

Commentary -- By David E. Bloom

The challenging billions of people

CAMBRIDGE -- The world is in the midst of the greatest demographic
upheaval in human history. Although the human race took perhaps one
million years to reach one billion people (around the year 1800), we
have been adding successive billions every 10-20 years since 1960.

The world's population now stands at seven billion and is projected to
reach 9.3 billion by 2050. In other words, between now and 2050, the
world is likely to add to its population almost as many people as
populated the entire planet in 1950. Or think of it as adding another
China and another India. Feeding, clothing, housing, and otherwise
providing for this massive net addition to the global population is one
of the main challenges facing humankind.

If we use as our guide average material progress over the course of
centuries, it might seem that necessity will again serve as the mother
of invention, and that we will meet the population challenge, just as we
have met previous challenges, through technological and institutional
innovation. But long-term averages can mask significant volatility over
time and variation across countries. We know for certain that there is
great risk in the population growth that lies ahead, as nearly all of it
will occur in the world's most economically, politically, socially, and
environmentally fragile countries.

A failure to absorb large numbers of people into productive employment
could lead to mass suffering and myriad catastrophes. The continuation
of extreme cross-country income inequality could deter international
cooperation, stalling or even reversing globalization, despite its
potential to improve everyone's standard of living.

Rapid population growth also tends to accelerate the depletion of
environmental resources both locally and globally, and can permanently
undermine the prospects for their recovery.

Some developing countries have addressed these population challenges
well. For example, the East Asian "Tigers" cut their birth rates
precipitously in the 1970s and 1980s, and used the resulting demographic
breathing room to stunning advantage through judicious education and
health policies, sound macroeconomic management, and careful regional
and global economic engagement.

At the other end of the spectrum, countries in sub-Saharan Africa have
fared much worse developmentally, in no small measure due to their
inability to escape the crushing burden of rapid population growth and
youth dependency.

Although developing countries are the primary sites of the world's most
threatening population problems, the wealthy industrial countries face
some rather vexing problems of their own. From a purely demographic
perspective, the advanced economies' productive capacity has reached a
plateau of slightly more than two working-age people per dependent. But
that indicator is projected to plummet to 1.36 by 2050, posing a threat
to the sizable demographic dividend that these countries have enjoyed in
recent decades. Moreover, the rich countries can expect a massive
expansion in the proportion of elderly people in their populations,
owing to increased longevity, continued low fertility, and the
progression of baby-boom cohorts through the population pyramid.

Although economic performance in the context of population aging is
substantially uncharted territory, it is not hard to understand fears
about the fiscal integrity of pay-as-you-go pension and health-care
systems, and about growth slowdowns in the face of contracting workforces.

There are many policy suggestions to address fiscal sustainability and
workforce shortages already under consideration, including higher
retirement ages and mandatory contributions, together with lower
benefits. Liberalizing international migration could be another
response, though it would be unlikely to offer appreciable relief, owing
to social and political opposition to increased immigration in most
developed countries. We can, however, count on rising rates of female
labor-force participation (spurred by continued low fertility),
increased levels of effective labor as educational attainment continues
to rise, and higher savings rates in anticipation of greater longevity
and longer retirements.
In the end, it is unlikely that the worst fears associated with our
graying populations will be realized. But a great deal of analysis,
debate, behavioral adaptation, and policy reform -- in both the public
and private spheres -- will have to take place before we can be sure.

Although the issues immediately confronting developing countries are
different from those facing the rich countries, in our globalized world,
demographic challenges anywhere are demographic challenges everywhere.
And, while the challenges posed by population change are formidable,
they are most likely surmountable.

It would be irresponsible to neglect those challenges and submit
humankind, unnecessarily, to the great perils that we can already
reliably foresee.

David Bloom is professor of Economics and Demography at the Harvard
School of Public Health.

Project Syndicate

www.project-syndicate.org

Updates on the BAP-Credit Bureau

29 June 2011

Mr. Leonilo 'Topper' Coronel, Managing Director of the Bankers
Association of the Philippines Credit Bureau (BAP-CB), presented the
private credit bureau's latest changes and activities to participants of
the 2011 RBAP-MABS National Roundtable last May 23-24 in Manila. He
shared the latest developments in the effort of BAP-CB and a consortium
of microfinance institutions' (MFIs) to build a responsive credit
information system for the microfinance sector. (see Philippine Star
article)

He reported the over 60% growth in the number of participating rural
banks from 28 to 46 in May 2011, attributing this increase to the
BAP-CB's efforts to reach out to rural bank federations in the country,
and the assistance of the USAID-supported RBAP-MABS Program.

He also underscored the enhancements in the bureau's Negative File
Information System (NFIS) particularly its accessibility via the
Internet, which allows the credit bureau to automatically process
requests on a daily basis, even on non-working days. In addition, BAP-CB
provides its participating institutions with (1) one-on-one training for
their key officers, (2) data management modules, and (3) other data
mining applications such as SNIP (or Similar Names Inquired Previously).
Finally, the inquiry fee has been reduced by half – the bureau now
charges P5.00 per inquiry versus P10.00 in the past.

Mr. Coronel also presented the activities that BAP-CB is currently
working on with major microfinance institutions (MFIs) that rural banks
can participate in soon. In what he described as a historic meeting of
minds, the leading microfinance players in the country agreed to build a
'client at risk' file in contrast to the traditional 'caution list' or
negative list for delinquent borrowers. The objective is to provide
reform programs for delinquent borrowers from lower income segments with
the aim of rehabilitating their credit worthiness and making them
'bankable' again based on a better understanding of their financial
situation.

The tripartite partnership for the experimental project has defined the
roles for each of the partners: the group of MFIs provides the vision,
strategic directions and specific business requirements; the Rafael B.
Buenaventura (RBB) Foundation, a microfinance enabler, plays a key role
as catalyst to match needs against resources; and BAP-CB develops
solutions, operates the technology infrastructure, and provides credit
bureau services for the participating institutions. This project enables
MFIs to create a new category of outreach that supports former borrowers
and provides a pathway for them to become financially healthy and
creditworthy once more. Furthermore, as rural banks join the efforts of
the BAP-CB, the client database is enriched to cover key rural areas in
the country and not just urban town centers. This supports the credit
risk management processes of many financial institutions and at the same
time allows rural banks to explore 'client at risk' issues.

Interest in BAP-CB services has also prompted the Federation of Laguna
Rural Banks to pilot test the sharing of positive data among its
members. Furthermore, BAP-CB is now at the forefront of developing
SMS-based or text-based information inquiry through the mobile phone
that will open up a new venue for more accessible credit information
even for banks' field credit officers.

The USAID-supported RBAP-MABS program started its partnership with the
BAP-Credit Bureau more than 10 years ago with a pilot implementation in
Mindanao that allowed some rural banks to test the use the credit bureau
services. BAP-Credit Bureau is a private non-government organization
providing credit bureau services.

Mr. Leonilo"Topper" G. Coronel is the current Executive Director of the
Rafael B. Buenaventura (RBB) MicroFinance Resource Center Foundation,
which was established by the BAP to continue the vision of the late BSP
Gov. Rafael B. Buenaventura in support of microfinance.

Asia sizes up threats from faltering United States, Europe

SINGAPORE/BEIJING -- Singapore's finance minister yesterday said a
global recession looked more likely than not and a Chinese official
acknowledged China's growth may slow to a 10-year low, highlighting
Asia's rising concern over its exposure to US and European risks.

If Europe's debt troubles deepen or the United States slips into another
recession, Asia's export-driven economies would be vulnerable through
both trade and investment channels. Economists have already begun
marking down growth forecasts while stocks have fallen across the region.
Japanese, Chinese and South Korean financial regulators discussed the
global threats in a conference call yesterday, Japan's financial
services minister told a news conference.

"Asia will not be immune to a global slowdown," said Tharman
Shanmugaratnam, Singapore's finance minister. "We are already at stall
speed in the US and Europe, which means we are now more likely than not
to see a recession."

Singapore, one of the world's biggest trade hubs, is heavily exposed to
global trade cycles and its economy contracted in the second quarter,
compared with the prior three months. Some economists predict another
contraction in the July-to-September period, which would fit the
commonly used recession benchmark of back-to-back negative quarters.

Mr. Tharman's prognosis was gloomier than those of most US and European
officials, who still see the global economy escaping another recession.
World Bank President Robert Zoellick, speaking in Singapore at the same
conference as Mr. Tharman, said another recession was unlikely although
the risks were high.
But a surprisingly weak US August employment report and mounting worries
about European sovereign debt sustainability have heightened concerns of
a downturn.
US stock markets were expected to sell off when they reopened on Tuesday
after a three-day holiday weekend. European shares fell sharply on Monday.
With growth constrained in most advanced economies, investors are
looking to emerging markets to pick up the slack. But growth is already
slowing in countries such as China, and with inflation stubbornly high,
policymakers are not inclined to provide much of an artificial boost.
Huang Guobo, the chief economist at China's currency regulator, said
growth may ease to below 9% in 2012, but fighting inflation remained the
top policy priority.
"The weakening global demand for Chinese exports will be a challenge,"
Mr. Huang said. "Next year, if the situation continues, China's growth
rate may fall below 9%."
Many private economists have already cut their 2012 growth forecasts for
China, so a sub-9% reading next year would not come as a big surprise.
However, it would mark a significant slowdown. China, the world's second
biggest economy, managed to sustain growth of more than 9% even during
the depths of the global financial crisis in 2008 and 2009.
China expects growth to average 7% over the next five years, so slipping
below 9% in 2012 would not be a policy disaster. In fact, it might help
to contain inflation, which hit a three-year high of 6.5% in July.
Data due on Friday is expected to show it moderated a bit in August,
although it is almost certain to remain far above China's annual target
of 4%.
Asia's advanced economies were also wary of global repercussions.
Australia's central bank held interest rates unchanged yesterday, as
expected, but said the outlook for the global economy was less clear.
Central banks in Japan, South Korea, Indonesia, Malaysia and the
Philippines hold policy-setting meetings later this week. -- Reuters

Economies need to focus on hiking domestic consumption, investment

Asia-Pacific countries should focus on increasing domestic investment
and consumption as global risks have increased, the central bank chief
and an economist of a United Nations agency yesterday said.
"Global economic activity has weakened and become more uneven and
downside risks are growing," Bangko Sentral ng Pilipinas
(BSP) Governor Amando M. Tetangco, Jr. said in a keynote speech at a
forum on lessons learned from the 2008 global crisis.
The growth of advanced economies is being hindered, he said, while
emerging economies are showing resiliency. A continued reliance on trade
with developed countries, however, was seen as a vulnerability.
"The main channel in which Asia will be affected will likely be via
trade, with more open and export-driven economies likely to be more
vulnerable," Mr. Tetangco said.
Nagesh Kumar, an economist at the UN Economic and Social Commission for
Asia and the Pacific (UNESCAP), concurred. The challenge, he noted, "is
to boost demand in the region to complement sluggish demand in developed
countries."
The policy issue for the region, said Mr. Tetangco, is how to "increase
domestic investment and consumption so that there would be multiple
planks for sustaining growth".
Mr. Kumar said this could be achieved by focusing on agriculture
productivity, rural development, the construction of basic services and
infrastructure, and social protection.

Philippine economy is losing steam

Core -- By Benjamin E. Diokno

The Philippine economic expansion is definitely losing steam. And three
international banks have just downgraded their projections of Philippine
growth forecasts for 2011 to confirm it: Citigroup to 4.8% from 5.5%,
HSBC to 4.3% from 5.2%, and Credit Suisse to 4.3% from 4.6%.

It looks like GDP growth for this year will settle, at best, at around
4.5% or lower, below the revised 5% to 6% government forecast, and much
lower than the aspirational goal of 7% to 8% GDP growth.

But nobody believed the government's aspirational growth targets in the
first place -- except for some super-optimists.

When the political crisis erupted in the Middle East and North African
(MENA) territories erupted, and with the threat on overseas remittance
es and higher oil prices, government economic managers were quick to
dismiss the threat as manageable.

When Japan was hit by its triple tragedy -- earthquake, tsunami, and
nuclear fallout -- President Aquino's economic men were quick to dismiss
the catastrophe as transitory and some, in fact, saw huge opportunities
for Filipino businessmen and contractors down the road. The effect of
the Japan is a net positive for the Philippines, some government
officials insensibly argued.

Don't they talk to each other?

When Standard & Poor's downgraded the United States credit rating,
President Aquino prematurely stated that it wouldn't have much impact on
the Philippine economy and investments. It was reasonable to assume that
the President had been briefed by his economic managers before he made
his statement.

Apparently that was not the case. Appearing before the Senate finance
committee, the Monday after the weekend the US triple A credit rating
was cut, the economic managers admitted that they had yet to study the
possible impacts of the the US credit rating downgrade on the 2012
national budget.

BSP Governor Tetangco asked for "some time to assess the potential
impact." However, BSP expressed the view that the impact of the decision
of S&P to downgrade the triple A credit rating of the US would be
short-lived. Finance Secretary Purisima rightfully asked for more time
to be able to determine what markets would react to the US downgrade,
and how it would impact on the Philippine economy.

But what a contrast. Two days after the US downgrade, Mr. Aquino had
made up his mind: it would not affect the Philippine economy. His
economic men, on the other hand, were more pensive and asked for more
time to evaluate the historic US downgrade.

Even as all these were happening, analysts were calling the attention of
policy makers to the slow-moving infrastructure program and the stalled
public-private partnership (PPP) initiative. Not to worry, we have a
catch-up plan, Budget Secretary Abad assured the general public. We're
still on track on the PPP, said Finance Secretary Purisima.

Reality check

Fast forward. The economic numbers are in: the economy grew at 3.4% in
the second quarter of 2011, the slowest since Mr. Aquino took power. For
the first semester of 2011, the economy grew by 4.0% -- much lower than
the aspirational growth of 7% to 8%. But importantly, the economy slowed
as a result of all the external and domestic factors that were not
supposed to affect the Philippine economy: weak world economy, political
crisis in the MENA area, Japan's triple tragedy, US downgrade and the
risk of global double-dip recession, and severe government underspending.

On the underspending and slow implementation of projects, how credible
is the catch-up plan? First, under the best possible condition, even if
all the projects appropriated in the 2011 budget are implemented between
now and the end of the year -- that's less than four months -- the
contribution of public infrastructure to the economy will still be negative.

The harsh reality is that the President proposed, and Congress dutifully
approved, an infrastructure budget that is much smaller than the
previous year's. The budget for DPWH for 2011 is P95.0 billion, 27.6%
lower than the P131.3 billion in 2010.

Infrastructure and other capital outlays in 2011 is P241.7 billion, 8.4%
higher than the P223.0 billion in 2010. As percent of GDP,
infrastructure and other capital outlays is 2.4%, lower than 2.5% in
2010. It is generally known that the total overstates the allocation for
infrastructure since it includes other capital outlays which may include
buildings, equipment, cars and trucks, chairs and desks, and other
non-infrastructure
spending.
The reality is that the Executive Department cannot spend more than what
Congress has authorized it to spend. That's the right path.
The extent of underspending is staggering: from January to July this
year, actual spending plunged by P91.5 billion or by 58.7% compared to
the same period last year. During the same period, actual spending was
one slightly one-fourth (26.7%) of programmed budget.
Not surprisingly, public construction contracted by 51.2% in the first
half of 2011, compared to a growth of 27% during the same period last
year, according to the National Statistics Coordination Board.
What about the much-vaunted PPP initiative? A disaster -- none of the
projects that were announced last year and were supposed to be bid this
year has taken off.
The earth-shaking news, however, is that the head of the agency tasked
to oversee the PPP initiative has resigned. It's awfully hard to put a
positive spin to the resignation. When the quarterback of a team is
taken out (injured, walked out, relieved) of the game early in the first
quarter, that's a bad sign. But if the bench is deep, say if the team
has two to three good reserves, then a recovery is possible.
But Mr. Aquino's centerpiece PPP program is already very much delayed. I
don't know enough of the PPP organizational structure to say whether the
PPP team has good enough reserves. But when the team leader resigns, it
should have the effect of hurting the performance of the team, even
temporarily.
Time -- and the potentially destructive weather for the next few weeks
-- is not on the side of the government's catch-up plan for its
infrastructure program. There are less than four months between now and
the end of the year. But public authorities have to reckon with a few
more rainy weeks up front and later a few laid-back weeks in December --
it's hard to get things done in the Philippines when the Christmas
season sets in.
All told, more than half of the government projects authorized by
Congress in the 2011 budget will not get done this year. Missed
opportunities. You bet?

Forex rules eased further by BSP

THE BANGKO Sentral ng Pilipinas (BSP) yesterday said it will allow
companies with unregistered loans to buy dollars from banks, in another
move to stem the peso's appreciation amid expectations of continued
heavy capital inflows.

The central bank also raised its outlook for its gross international
reserves (GIR), which hit $71 billion in July, due to these inflows.

"For a certain period, we will allow companies and entities with foreign
loans that are unregistered to buy dollars to service their loans," BSP
Governor Amando M. Tetangco, Jr. told reporters yesterday.

"This will increase the demand for dollars," he said, adding this will
ease pressure on the peso.

The move is also "part of the response to strong capital inflows."

At present, foreign or foreign currency-denominated borrowings must be
approved by and registered with the central bank.

Government borrowings must have prior approval, while those of private
firms must be approved and registered.

This is to allow the BSP to monitor the size of the country's foreign
obligations and keep debt servicing costs manageable.

For private firms, approval and registration are required if the loans
are guaranteed by the public sector or covered by foreign exchange
guarantees issued by authorized agent banks.

Another condition is if the loans will be serviced with foreign exchange
to be purchased from these banks or these banks' forex units, or
obtained by non-bank financial institutions for the purpose of relending.

"Even if they did not register, they will be allowed to buy dollars
because the present regulation says you have to register before you have
to buy dollars," Mr. Tetangco said.

The plan will be implemented next year and for a limited period. Mr.
Tetangco stressed the dollar purchases should be used to pay for
existing dollar-denominated debts.

At present, Mr. Tetangco said those with unregistered foreign loans buy
dollars from the "parallel market" or the black market.

The peso, even if it slid to P42.285 per dollar yesterday, has remained
strong as it opened at the P44-per-dollar level at the start of the year.

Exporters have complained, while shipments have slowed due to declining
orders from abroad.

Capital inflows, meanwhile, have been strong this year, as emerging
markets have attracted investments seeking yields.

Foreign portfolio investments -- also known as "hot money" for the ease
with which they enter and exit the economy -- hit $2.832 billion as of
Aug. 12, more than four times the $715.97 million as of Aug. 13 last year.

The central bank has been unwilling to impose capital controls, choosing
instead to make it easier to buy dollars.

In October of last year, the BSP approved new rules that made it easier
to take dollars abroad.

Among others, it increased the limit of over-the-counter foreign
exchange purchases by residents to $60,000 from $30,000 at authorized
agent banks and foreign exchange corporations.

It also raised the pesos departing tourists or balikbayans may convert
back to dollars to $5,000 from $200 without need to show proof they sold
dollars for pesos.

With capital inflows expected to remain heavy in the coming months, Mr.
Tetangco said the BSP now expects the GIR to rise to $74-75 billion this
year.

The central bank originally forecast $70 billion but this was breached
two months ago.

Mr. Tetangco said the balance of payments (BoP) surplus could be higher
than expected as "the first semester [figures] were already big."

The country recorded a $6.3-billion BoP surplus as of July, up by 82%
compared to last year. This was also around 94% of the full-year
estimate of $6.7 billion.

The central bank attributed the high surplus to inflows from
remittances, exports and tourist receipts and investments. -- N. J. C.
Morales

Plantersbank targeting south’s banana growers

Plantersbank targeting south's banana growers

DAVAO CITY -- Planters Development Bank (Plantersbank) and state-run
Philippine Export-Import Credit Agency (Philexim) have rolled out an
initial P2.5-billion special loan window tailor-fitted to the
requirements of Mindanao's banana growers.

Gerardo V. Munda, Plantersbank vice-president for the VisMin Lending
Department, said a loan applicant may borrow as low as P1 million to as
much as P50 million under the program.

But there are special cases, he said, when applications over the maximum
cap may also be approved. Philexim, which serves as guarantor, will
cover 90% in case of losses, he said.

"We will do company calls so [growers] know about the program," he said.

Both Plantersbank and Philexim would also solicit suggestions from
banana companies, particularly those belonging to the Pilipino Banana
Growers and Exporters Association (PBGEA), on how to fine-tune the
program to get the desired results.

Stephen A. Antig, PBGEA executive director, said it would be helpful for
banana growers if both Plantersbank and Philexim allow restructuring to
cover losses from natural disasters.

"We need insurance protection for the crops because in case of
disasters, we have difficulty collecting from the growers," he said.

Mr. Antig said the growers apply for refinancing and spend millions to
rehabilitate the farms but floods or intense drought could wreak havoc
on the industry like what happened during the El Niño phenomenon in the
first quarter of 2010 when 18,000 hectares, out of over 50,000 hectares,
of banana plantations sustained damage.

Data from the association revealed that around 240,000 workers are
dependent on the local banana industry, which generates $720 million in
export receipts. Banana is the second biggest export product of
Mindanao, after coconut, and is the fifth largest in the country.

Mr. Antig said the banana industry contributes nearly a quarter of the
country's total agricultural exports. The Philippines, meanwhile, only
trails Ecuador in terms of banana exports and is the only Asian country
to land among the top five, which are dominated by South American
countries like Colombia, Costa Rica and Guatemala. -- Joel B. Escovilla

Filipino kids lack money management skills -- study

BY DIANE CLAIRE J. JIAO, Reporter

Filipino kids lack money management skills -- study

HONG KONG -- Almost all Filipino children have regular access to cash,
but they still do not understand key money concepts, such as earning,
saving and spending, and the impact these have on their lives, a study
showed.

Nearly all Filipino parents also value financial literacy for their
children, as only a fifth of them believe their kids have good money
management skills.

A total of 99% of Filipino parents claim their children receive regular
pocket money, usually by the age of seven, a study commissioned by
insurance giant Prudential Corporation Asia showed yesterday. Some 93%
also say their kids get additional money as gifts.

However, only 19% of Filipino parents think their children have
"adequate" money management skills, and 98% want their children to learn
financial literacy, the report noted.

The study, conducted by Oracle Added Value from March to May this year,
spans seven Asian markets: Hong Kong, Singapore, Malaysia, Thailand,
Vietnam, Indonesia and the Philippines.

Some 3,500 parents with kids ages 7 to 12 years old across the region
were interviewed, with 500 parents from the Philippines, particularly in
the cities of Manila, Cebu and Davao. Parents from the middle 60% income
brackets were targeted.

While nine out of 10 Filipino parents claim their children knew that
adults must work to earn money, nearly six out of 10 say their kids do
not hesitate to just ask for more money whenever they need it, the study
stated.

A third of Filipino parents also tend to give in when their children
request for more money.

"Parents in the Philippines are more relaxed about giving their children
more money, since in Asia, only a quarter of parents do so," Oracle
Added Value Regional Research Head Arthur Tam told reporters during a
media briefing yesterday.

Moreover, only 52% of Filipino children have a habit of saving, as
compared to 59% of Asian kids, the data showed. Filipino kids save only
42% of their money, about the same level as the 41% seen in the region.

"Children do not have a strong understanding of the purpose of saving,"
the study explained further.

Eight out of 10 Filipino kids save "simply to buy what they want," while
only two out of 10 "save for the future." In contrast, six out of 10
Asian children save for their wants, while three out of 10 save for the
future.

In terms of expenses, just 8% of Filipino parents believe their children
keep a record of their spending, the same percentage seen in the region.
Majority of parents, 59%, also do not keep track of their kids'
spending, the report showed.

"The kids don't record their expenses and the parents don't either.
There is just a hole in the middle as to how much the children have been
spending," Mr. Tam said.

Parents have more of an "advisory role" in their children's money
management, with only a fifth of Filipino parents interfering in their
kids' finances, the study added.

"However, mothers and fathers want to get more involved in their
children's financial education and feel it is their responsibility to do
so," Mr. Tam explained.

Ninety-four percent of Filipino parents will utilize a television or
Internet entertainment program to teach money management skills to
children, he said.

In line with the findings, Prudential yesterday launched a financial
literacy campaign specially designed for children. Cha-Ching, a series
of animated musical cartoons focused on money matters, will air across
the region starting this month on Cartoon Network, Asia's leading
children's channel. A Web site, games and phone applications will also
complement the TV program.

"We saw a need to round out our financial literacy efforts to an even
younger audience. Children in Asia are growing up in families with more
disposable income than they had previously and there is now a growing
interest in and need for financial literacy skills for children,"
Prudential Chief Executive Officer Barry Stowe said during the press
conference yesterday.

"Cha-Ching will be a fun, interactive and engaging way for parents to
teach their children money management. It is better to show kids what to
do than to tell them what to do," he added.

The campaign will also be a key strategy in targeting the Philippines'
lack of awareness in terms of financial management, said Antonio G. de
Rosas, the Chief Executive Officer of Prudential's Philippine arm Pru
Life UK.

"An effective financial literacy program should start from the core,
from childhood to be ingrained in the countryís culture and be
implemented in the long-term. The youth and families will surely benefit
from the Cha-Ching project of Prudential and Cartoon Network," Mr. de
Rosas said in a statement.

Prudential Corporation Asia is part of Prudential plc, headquartered in
London and one of the world's largest financial service firms.

Tuesday, September 6, 2011

PhilHealth card loaded with benefits

September 05, 2011

Sep 06, 2011 (The Manila Times - McClatchy-Tribune Information Services
via COMTEX) -- THE Philippine Health Insurance Corp. (Philhealth)
launched its new card that is loaded with benefits.

The card entitles all PhilHealth members to discounts for medicines and
other health services. Watson's Pharmacy will give discounts for
medicine and cosmetic products while Rose Pharmacy and SouthStar Drug
will have discounts for its unbranded generic drugs. Qualifirst, a
subsidiary of United Laboratories, will also give 50-percent to
60-percent discount for its generic medicines. Also, Glaxo-Smith Kleine
will offer 80-percent discount for their flu vaccines while PQ Health
Shield will provide 20 percent discount on all vaccines given in their
outlets. Fresenius Medical Care will reduce the price of hemodialysis
from P6,700 to P4,000 in its 18 outlets in Luzon and Visayas. Vivian
Sarabia, on the other hand, will give free eye \exam and 20-percent
discount for lenses.

Unilab will shoulder the P50 card fee for senior citizens.

The new scheme is in line with the government's Universal Health Program
that aims to provide better PhilHealth coverage to members.

"We launched this new ID card because we are employing another approach
to further expand our membership base and help achieve our government's
goal of Universal Health Care by 2013. To do this, we are adding value
to the PhilHealth card by loading it with incentives and privileges that
our members may avail themselves of at participating commercial
establishments. As such, even if they are not hospitalized, they will
still be able to make use of their PhilHealth ID card to maintain their
good health." PhilHealth President and Chief Executive Officer Dr. Rey
Aquino said.

The project will first be implemented in Metro Manila on September 12,
Luzon on September 19, Visayas on September 26 and Mindanao on October 3.

Those who want to become Philhealth members can go to any SM mall or CIS
Bayad Centers to register. Globe and Smart telecommunications will allow
users to transact with PhilHealth through their mobile phones.

___ (c)2011 The Manila Times (Manila, Philippines) Visit The Manila Times
(Manila, Philippines) at www.manilatimes.net Distributed by MCT Information
Services

Sunday, September 4, 2011

BAC services Malayan Group microinsurance

September 2, 2011, 11:08pm

MANILA, Philippines — A company looking to succeed in offering
microinsurance must be able to handle the specialized needs of the vast
market it presents. A lot of the processes involved in traditional
insurance markets must be re-engineered into a different level of
service to garner the attention and interest of the low-income groups.

Showing its commitment to develop this market further, the Malayan Group
of Insurance Companies, the country's largest non-life insurance group,
has designated the Bankers Assurance Corporation (BAC) to service the
microinsurance segment, and to specialize on the insurance requirements
of the "masa" market.

Formerly known as the Malayan Zurich Insurance Company, BAC is tasked to
formulate products and institute specific processes that extend the
benefits of non-life insurance to what is considered as a previously
non-insurable segment.

"The microinsurance market requires a dedicated degree of service," said
BAC President Joel T. Almagro. "Products must be more consumer friendly
and affordable, require less documentary requirements, and of course,
offer genuine value that customers can easily understand and appreciate."

Recognizing the special requirements of this market, BAC has launched
its Bayan Asenso line of products that offer packages of insurance
covers and financial assistance, providing personal accident insurance
as well as protection for the home, small business, and family.

"Our role is to leverage on the strengths of Malayan Insurance to serve
the greater market of low-income Filipinos more efficiently," he added.

"We have a long way to go since only a small industry niche engages in
microinsurance," said Almagro. "BAC is committed to help generate
greater public awareness on the importance of having risk protection for
the low-income and informal sectors of society."

Saturday, September 3, 2011

AmCham pushes for lifting of foreign equity prohibition in rural banks

THE AMERICAN Chamber of Commerce of the Philippines (AmCham) has urged
lawmakers to remove the cap on foreign equity in rural banks, the Joint
Foreign Chambers of the Philippines (JFC) posted on its business
advocacy website on Wednesday.

The recommendation came as the American business group expressed, in a
letter dated Aug. 19, its support for the House banks and financial
intermediaries committee' efforts to amend Republic Act 7353 or the
Rural Banks Act of 1992 through three proposals, House Bills (HB) 4805,
4854, and 4519.

In its original form, the act provides that a rural bank's capital stock
be fully owned and held directly or indirectly by Filipino citizens and
other legal entities, such as corporations and cooperatives.

HB 4805 and 4854 propose to allow rural banks to have foreign equity of
as much as 40%, while HB 4519 wants 60%.

"We recommend that the limits on foreign equity be deleted altogether.
Allowing foreign capital to come in would certainly maximize the
investments in rural banks," Jeffrey C. Woodruff, AmCham executive
director, said in a letter to Leyte Rep. Sergio F. Apostol, chairman of
the House banks and financial intermediaries committee.

"If limits were set, exceptions should be allowed in case of the
acquisition of a distressed bank with a reasonable grace period to turn
around and recoup the investment," he added.

Mr. Woodruff explained the reform would infuse capital into rural banks,
thus allowing them to expand services, improve lending capacity, invest
in modern technology, and reach remote areas of the country where
commercial banks are absent.

The relaxation of foreign equity limits in the country is one of JFC's
business competitiveness advocacies under its Arangkada (Accelerate)
Philippines campaign. -- E. J. Diaz

BSP issues guidelines on group-wide compliance with Agri-Agra Credit Law

A BANK'S loans to the agriculture and the agrarian reform sectors, which
exceed the requirements of the Agri-Agra Reform Credit Law, can be used
to fill the deficiency of another bank, as long as the two belong to the
same banking group.

Bangko Sentral ng Pilipinas (BSP) Circular 736 dated July 20, 2011 but
published in a newspaper only on Friday, also provides the way to
compute a bank's total loanable funds, which will serve as basis for
determining how much the bank should set aside for loans to the
agriculture and agrarian reform sectors.

"The compliance with agri-agra mandatory allocations of funds under
Republic Act (RA) 10000 shall be allowed on a group-wide basis so that
excess compliance of any bank in the group can be used as compliance for
any deficient bank in the group," the circular read.

The subsidiary banks should be directly or indirectly majority owned by
the parent bank -- or head office in the case of foreign banks -- which
will be responsible for the entire group.

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.
It aims to increase credit to the agriculture and agrarian reform sectors.

The BSP, together with the Department of Agriculture and Department of
Agrarian Reform, issued last week the implementing rules and regulations
(IRR) of RA 10000. The IRR stated that the central bank shall issue the
guidelines on consolidated compliance and computation of total loanable
funds.

The law orders banks to set aside at least 25% of their total loanable
funds for agriculture and agrarian reform lending, of which 10% should
go to agrarian reform beneficiaries.

Total loanable funds, based on Circular 736, shall be computed as the
combined increase in total peso deposits, bills payable, bonds payable,
unsecured subordinated debt, redeemable preferred shares and total
equity accounts beginning April 20, 2010.

The increase in items like debt and equity securities, sales contract
receivable, accrued interest income, goodwill and other intangible
assets -- also beginning Apr. 20, 2010 -- shall be subtracted from the
items above. Provisions for liquidity equivalent to 15% of the net
increase in total peso deposits shall also be deducted.

Banks or cooperatives that want to be accredited by the central bank
under RA 10000 must submit a letter to the BSP's Supervision and
Examination Sector, as well as a notarized undertaking it will comply
with the central bank's regulations and a notarized certification that
its loan portfolio "is substantially agri-agra related."

The law provides ways to comply with the 25% requirement other than
actual extension of loans and purchase of eligible loans from other
banks. These alternative modes include paid subscription of shares of
stock in accredited rural financial institutions and investments in the
special deposit accounts of accredited rural financial institutions.

Accredited institutions, which may be a rural bank, a cooperative bank,
a farmers' cooperative or a mutual benefit association, will be given a
certificate of accreditation as long as their total loan portfolio is
higher than total investments and their credit exposure to the agri-agra
sector is higher than their exposure to other sectors. -- NJCM

Friday, September 2, 2011

RCBC goes heavy into micro financing

BY AMADO P. MACASAET

Realizing that microfinance is an underbanked sector but an emerging
major engine of growth in the banking sector, Rizal Commercial Banking
Corp., the country's fourth-largest universal bank, opened an additional
13 new micro-lending offices last July.

Lorenzo Tan, president and chief executive officer of RCBC, said in an
exclusive interview with Malaya Business Insight that so far the bank
has released 4,500 loans to 864 micro-entrepreneurs.

Microfinance appears to be messy because the number of borrowers is
large. However, Tan is emboldened to go heavy into the business after
seeing that non-performing loans are only 0.5 percent of total loans of
micro borrowers.

The low risk of default is seen by Tan as an indication that small
entrepreneurs do not want to besmirch their credit reputation because
they want to go on borrowing in the hope of expanding their operations.

The philosophy in microfinance is that even if a good number of
borrowers default, the lending bank will hardly be affected because the
size of individual loans is small.

On the other hand, a few defaults in the billions of pesos among giant
borrowers may force a less stable bank to run to the Philippine Deposit
Insurance Corp. for advances.

RCBC has seen the lower end of the market and consumer finance as a main
area of lending concentration. In 2010, 25 percent of the bank's
portfolio went to consumer finance, 8 percent to small and medium
enterprises, and 67 percent to corporate borrowers.

By 2015, the mix of the portfolio will be reversed. Tan estimates that
by that year, 36 per cent of the portfolio will go to consumer loans and
15 per cent to SMEs. Corporate loans are expected to come down from 67
per cent in 2010 to 49 per cent by 2015.

There are no numbers for microfinance in the presentation made recently
to select clients.

RCBC completely recognizes the necessity of servicing the lower end of
the market, particularly microfinance. The bank believes that
empowerment of the poor is a longer-lasting solution to economic
problems and poverty.

At present, market vendors and the smallest of the small business people
survive on 5-6 lending operation of the Indians. A fish vendor, for
example, borrows P5 in the morning and pays the lender P6 in the afternoon.

Despite the Shylock rates, operations of the Indian lenders continue to
grow because money is lent on the spot. There are no forms to fill out.
No financial background is required.

But Tan said the excessive rate of the Indians is not the only
"punishment" the borrowers have to go through. He said the Indians never
teach their borrowers the basics of entrepreneurship because they do not
know any better.

The interest charged by Indian lenders is about 7,000 percent a year.
Yet, they survive, according to Tan. RCBC's rate is remarkably higher
than market but Tan said RCBC is looking at ways to reduce the interest
rate it charges to micro borrowers.

Micro lending becomes expensive and messy because the lending banks go
out of their way to teach the borrowers the basics of preparing balance
sheets and knowing which expense is related to the business and which
ones are not.

Before long, Tan said, micro borrowers will learn entrepreneurship,
considering that their businesses are small at the beginning.

What Tan dreams of is seeing the high rate of unemployment reduced by
self-employment through micro finance.

Tan sees bright opportunities with the unaided eye. He mentions that the
Philippines is the 12th most populous nation in the world. If a good
number of the people can be given purchasing power – microfinance is one
way – higher demand for products and services will naturally follow.

He pointed out that 56 per cent of the population is younger than 25
years; 71 per cent is below 35.

About 10.5 million Filipinos are younger than four years.

What this could mean is that the Philippines is "armed" with younger
people who can make a living with their sinews.

Six million household have computers, making electronic banking easier
to accomplish. There are 10 million people with broadband and Tan said
the number is growing. Roughly 80 per cent or 80 million people are
cellular phone users.

The high dependence on OFW remittances is best indicated, Tan said, by
the fact that 46 percent of households have relatives working abroad.

The continued growth of BPO is supported by the fact that 18 percent of
the population has relatives working in outsourcing operations.

All these, Tan said, are opportunities that RCBC is trying to make use of.

According to Tan, annual remittances of OFWs amount to $18 billion. This
puts purchasing power in the hands of dependents at home but,
surprisingly, the higher demand has not pushed inflation that far.

The country gets $11 billion a year in BPO revenues and the figure is
expected to double in about five years.

Thursday, September 1, 2011

Taxation of cooperatives

by Recel P. Cachuela

The Cooperative Code of the Philippines (Republic Act No. 6938) declares
the policy of the State to foster the creation and growth of cooperative
as a practical vehicle for promoting self-reliance and harnessing people
power towards the attainment of economic development and social justice.

To encourage their formation and organization, cooperatives were granted
tax incentives under the Cooperative Code. The incentive vary depending
on whether the cooperative does business exclusively with members or
deals with non-members.

Cooperatives dealing exclusively with members are not subject to any
government taxes or fees imposed under the internal revenue laws and
other tax laws. For national taxes, the tax exemptions, as clarified
under Revenue Regulations ("RR") No. 20-01, include the following:

a. Income tax on income from operations
b. Value-added tax, subject to certain conditions
c. 3% percentage tax
d. Donor's tax subject to certain limitations
e. Excise tax
f. Documentary stamp tax (DST)
g. Annual registration fee of P500.00

They are also exempt from local taxes, except service charges or rentals
for the use of property and equipment or public utilities owned by local
government units, as confirmed through various rulings issued by the
Bureau of Local Government Finance.

For cooperatives dealing with both members and non-members, the
taxability of the transactions depends on whether or not the accumulated
reserves and undivided net savings (ARUNS) exceeds P10 million. If the
ARUNS is within the P10 million threshold, the cooperative enjoys the
same incentives as cooperatives dealing with members only.

Those with ARUNS exceeding the P10 million threshold are subject to
income tax on transactions with non-members after the lapse of 10 years
from the date of registration with the CDA. They are, likewise, subject
to donor's tax, DST, excise tax and local taxes. RR No. 20-01 further
clarified that the income of cooperatives, regardless of classification,
from transactions not related to their principal operation are subject
to the appropriate taxes under the Tax Code.

Despite the clear exemptions of cooperatives from taxes, many
cooperatives are still swamped with deficiency tax assessments from the
Bureau of Internal Revenue. Should these cooperatives be made liable for
taxes even if the exemption is clearly provided in the law? Is the
failure to comply with administrative requirement sufficient basis for
divesting cooperatives of the tax exemption privileges?

For example, RR No. 20-01 requires the cooperatives to apply for
Certificate of Exemption (COE) through the Legal Services of the Revenue
Region having jurisdiction over the cooperatives' principal place of
business. This is not, however, imposed as a requisite for the availment
of the tax exemption. Neither does the law require a Certificate of
Exemption as a condition for the enjoyment of the tax exemption
privileges. Thus, cooperatives could not be denied the incentives
provided in the law merely for failure to comply with the administrative
requirement.

Another pressing issue affecting particularly savings and credit
cooperative (SSC) is its supposed obligation, as withholding agent, to
withhold 20% final tax on the interest expenses paid to
member-depositors. In the February 2006 draft Manual of Rules and
Regulations for Cooperatives with Savings and Credit Services in the
Philippines, it is provided that SSCs are required to withhold and remit
20% final tax on interest income earned by the member-depositors. It is
to be noted that the Tax Code requires a final tax of 20% only upon the
amount of interest on currency bank deposit and yield or any other
monetary benefit from deposit substitutes and from trust funds and
similar arrangement. Considering th at a cooperative is not a bank, the
interest derived by the members should be exempt from final withholding
tax.

These are only some of the many challenges that the cooperatives face in
terms of complying with their tax obligations. If the cooperatives are
to be considered as vehicles for promoting self-reliance aimed towards
the attainment of economic development and social justice, these should
be accorded the benefits clearly intended by the law. In fact, every
government agency, including the revenue tax authority, is expected to
ensure that cooperatives develop into viable and responsive economic
enterprises free from any conditions that may infringe upon their
autonomy or organizational integrity.

(The author is a tax manager at the Davao branch of Punongbayan &
Araullo, member of Grant Thornton International. For comments and
inquiries, please e-mail the author).

LandBank enlists WMSU for agri-tech promo

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Published : Thursday, September 01, 2011 00:00 Article Views : 27
Written by : JAMES KONSTANTIN GALVEZ

STATE-RUN Land Bank of the Philippines has signed a memorandum of
agreement with the Western Mindanao State University (WMSU) for the
implementation of the Technology Promotion Center program for high-value
lowland crops, agro-forestry and small ruminants.

Under the agreement, LandBank and WMSU will use their technical,
financial, physical and manpower resources to promote appropriate and
viable technologies that would generate production and post-production
efficiencies, as well as increase farmers' incomes.

"Through LandBank's partnership with state universities like WMSU, we
can provide updated and viable technologies to more farmers and
fisherfolk, giving them opportunity and higher earnings," said Gilda
Pico, the lender's president and chief executive.

Both parties also will work to enhance LandBank's lending programs
through technology validation for effective transfer of technologies to
rural farmers and entrepreneurs.

The bank will provide funds for the selected technology while WMSU will
establish technology demo farms to showcase the performance of
high-yielding crops and serve as a training center for farmers in the
region.

Under the TPC program, LandBank continues to validate technologies for
crop production, fishery, and livestock activities, including organic
banana production, Indian sweet corn production, cloth processing using
pina leaves, organic sugarcane production, bangus mariculture, and
marine aquarium fish projects.

The WMSU is the 14th partner under the TPC program and the third in
Mindanao.