PHILDEVFINANCE (old news)

Sunday, November 21, 2010

Minimizing cash handling

Minimizing cash handling

Banking & Finance

Written by George S. Chua / Free Enterprise

THURSDAY, 15 JULY 2010 21:55

ONE of the more serious problems facing businesses today is the inescapable need to still deal in cash in their normal operations. Handling and dealing in cash has some inherent problems due to their negotiability which is normally vested on whoever is actually holding on to the cash. This is the primary reason why criminals target business establishments with substantial amounts of cash within their premises such as banks, gasoline stations, restaurants, money changers, pawnshops, lotto outlets and other retail stores. Also at risk are the collectors, payroll clerks, cashiers, roving tellers and anyone else involved in the transfer and movement of cash.

If you are still stuffing cash in pay envelopes for your employees every payday, you should change your system into something better. Think of the manpower needed to do the cash count and payroll processing making sure each pay envelope has the exact amount due to the employee.

There are also a number of risks involved. First is getting the cash from the bank and of course, once the employees get the cash, their risk of carrying the cash going home. There could also be errors in cash handling, counting and distribution.

Fortunately, given the advances in technology, it is fairly simple to have a payroll account with practically any bank where the company maintains an account and each employee can have a payroll account tied into an ATM.

What happens here is every pay day, the company simply provides the bank in electronic form and with the appropriate safeguards the list of the employees with their account numbers and their respective pay. The bank then debits the account of the company and credits the individual employees’ accounts. There may be some fees or minimum-balance requirements that the bank may impose, but if you count on the savings in terms of hours plus the safety and convenience of all your employees, it will be worth it.

There are also a number of ways to reduce the amount of cash you receive from your customers. While individual customers may be able to use their credit cards, corporations will not have this flexibility. You could offer your corporate customers other payment alternatives.

Your both having accounts in the same bank could facilitate payments and reduce the risk for both parties. The payment from your corporate customer could simply be credited to your account and since the funds are coming from the same bank, there is no clearing. With electronic banking, you could see this credit online and depending on the bank, you could even see which account it came from, thus enabling you to identify which customer made the payment.

Your customer is also at an advantage since he is sure that the payment is actually made to you and that there has been no diversion which is possible if payment was made in cash or even via check. The risks associated in making a cash payment is eliminated for both parties. There is also some savings from the elimination of the use of checks and the payment can be done through electronic banking like a bills payment system, similar to individuals being able to pay for their various utility and credit-card bills using the e-banking facility of their bank. On the flip side, when you are the customer and you need to pay your suppliers, you can make the same arrangements and take advantage of the same convenience.

Other simple cash management techniques to minimize both internal fraud and robbery is by installing a safe with a one-way slot so that the cashier can drop in the cash collections and payments. This way, there is no cash that can readily be stolen and if the criminals know about this, then the cash register will be less of a target. Minimizing the distance between the bank and your facility will also be a big help to reduce the security risk. For example if you were operating inside a mall, using a bank within the mall rather than outside will not only be more convenient, but will also reduce your risk.

Keeping your cash secure in cases when you need to have some within the premises can be helped by having dual control. Having two separate locks or combinations to the vault or safe with two different custodians will provide an additional layer of security. Putting remote monitors on sensitive areas and recording it will also serve as a deterrent. The cost involved is not a lot and will certainly be worth it.

Making all of these changes for the better may seem like a lot of work, but if you take into account the savings in cost, efficiency, manpower and most importantly your safety and that of your employees, how can you afford not to make these changes?

(Comments may be sent to chua.george@yahoo.com)

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Wanted: Government as risk-takers in SME finance

Wanted: Government as risk-takers in SME finance

BUSINESS OPTION
By BENEL P. LAGUA

In 2009, the Bank of Thailand asked for the cooperation of 16 commercial banks to give additional loan of 100 billion Baht to Thai SMEs. In return, it offered a portfolio guarantee with an assured cap of 15.5% claim worth 30 billion Baht. Then, the Cabinet approved a subsidy to the Small Business Credit Guarantee (SBCG) of Thailand for a potential charge of 2 billion Baht against losses.

In the same year, Indonesia implemented the KUR Guarantee Program or “Kredit Usama Rakyat” for MSMEs. The KUR program was supported with government putting in additional shares of IDR 1.45 trillion to its guarantee corporation.

Similarly, Taiwan’s SMEG, their guarantee corporation, helped clients obtain NT$631.2 billion of loans, of which NT$ 475.2 billion was guaranteed. The SMEG continued to receive yearly “donations” from central and local government to pursue its mission.

Incidentally, in 2008, the Philippines passed the new Magna Carta for MSMEs which increased the authorized capitalization of the local guarantee corporation from P5 billion to P10 billion. The capital stock was raised on paper, and on paper alone, with no actual capital infusion and equity remaining at the 2001 level of less than P2.0 billion.

We could go on citing the measures taken in various economies to improve the funding for MSME credit assistance programs all over Asia. But one thing evidently stands out. While other governments put their money where their mouth is, so to speak, ours have been very risk averse, although some would some say “prudent” given our fiscal position. How can we be competitive against our neighbors if we are not prepared to make the necessary investment?. Our MSME finance support requires a strategic approach and firm commitment, not a half-hearted approach.

Even if most market-oriented economists believe that credit access will only improve with reforms that will reduce regulatory and institutional barriers, this process takes time. Thus, many transitional economies create specialized institutions that not only directly serve the MSME market, but also stimulate the participation by the commercial banking sector in MSME lending. Although there may be argument on whether or not it is needed, the increased competition benefit SMEs through improved access to loans and lower interest rates.

Credit guarantee schemes are a very useful approach because in contrast to a credit line or a rediscount system, credit guarantee schemes allow for leverage or a multiplier effect. The funding is ex post as a result of borrower default rather than ex ante from the rediscounting lines. As an ADB paper wrote, it is important that the objective of a credit guarantee scheme is an increased volume of guarantees and not maximizing investment income to show a profit. Leverage is the ratio of the amount of guarantees outstanding to the capital value of the fund.

Credit guarantee programs create additionality in the short or medium term, enabling banks to lend more which could otherwise be impossible without guarantees. And in the long-term, credit guarantees provide learning opportunity to make banks understand MSMEs better and give their confidence on the viability of an SME lending, even with the absence of guarantees.
The problem with the Philippine guarantee system is its weak structure in terms of policies on credit guarantee operations and the limited funding support by the national government for this type of MSME program.

Credit guarantees work because its users find it reliable, credible, and dependable, especially since it represents their second way out. Thus the guarantee fund must have enough muscle and be big enough to meet the default scenarios. In most economists the government gives its unconditional support through a sovereign cover. This not only assures the banks funds are there when needed, it also substantially reduces the risk weight of the loans.

In the Philippines, our major guarantee corporation for SMEs is not just undercapitalized, there is no sovereign cover. This situation forces a more conservative approach to the leverage objective.
Then, there is the issue of numbers and fragmentation. The Philippines has a PhilExim Agency which guarantees both small and large loans, although it is supposed to be export focused. There was Quedancor that is unfortunately in the rehabilitation stage. Small Business Corporation is the creation of the Magna Carta. There is the Industrial Guarantee and Loan Fund (IGLF) that is not even doing any guarantee work at the moment. In recent years, government created an agricultural guarantee fund which Land Bank of the Philippines has been asked to administer. And recently, the Bangko Sentral ng Pilipinas has been sponsoring small credit surety funds in cooperation with select local government units and some finance-oriented cooperatives.

The big question is – do we really need all of these? The successful guarantee programs have both size and scale, and the sooner policy makers realize this the better for our SMEs. A more rational and harmonized approach to the implementation of credit guarantees is what our country needs to make the credit access objective happen in a big way.

It is important to understand that guarantee programs are by nature “risk” programs, and their success depends on the extent to which the government is willing to give its support to keep it moving and to make it an attractive scheme to for the commercial banking sector. All over the world, guarantee programs depend on some form of subsidy. The most successful guarantee programs are at best break even operations. But if the program leads to additionality and economic benefits in terms of new jobs, taxes, profits, the support is well worth it. This is even much better than the cash transfer schemes at vogue at the moment. Political will is, thus, the key to this success.

Not only does the funding issue need the attention of our government, the regulatory environment must also be enlightened such that rules for regulating banks will be different from the rules in supervising guarantee corporations. A more conducive environment for guarantee operations must be created to entice banks to participate in this type of SME financing scheme.

In the end, our goal is to create a learning environment that will help make banks realize that indeed, SME lending is a profitable venture that no longer requires credit guarantees. But while our country has not yet established a legal and regulatory environment conducive to SME lending, credit guarantee programs will be beneficial to us, specially to the SME sector. We should work towards a well-developed financial system where a good credit information system also exists.

It all boils down to having a competitive mindset. Our neighbors are aggressively pursuing this tack. Can we afford to be left behind?
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( Mr. Benel P. Lagua is the President / COO of the Small Business Corporation. He is likewise an active member of FINEX. Feedback and comments are welcome at benellagua@alumni.ksg.harvard.edu).

SSS expects to collect P3.9 billion from delinquent employers

SSS expects to collect P3.9 billion from delinquent employers

By Iris C. Gonzales (The Philippine Star)

MANILA, Philippines - The Social Security System (SSS) expects to collect at least P3.9 billion in five years from employers who are delinquent in the payment of their employee contributions.

SSS president and chief executive officer Romulo Neri said that amount is expected to be collected from employees who would avail of a new amnesty program that would condone penalties on overdue contributions.

The program will allow SSS to settle their overdue obligations to SSS without paying the accumulated penalties and their workers can avail of SSS benefits and loans.

Under the amnesty program, Neri said the agency estimates that total contribution collections are expected to reach P3.69 billion while interest payments which are pegged at three percent per annum will amount to P208 million in five years.

Employers who have been delinquent in their payments have until July 31 to apply for condonation of penalties but they can remit their obligations within a maximum period of 48 months under an installment plan.

“Initial figures show that we have already collected P48.71 million from 549 employers nationwide, adding that condoned penalties so far amount to P208 million in five years,” Neri said.

Under the program, companies have the option to fully settle their delinquencies within the six-month amnesty period or pay in equal monthly installments of up to four years. The SSS expects 25,300 employers to avail of the amnesty program.

Delinquent employers have been a major problem of the agency.

Last year, SSS filed cases against a total of 1,133 employers for failing to remit contributions of workers estimated at P478.22 million, including penalties amounting to P167.04 million.

Employers can pay their contributions in full or submit an installment payment proposal within the six-month availment period. Installment payments have a maximum term of 48 months and a three percent annual interest.

Neri said that the agency would withdraw the cases against employers who would avail of the amnesty. At the same time, he said, SSS would re-file the charges if they fail to remit their delinquent contributions in full or if they default on their installment payments under the amnesty program.

Delinquent employers face imprisonment of six to 12 years and a maximum fine of P20,000 as provided under the Social Security Act of 1997.

Over 600 of the cases filed in 2009 were against employers in the National Capital Region. The agency also sued at least 188 employers who refused to present company records.

View previous articles from this author.

Saturday, November 20, 2010

Taiwan, HK OFWs hit more insurance coverage

Taiwan, HK OFWs hit more insurance coverage

By MADEL R. SABATER and ROY C. MABASA
November 19, 2010, 7:03pm

MANILA, Philippines — Overseas Filipino workers (OFWs) in Taiwan, like their counterparts in Hong Kong, are seeking exemption from the mandatory insurance coverage imposed by the Philippine government, saying that it would lead to non-hiring of OFWs in Taiwan.

Filipino migrant organization Migrante International-Taiwan chapter said it “condemns” the imposition of the mandatory insurance coverage for OFWs, stressing that it would be an additional burden for OFWs, particularly in Taiwan, as it would eventually be paid by OFWs themselves.

In a statement, Migrante International-Taiwan chapter chairman Dave Chang asked the Philippine government to exempt OFWs in Taiwan and Hong Kong from the insurance coverage, saying that both require mandatory insurance coverage for foreign workers.

He said this week a Filipino applicant has been forced to pay P6,500 in insurance fee.

“This forced implementation of such insurance is only adding and putting the migrant workers in debt,” he said, adding that some Philippine recruitment firms have been collecting New Taiwan Dollar (NT$) NT$5,000 as insurance fee in advance for the rehire of Filipino workers in Taiwan.

“There is already an existing mandatory insurance coverage for foreign workers in Taiwan which are both paid monthly by employers and employees alike, with the latter paying more,” he said.

Insurance coverage includes medical and labor insurance amounting to NT$236 (US$7.75) and NT$576 (US$18.92), respectively.

However, he said there are cases of OFWs force to shoulder their own insurance premiums amounting to NT$11,844.

“If you add the insurance as required by Republic Act (RA) No. 10022, this would grow to NT$12,026 a month. The minimum wage in Taiwan is NT$17,280 and the OFW is left with only NT$5436 in monthly earnings,” Chang said.

“Either the ones who drafted the new law are unaware of the situation in Taiwan and in other places where local legislation already requires mandatory insurance for foreign workers or are ignorant even of the insurance coverage of the OWWA or even where the Assistance to Nationals (ATN) fund should go to,” he said.

Under Republic Act (R. A.) 10022 or the Amended Migrant Workers Act, an Overseas Employment Certificate (OEC) or exit clearance would only be released if there is a certificate of cover (CoC) provided by the insurance company and certified by the Office of the Insurance Commission.

Under the new law, OFWs deployed through a recruitment agency should have an accidental death benefit of US$15,000; natural death benefit of $10,000; and permanent total disablement benefit worth $7,500.

Earlier this week, Vice President and overseas Filipino workers (OFW) czar Jejomar Binay said he has requested the Insurance Commission to review the new law requiring mandatory insurance coverage among recruiters, adding that there should be an exemption for OFWs whose insurances abroad comply with or exceed the requirements stated in RA 10022.

“I have requested the office of the Insurance Commission to review the new law requiring all recruiters for compulsory insurance for OFWs,” Binay said. “I am confident that we can find a solution that will adequately protect our OFWs without causing them additional and unnecessary burden of expenses.”

Republic Act 10022 is an amended version of Republic Act 8042 or the Migrant Workers and Overseas Filipinos Act of 1995.

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CARLOS ANI - SEEDFINANCE Corporation - PhilDevFinance http://phildevfinance.posterous.com http://phildevfinance.wordpress.com http://www.carlosani.com Email: carlosani@seedfinance.net

Friday, November 19, 2010

Taiwan, HK OFWs seek exemption from insurance

Taiwan, HK OFWs seek exemption from insurance
By MADEL R. SABATER and ROY C. MABASA
November 19, 2010, 7:03pm

MANILA, Philippines — Overseas Filipino workers (OFWs) in Taiwan, like their counterparts in Hong Kong, are seeking exemption from the mandatory insurance coverage imposed by the Philippine government, saying that it would lead to non-hiring of OFWs in Taiwan.

Filipino migrant organization Migrante International-Taiwan chapter said it “condemns” the imposition of the mandatory insurance coverage for OFWs, stressing that it would be an additional burden for OFWs, particularly in Taiwan, as it would eventually be paid by OFWs themselves.

In a statement, Migrante International-Taiwan chapter chairman Dave Chang asked the Philippine government to exempt OFWs in Taiwan and Hong Kong from the insurance coverage, saying that both require mandatory insurance coverage for foreign workers.

He said this week a Filipino applicant has been forced to pay P6,500 in insurance fee.

“This forced implementation of such insurance is only adding and putting the migrant workers in debt,” he said, adding that some Philippine recruitment firms have been collecting New Taiwan Dollar (NT$) NT$5,000 as insurance fee in advance for the rehire of Filipino workers in Taiwan.

“There is already an existing mandatory insurance coverage for foreign workers in Taiwan which are both paid monthly by employers and employees alike, with the latter paying more,” he said.

Insurance coverage includes medical and labor insurance amounting to NT$236 (US$7.75) and NT$576 (US$18.92), respectively.

However, he said there are cases of OFWs force to shoulder their own insurance premiums amounting to NT$11,844.

“If you add the insurance as required by Republic Act (RA) No. 10022, this would grow to NT$12,026 a month. The minimum wage in Taiwan is NT$17,280 and the OFW is left with only NT$5436 in monthly earnings,” Chang said.

“Either the ones who drafted the new law are unaware of the situation in Taiwan and in other places where local legislation already requires mandatory insurance for foreign workers or are ignorant even of the insurance coverage of the OWWA or even where the Assistance to Nationals (ATN) fund should go to,” he said.

Under Republic Act (R. A.) 10022 or the Amended Migrant Workers Act, an Overseas Employment Certificate (OEC) or exit clearance would only be released if there is a certificate of cover (CoC) provided by the insurance company and certified by the Office of the Insurance Commission.

Under the new law, OFWs deployed through a recruitment agency should have an accidental death benefit of US$15,000; natural death benefit of $10,000; and permanent total disablement benefit worth $7,500.

Earlier this week, Vice President and overseas Filipino workers (OFW) czar Jejomar Binay said he has requested the Insurance Commission to review the new law requiring mandatory insurance coverage among recruiters, adding that there should be an exemption for OFWs whose insurances abroad comply with or exceed the requirements stated in RA 10022.

“I have requested the office of the Insurance Commission to review the new law requiring all recruiters for compulsory insurance for OFWs,” Binay said. “I am confident that we can find a solution that will adequately protect our OFWs without causing them additional and unnecessary burden of expenses.”

Republic Act 10022 is an amended version of Republic Act 8042 or the Migrant Workers and Overseas Filipinos Act of 1995.

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CARLOS ANI - SEEDFINANCE Corporation - PhilDevFinance http://phildevfinance.posterous.com http://phildevfinance.wordpress.com http://www.carlosani.com Email: carlosani@seedfinance.net

Micro Financing for Land Reform Beneficiaries Set

Micro Financing for Land Reform Beneficiaries Set

October 13, 2010, 6:37pm

MANILA, Philippines – The Department of Agrarian Reform (DAR) has forged a partnership with the Center for Agricultural and Rural Development (CARD) to provide credit to farmer-beneficiaries.

DAR Secretary Virgilio de los Reyes said the project, called “DAR-CARD Microfinance Capacity Development Program,” is a three-year project that seeks to extend loans to agrarian reform beneficiaries (ARBs).

De los Reyes said CARD will also work with DAR in training co-op members to ensure better performance in managing their business ventures and to avoid, if not limit, delinquency or even default on their payments.

“The program aims to develop small farmers’ cooperatives into successful microfinance service providers in their areas,” De los Reyes said.

The DAR, through the Bureau of Agrarian Reform Beneficiaries Development, aims to bolster its credit program through partnership with various microfinance institutions like CARD.

BARBD Director Elena Cabanes said the program is expected to serve at least 18,000 active ARB borrowers and depositors, extend loan amounting to more than P27 million and generate savings and share capital of more than P13 million.

She added that the program covers 12 cooperatives, which include among others the Kaunayan Multi-Purpose Cooperative in Pagudpud, Ilocos Norte; Sirmata MPC in San Ildefonso, Ilocos Sur; Villaluna MPC in Cauayan City, Isabela: and Kalipunan ng Maliliit na Magniniyog ng Napan, Malay, Aklan.

Other targeted cooperatives are San Julian MPC in Badiangan, Iloilo; Panubigan Community MPC in Canlaon City, Negros Oraiental; Mayaposi Small Farmers MPC in Mabina, Negros Oriental; Sibula Farmers’ MPC in Lopez Jaena, Misamis Occidental while three others are to be identified in Cagyan, Agusan del Sur and Surigao del Norte.

Cabanes explained that their cooperatives must have at least 100 members, their livelihood and enterprise potential high, and have no existing contracts with other microfinance institutions.

She added that participating co-op members must save P50 weekly to be deposited in their savings accounts. All money borrowed and deposited through the program are covered by CARD’s insurance.

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CARLOS ANI - SEEDFINANCE Corporation - PhilDevFinance http://phildevfinance.posterous.com http://phildevfinance.wordpress.com http://www.carlosani.com Email: carlosani@seedfinance.net