PHILDEVFINANCE (old news)

Tuesday, June 21, 2011

Security Bank launches Tuition Light for parents

Security Bank launches Tuition Light for parents

TUESDAY, 07 JUNE 2011 20:06

WHAT do most parents think about when it’s back-to-school season? While it’s nice to think about seeing your first grader weave ambitions or help a high-school senior decide on what course to take in college, the truth is parents are mostly preoccupied with worrying about practical realities. Think of school, and the next thing that they do is worry about one thing: tuition.

And it’s hard not to. Because of recent financial setbacks that swept the country, even the upper-middle to upper-income families have tightened belts and have become more conscious of how to spend hard-earned money. Now more than ever, every peso counts. Those who used to pay tuition in full upon enrollment now think twice: Is it better to just pay every quarter? Every month? What if funds are not sufficient for the next payment period?

Tuition is not the only thing to anticipate; at times, the so-called miscellaneous fees and other education-related expenses such as uniform fees, laboratory fees, board and lodging fees, not to mention daily allowances, also eat a big—if not a bigger—chunk of a family’s budget.

Fortunately, financial institutions such as banks have developed products and services that allow paying school fees through credit. But steep interest rates could also put a toll on the pocket. Acknowledging this, Security Bank Corp., launched as early as April this year its “Tuition Light” promo to remain responsive to the needs of its customers, as it celebrates its 60th anniversary this June.

Paying tuition has become easier and lighter with Tuition Light. Open to primary Security Bank MasterCard and Diners Club cardholders with active and current status, Tuition Light offers as low as 0.88 percent monthly add-on interest rate and allows flexible availment options. The promo can be availed either during the pre-enrollment or post-enrollment phase.

For pre-enrollment, Tuition Light assures that students can be enrolled even when there is no immediate access to cash. To avail themselves the promo, the cardholder just needs to submit the school’s official enrollment or assessment form and required supporting documents.

For post-enrollment, Tuition Light can be used to reimburse tuition fee expenses. To avail themselves of the promo, the cardholder only needs to present the official receipt of the school and required supporting documents (original or photocopy).

Aside from tuition, Tuition Light can be used to reimburse other school-related expenses such as school supplies and uniforms. To reimburse, the cardholder just needs to present the official receipt of the merchants and required supporting documents (original or photocopy).

Cardholders can avail themselves of the promo with a minimum amount of P5,000, while maximum availments must be within the cardholder’s available credit limits and are released through checks. Checks may be issued directly payable to schools or to the cardholder and can be picked up at the Security Bank head office in Ayala Avenue, Makati. Checks payable to the cardholder can also be deposited directly to the cardholder’s bank account with Security Bank or with another bank. Promo runs until June 30, 2011.

Tuition Light is just one of the many promos under Security Bank’s ChargeLight Installment Plan.

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House approves bill giving credit-card holders ‘true cost’ of partial payments

House approves bill giving credit-card holders 'true cost' of partial payments

TUESDAY, 07 JUNE 2011 20:07

THE House of Representatives has passed on third and final reading a bill that would compel credit- card firms to clearly indicate in their billing statements the high price that cardholders would have to pay should they decide to settle only the minimum monthly amount due and defer paying off their entire outstanding balance.

"We want cardholders to be fully informed that it will cost them an arm and a leg if they settle only the minimum monthly payment required (by card issuers), which is usually five percent of the full balance," said House deputy majority leader and Pasig City Rep. Roman Romulo, the bill's author.

House Bill 4655 proposes to include the following cautionary statement on every card billing statement: "Warning: Making the minimum payment only or any amount less than the total amount due for the billing cycle/period will increase the amount of interest and other charges you pay and the time it takes to repay your balance."

Romulo said credit-card firms "have been cleverly pushing consumers to settle only the minimum monthly payment required precisely because they [card issuers] stand to collect considerably larger interest payments the longer the cardholder keeps a huge outstanding balance unpaid."

"Our bill will give more meaning to The Truth in Lending Act, which protects the people from lack of awareness of the true cost of credit by assuring full disclosure of such cost, with a view to discouraging the uninformed use of credit to the detriment of the economy," he said.

"The measure will also advance the State's avowed policy in The Consumer Act to protect the interests and general welfare of consumers, and to establish fair standards of conduct for business and industry, in this case for credit card firms," he added.

Romulo's bill would amend the 1998 Access Devices Regulation Law or Republic Act 8484.

The bill seeks to include the following repayment information in every card billing statement:

The number of months (rounded to the nearest month) that it would take to pay the entire amount of the outstanding balance, if the consumer pays only the required minimum monthly payments and if no further advances are made;

The total cost to the consumer, including interest and principal payments, of paying that balance in full, if the consumer pays only the required minimum monthly payments and if no further advances are made;

The monthly payment amount that would be required for the consumer to eliminate the outstanding balance in 36 months, if no further advances are made; and

The total cost to the consumer, including interest and principal payments, of paying that balance in full if the consumer pays the balance over 36 months.

The bill also puts all credit card companies directly under the supervision of the Bangko Sentral ng Pilpinas (BSP). At present, only card issuers affiliated with banks are supervised by the BSP.

BSP lifts bank-branching restrictions in 8 cities

BSP lifts bank-branching restrictions in 8 cities

SUNDAY, 05 JUNE 2011 19:17 VG CABUAG / REPORTER

THE Bangko Sentral ng Pilipinas (BSP) has lifted the branching restriction of banks in eight Metro Manila cities in a move to promote a competitive environment to improve the country’s financial services.

The Monetary Board (MB), the policymaking body of the BSP, on Friday lifted the branching restriction under a two-phased liberalization that covers Quezon City and the cities of Makati, Mandaluyong, Manila, Parañaque, Pasay, Pasig and San Juan.

The cities were the only ones remaining when the government partially lifted the moratorium in December 2005.

Under the phase-one implementation, private and domestically incorporated universal, commercial and thrift banks that have less than 200 branches in the previous “restricted areas” can apply to establish a bank in the cities from now until June 30, 2014.

For the phase-two implementation, all banks, except rural and cooperative banks, will have access to apply for a branch in all the eight cities.

Rural and cooperative banks generally are not allowed to establish a branch in Metro Manila.

Government-owned banks can immediately apply for a branch in the said areas but these may have to justify the said application to the MB.

“This is a major policy reform that lifts the last remaining restriction on bank branching,” said BSP Governor Amando Tetangco Jr.

“We are expecting that the liberalization will further improve the competitive environment, which should translate to better financial services for the public. The new policy also aims to encourage banks to further scale up and improve their operations in order to be competitive,” he added.

Tetangco said the central bank also imposed a special licensing fee for the opened-up restricted areas to continue to promote a balanced delivery of financial services nationwide.

To qualify for additional restricted area branches, a commercial bank must have combined capital accounts of at least P10 billion and at least P3 billion for a thrift bank.

If a bank does not have the said capital requirement, the government is allowing the company to build up to June 30, 2014.

Applications by private banks for establishment of branches in the restricted areas under the Phase I implementation should be submitted to the BSP within 90 calendar days from effectivity of the circular.

The final number of branches that may be established by qualified banks in the restricted areas under Phase 1 may, however, be subject to adjustment by the MB based on the total number of applications received.

A nonrefundable special licensing fee of P20 million per commercial bank branch and P15 million per thrift bank branch shall be charged for accepted applications.

In addition, the applicant bank should comply with the other standard requirements for the grant of authority to establish a branch under existing regulations, except for the rule limiting the number of branch applications that may be submitted to the BSP to five at a time.

This time, Security Bank acquires Premiere Bank

This time, Security Bank acquires Premiere Bank

THURSDAY, 02 JUNE 2011 20:00 MIGUEL R. CAMUS / REPORTER

LISTED Security Bank Corp. is taking a 98-percent stake in the privately held Premiere Development Bank in an all- cash transaction valued at P1.3 billion, the lender announced on Thursday.

This latest acquisition comes at the heels of Security Bank’s recently forged joint venture establishing a leasing company with Marubeni Corp. of Japan.

The new deal, still subject to regulatory approvals, will boost Security Bank’s network by a third, or additional 38 branches in Metro Manila, Bulacan, Rizal, Laguna, Cavite and Batangas.

The transaction will also swell its depositor base by another 37,000 with an estimated P4.5 billion in deposits while loan accounts will increase by about P3 billion, the statement said.

“Combining our people and resources, our two banks will continue to grow and provide the exceptional customer service we’ve always been known for in the banking community,” said Security Bank president and chief executive officer Alberto S. Villarosa.

The major selling shareholders in the deal include the Puyat-Reyes Family, the Madrigal-Gonzales Family and the Rohatyn Group, a New York-based private investment firm specializing in emerging markets with $3 billion in funds under management.

“The four-year partnership has grown Premiere Bank by three times in terms of assets and in the process, produced considerable added value for its shareholders. At this stage of Premiere Bank’s development, its shareholders are best served if the bank becomes part of a larger banking franchise,” Premiere Bank president and CEO Herminio M. Famatigan Jr. said in a separate statement.

The transaction was priced at 1.6 times the book value of Premiere Bank as of December 2010, the statement showed. Security Bank said it plans to acquire the remaining 2 percent of Premiere Bank that it does not yet own.

Premiere Bank was incorporated in 1960 by Dr. Procopio C. Reyes under the name of Pasay City Development Bank.

Security Bank, which turns 60 this year, saw its shares decline 0.43 percent to P92.70 each on Thursday’s close.

Rural bank mergers pushed

Rural bank mergers pushed

RURAL BANKS are urged to hasten mergers or consolidations to create stronger banks that will not only provide better products and services to clients, but more importantly, compete with commercial banks that have started to branch out to the countryside, the incoming president of the association of rural banks said.

Rural banks are urged to merge or consolidate in order to improve products and services to clients such as market vendors. -- JONATHAN L. CELLONA

“Five to 10 years from now, commercial banks are expected to fully saturate urban areas, so the next step for them is to enter the countryside to continue their business expansion,” said Ian Eric S. Pama, the incoming president of the Rural Bankers Association of the Philippines (RBAP), in an interview last Thursday.

Mr. Pama, also president of the Valiant Rural Bank, Inc. based in Iloilo, replaces Ma. Corazon Liamzon-Miller, whose term as RBAP president ends this month.

The central bank is encouraging rural banks to merge or consolidate to create stronger, more professionally-run institutions. Among the banks it supervises, rural banks are most prone to collapse.

Bangko Sentral ng Pilipinas data showed a total of 607 rural bank head offices as of December 2010, down from 631 in December 2009 due to mergers and consolidations and closure of weaker players.

The central bank, together with the Philippine Deposit Insurance Corp., has instituted the Strengthening Program for Rural Banks (SPRB), a P5-billion program that will run until next year, to spur mergers or consolidations among rural banks. It has also issued orders raising rural banks’ minimum capital requirement and requiring a capital adequacy ratio of at least 10% beginning 2012.

“Big commercial banks have not yet fully penetrated the countryside, they may still be studying how to build their business there,” Mr. Pama said. “But once they enter our market, they could capture some of our market share.”

The Rizal Commercial Banking Corp. (RCBC) and the Bank of the Philippine Islands (BPI), he noted, have launched their respective microfinance operations, encroaching into a business that used to be dominated by the rural banks.

“RCBC and BPI are among the big banks that have started to go into microfinancing in the countryside. Other big banks are expected to follow their footsteps in a few years,” Mr. Pama added.

RCBC conducts its microfinance business through subsidiaries President Jose P. Laurel Rural Bank, Inc. based in Tanauan City and Rizal Micro Bank, formerly Merchants Savings & Loan Association, Inc., based in Mindanao.

BPI has BPI Globe BanKO, Inc., which extends microfinance loans through Globe Telecom Inc.’s GCASH e-money platform.

The big banks can steal rural banks’ market share for one, Mr. Pama said, by giving lower interest rates.

“The big banks can ‘sacrifice’ one branch in the countryside just to capture the market. They make up for their loss in other areas where they can offer higher interest rates,” Mr. Pama said. “This will be the greatest challenge for rural banks, especially stand-alone rural banks.”

Mergers and consolidations among rural banks, he said, will result in a stronger capital base for the new bank, more branches and better technology, which will enable the banks to serve more clients as well as provide them with better credit facilities and products.

Rural banks are known for their expertise in serving the countryside, where they offer products such as micro-agri loans, micro-housing loans and micro-insurance.

“Rural banks have long been urged by the central bank and the RBAP to merge or consolidate to strengthen the rural banking industry, but some refuse to do so,” Mr. Pama noted.

“Usually, rural bank owners who are not amenable to the idea are those who have a stand-alone bank and yet are operating profitably,” he pointed out.

He said RBAP will continue to promote the SPRB program among its members through road shows to make rural bankers understand the “intricacies” of the industry, which he said, is operating within “a very competitive environment.”

Banco de Oro eyes takeover of PBCom

Banco de Oro eyes takeover of PBCom

By: Doris C. Dumlao

Philippine Daily Inquirer
Tuesday, June 21st, 2011

MANILA, Philippines—The country’s largest lender, Banco de Oro Unibank, has submitted a conditional offer to take over Philippine Bank of Communications, where a controlling stake is currently on the auction block.

PBCom disclosed to the Philippine Stock Exchange on Tuesday that BDO, which is controlled by the family of the Philippines’ wealthiest tycoon Henry Sy, had submitted a proposal to invest in the bank, confirming an item that appeared in news column Biz Buzz on Monday.

In a separate disclosure, however, BDO said its offer to take over the 64-branch PBCom was not “formal.”

“BDO did submit an expression of interest in the transaction subject to further discussions and qualified by certain conditions,” the BDO disclosure said. It did not disclose the conditions it sought.

A group led by former Trade Minister Roberto V. Ongpin also seeks to gain a foothold in the banking business by acquiring a controlling stake in the medium-sized PBCom.

Industry sources said there were at least three offers being evaluated by Macquarie, the financial adviser tapped by the controlling shareholders to bid out a controlling stake in PBCom. The joint sale of a controlling stake in PBCom was part of the commitment made by key shareholders—the Luy, Chung and Nubla families—to the state-owned Philippine Deposit Insurance Corp.

PBCom is on the auction block commanding a floor price of P4.3 billion, or about P25 per common and preferred share. The bank is ranked 22nd among the country’s 38 commercial banks, with assets of around P43.8 billion at end-2010, according to data provided by the Bangko Sentral ng Pilipinas. It has P8.4 billion in net loans and receivables and a deposit base of P27.6 billion.

As for the latest on BDO’s talks with another bank, Asiatrust Development Bank, the BDO disclosure said it was still awaiting clearer regulatory guidelines on how to proceed and that no talks were ongoing at present.

“In the meantime, BDO is exploring other options for expanding its banking business,” it said.

BSP, PDIC may ditch technical receivership for closed rural banks

BSP, PDIC may ditch technical receivership for closed rural banks

By LEE C. CHIPONGIAN

The central bank and the Philippine Deposit Insurance Corp. (PDIC) are considering the cancellation of placing expired rural banks under a technical receivership.

Banks threatened by bankruptcy are placed under receivership with the PDIC to avoid liquidation.

The Bangko Sentral ng Pilipinas (BSP) has considered “abandonment” of the alternative options of placing expired rural banks under technical receivership after PDIC argued against it due to legal concerns.

The proposal to discard technical receivership has been with the Monetary Board since November last year.

PDIC, in said proposal, raised legal issues on its own authority to implement technical receivership. As receiver and liquidator, PDIC is mandated to gather and take charge of all the assets and liabilities of closed banks and convert their assets to money for disposal to creditors.

PDIC President Jose A. Nograles has been very vocal about the immediate liquidation of closed banks since these banks have already undergone rehabilitation process under the BSP’s prompt corrective action (PCA), which failed, hence the receivership order.

Based on its charter, PDIC extends financial assistance to banks in order to protect the interest of depositors but the assistance is granted only if there is a viable rehabilitation plan, including capital recovery.

Nograles said earlier of the 81 banks ordered closed by the Monetary Board from 2005 to September 2009, 27 applied for rehabilitation but none were found to be viable for rehabilitation.

He argued that the outright liquidation of closed banks will “save the PDIC, the banking industry, and the depositors precious time.”

Under the present system, a bank found in early stages of distress and non-compliance with standard conditions and ratings is placed under PCA. When all options have failed, the bank is ordered closed by the BSP’s monetary body.

But, PDIC may still accept rehabilitation proposals during the 90-day receivership period, most of which come from previous owners and stockholders of the closed banks, said Norgales.

Based on audited statements, PDIC in 2008 reported a loss of 6.7 percent with an income of P6.52 billion.

Microfinance’s greater rewards

Microfinance's greater rewards

By: Gemma Rita R. Marin
Philippine Daily Inquirer

1:32 am | Sunday, June 19th, 2011

It is so easy to go into microfinance. With a small amount of capital, minimum policies set on the loanable amount that can be as low as P3,000 per client, interest rate, period of payment, mode of regular repayments, loan security which need not be hard collateral, savings or capital build-up, and a lean, efficient staff complement to run the credit and savings operations, one can already embark on the "business" of microfinance.

Microfinance became a popular tool for poverty alleviation in the Philippines in the late 1980s. Non-government organizations such as Negros Women for Tomorrow Foundation Inc. (NWTF), Tulay sa Pag-unlad Inc. and Ahon sa Hirap Inc. pioneered in this field by replicating the Grameen Bank scheme of Professor Muhammad Yunus, Nobel Peace Prize winner in 2006. Today, microfinance institutions continue to touch the lives of their poor clients, mostly women, with various financial and non-financial services.

In the mid-1990s, the Philippine government engaged in microfinance. Three crucial moves would attest to this. First, it created the National Credit Council in 1993 to formulate a policy framework that would expedite the delivery of financial services to the marginalized sectors. Second, it came up with the National Strategy for Microfinance, which was presented in the First Microfinance Summit in Washington, DC in 1997.

The strategy espoused key policy principles of market-oriented financial and credit systems and the greater role of the private sector in the provision of financial services. The issuance of Executive Order 138 in 1999 demonstrated the government's thrust of promoting private sector participation and restricted the government from delivering credit services in favor of becoming an enabler to the market.

The Bangko Sentral ng Pilipinas joined in the fray. The General Banking Law of 2000 acknowledged microfinance institutions to be engaging in legitimate banking activity. While bank branching was put to a halt, the BSP allowed the establishment of new banks which were microfinance-oriented, and opened a rediscounting window for microfinance.

No less than the late President Cory Aquino decided to get involved in microfinance. Twenty years after the people power revolution of 1986, she began her next "revolution." Reportedly, she was inspired by a group of women in Tatalon, Quezon City, whom she visited one day, attending a seminar on microfinance and whose simple concern was how they could help augment their families' income.

The former President wasted no time after that day, and rallied known microfinance practitioners behind her goal of reaching 5 million clients in five years with P5 billion. To guarantee the funds, she also called on business leaders like Washington Sycip, Vitaliano Nañagas II and Ramon del Rosario who willingly threw in their support, having realized the potential of microfinance and microenterprise development as ways to address poverty in the country.

Innovations in the Philippine microfinance industry continue today. Take microfinance for agriculture, for instance. If providing small loans in the urban areas had been useful in increasing the poor's access to capital and credit, why can't it be done in the rural areas where 70 percent of the country's poor reside and are likewise in need of small working capital loans for their production or livelihood activities?

Such was the premise of NWTF which realized that in its 20 years of existence, it had not essentially reached out to the small sugar farmers who made up the poor sector in the province.

NWTF thus bravely and boldly offered a microfinance product called the micro-crop loan in 2005 to provide working capital for sugar production. Loans between P15,000 and P45,000 were granted at 3 percent per month. It covered the labor costs of the farmer on his own farm, who had no cash to spend during the period of land preparation and maintenance of sugar farms. Loans were paid in lump sum at the nearest branch office at harvest time or in 10 to 12 months. No hard collateral was required; instead, borrowers were organized into a center of 15 members to act as co-guarantors.

Offering the micro-crop loan though has not always been that encouraging. Some areas were remote and hard to reach. Thus, it was more difficult to deliver the credit and monitor the accounts. There were clients with low production due to the poor quality of the soil.

While these situations already posed repayment problems, NWTF still had to contend with some farmers who had been dishonest in their dealings. There were also factors beyond its control such as typhoons and dry spells, pests and diseases amid weather changes, which contributed to the low yield and consequent delinquency in loan repayment. NWTF nonetheless managed to tackle every issue it encountered.
For instance, it covered areas which were less distant but still populated with sugar farmers needing working capital. It put up necessary systems and control measures, and intensified its monitoring activities with the help of the centers it organized.

I take it back. Engaging in microfinance, especially for agriculture, is not that easy. There are many reasons that can discourage microfinance institutions from expanding its services to the agricultural sector. But the reward is great. The much-needed working capital, no matter how small, is provided to the small farmer at market rates and other convenient terms.

After four crop cycles, an outstanding client of NWTF from Murcia, Negros Occidental has reportedly leased other farms to expand his production and offered trucking services to his fellow farmers at the same time. The increased income derived from the farms allowed family members to engage in other income-generating activities such as tending a sari-sari store or backyard livestock, and to address more easily the school and health needs of the family.

All things considered, it can still be said that doing microfinance, even for agriculture, is well worth the effort and the risk.

Monday, June 20, 2011

New Microfinance rules issued by BSP

New Microfinance rules issued by BSP

THE BANGKO Sentral ng Pilipinas (BSP) has tightened its rules on banks that have attached nongovernment organizations (NGOs) or foundations, which are engaged in microfinance, in a bid to protect the public.

It issued Circular 725 dated June 16 that amended the Manual of Regulations for Banks (MORB) that defined these NGOs or foundations as banks’ “related interests” and set the parameters on how banks and their officers should deal with these institutions.

The BSP also issued Memorandum 33 dated June 15 that addressed all banks engaged in retail microfinance and set the standards governing the business relationships between these banks and their related NGOs or foundations that are also engaged in retail microfinance.

In a statement on Friday, the central bank warned how the dealings between banks and their related foundations or NGOs could lead to abuse.

“Over the years, an increasing number of banks have tried to create synergy in having affiliated NGOs/foundations as their partners in providing complementary microfinance operations primarily to prepare low-income customers for formal banking relationships,” the BSP said, noting there are at least 18 such banks at present.

“This development replicates the early successes of several microfinance-oriented banks wherein related NGOs/foundations served as a “laboratory,” experimenting with new loan products, screening potential borrowers, and training new loan officers,” it added.

“Eventually, the banks acquire the NGOs/foundations’ seasoned loan receivables. This unique relationship has served both entities well as shown by their continued asset growth and sustainability.”

The abuse, the BSP pointed out, could arise from common board memberships, shared resources and loan transfers, resulting in higher operational, governance and repetitional risks to the banks.

NGOs and foundations are not supervised by the BSP.

In Circular 725, the central bank defined “related interests” as those NGOs and foundations that are incorporated by the stockholders, directors or officers of related banks and are engaged in retail microfinance operations.

The BSP also required banks to treat related NGOs and foundations in a business-like manner, such that agreements must be covered by contracts.

It also prohibited bank officers from holding any position in these NGOs or foundations that will allow them to get involved in daily microfinance operations.

In Memorandum 33, the central bank said the microfinance operations of banks and their related NGOs or foundations must be administered separately. Thus, banks and these related institutions must have a separate organizational structure, manual of operations, management information systems, etc.

The banks should avoid conflict of interest situations and not extend preferential treatment to their related NGOs or foundations.

“Any loan, other credit accommodation or guarantee in any form whatsoever granted to a related NGO/foundation is subject to existing rules on DOSRI loans,” the memorandum also read.

However, the BSP said the DOSRI rule is relaxed as long as the deposits of the clients of the related NGOs or foundations are maintained in the loan-granting banks.

“[T]he liberal interpretation of DOSRI rules [is meant] to encourage clients of NGOS/foundations to open formal micro-deposit accounts with the related banks in lieu of alternative savings mobilization schemes in NGOs/foundations such as ‘capital build-up’ schemes,” the BSP said in the statement.

“The BSP believes this will result in better protection of customer savings.”

As of Sept. 31, 2010, the central bank, in its “2010 Year End Report on Bangko Sentral ng Pilipinas Initiatives In Microfinance and Financial Inclusion,” recorded P6.5 billion in microfinance loans extended by a total of 202 thrift, rural and microfinance banks. The borrowers numbered 932,622.

NGO banks slapped DOSRI limit

NGO banks slapped DOSRI limit

By LEE C. CHIPONGIAN

June 20, 2011, 2:08am

MANILA, Philippines — The DOSRI (directors, officers, stockholders and related interests) ceiling will now apply to the loans of the 18 central bank-monitored microfinance-oriented banks with related non-government organizations/foundations (NGOs) in a move that will tighten customer savings protection.

The Monetary Board of the Bangko Sentral ng Pilipinas (BSP) has approved Circular No. 725, signed by BSP Governor Amando M. Tetangco Jr. last June 16, which will now subject microfinance-oriented banks’ NGOs/foundations under existing regulations governing DOSRI loans. These NGOs/foundations, while classified as non-stock and non-profit organizations, offers financial assistance to its customers.

The BSP’s Manual of Regulations for Banks (MORB) defines ‘related interest’ as any ‘corporation, association or firm which a director or officer of the bank or his spouse is also a director or officer of such corporation Based on this definition, the BSP deemed it appropriate to impose the DOSRI limit to related NGOs/foundations.

All loans, other credit accommodations and guarantees to such related NGO/foundation will be included in determining a related bank’s compliance with DOSRI caps, which is 10 percent and five percent for unsecured limits, and aggregate 20 percent limit on loans.

The existing 18 microfinance-oriented NGOs/foundations which are engaged in microfinance by regulated financial institutions, are uniquely homegrown, said the BSP in a memo to the Monetary Board. The adoption of this approach to microfinancing has expanded the microfinance program without regulatory restrictions such as minimum capital requirements.

The 18 thrift and rural banks with related NGOs/foundations includes Opportunity Kausawagan Bank Inc. (IloIlo City), Dungganon Bank (Bacolod City), Vision Bank (Catanduanes), CARD Bank (San Pablo City, Laguna) and Xavier-Tibod Bank (Cagayan de Oro, Misamis Oriental).

Of the 18, 13 are rural banks: Rural Bank of Sto. Tomas (Batangas) Inc., Enterprise Bank (Linga, Surigao del Sur), Lifebank Inc. (Maasin, IloIlo), People’s Bank of Caraga (San Francisco, Agusan del Sur), New Rural Bank of San Leonardo (Nueva Ecija), Rural Bank Talisayan (Misamis Oriental), Gulf Bank (Lingayen, Pangasinan), Rural Bank of Guinobatan (Albay), Bangko Kabayan (Ibaan, Batangas), Producers Bank Inc. (Cabanatuan, Nueva Ecija), Women Rural Bank (Rosario, Batangas), Progressive Bank (Balasan, IloIlo City), and Rural Bank Atimonan (Quezon).

The BSP, in a press statement last Friday, said it has issued general governance principles and standards covering the business relationships of banks and their related NGOs/foundations.

“Over the years, an increasing number of banks have tried to create synergy in having affiliated NGOs/foundations as their partners in providing complementary microfinance operations primarily to prepare low-income customers for formal banking relationships,” said the BSP

Sunday, June 19, 2011

Gov’t secures agriculture for food-secure future

Gov't secures agriculture for food-secure future
By Riza T. Olchondra
Philippine Daily Inquirer
Sunday, June 19th, 2011

A store attendant scoops rice for sale in a store in suburban Quezon City north of Manila, Philippines. The Oxfam, an international aid agency, warned of a looming food crisis in the Philippines, where farms are shrinking, the population grows by 2 million a year and half of families already spend 56 percent of incomes on food. AP/PAT ROQUE

If we want a food-secure future, secure agriculture.

The prospect of the country's food system failing at a time of growing hunger crisis worldwide has galvanized a public-private partnership aimed at changing the way the country's leaders envision food security for the Philippines.

"The Department of Agriculture alone cannot achieve its goal of food security for Filipinos. That's why we are ready and willing to listen to our farmers and suppliers, the private sector, because only true private-public partnerships will take us to that goal," said Agriculture Secretary Proceso Alcala.

The most recent food summit, or the Agriculture and Fisheries 2025 (AF2025), held last February, brought up creative solutions and achievable goals for nurturing agriculture, still seen as the only way to ensure a food-secure future for the country amid soaring food prices and financial shocks that are seen to become more pronounced.

The multisectoral AF2025 focused on defining the goals, strategies and priority activities for the agriculture and fisheries sector in the next 15 years, and in enhancing the partnership between the private sector, particularly the farmers, fisherfolk and agribusiness, and government.

Alcala, Senator Francis Pangilinan and Batangas Representative Mark Mendoza—the main convenors of AF2025—recently sat at a roundtable discussion with Inquirer editors and reporters to discuss these new, exciting developments in agriculture.

The beauty of it

Pangilinan and Mendoza are the agricultural committee chairs at the Senate and the House.

According to Pangilinan, the beauty of AF2025 is that where there used to be division and lack of coordination even within government, both the legislative and executive branches are now working with the private sector to promote agriculture.

More exciting for youth

With the changes, Pangilinan hopes that the young would be enticed to go into agriculture, noting that the average age of farmers is 57.

For a new generation of farmers to take up the job of feeding the country, agriculture must be shown to be exciting and profitable, the senator said.

Alcala said one of the changes is that the government is making actual investments and linking the small farmers with other stakeholders in a complete supply chain.

"It's sad that agriculture used to be overlooked. Agriculture takes up only about 2.5 percent of the total budget but its contribution to the GDP is about 18 percent," he said.

If you include agribusiness, the sector's contribution to GDP is actually 70 percent, Pangilinan said. It employs up to 70 percent of the country's labor force, he added.

"The truth is that we are still an agricultural economy," Alcala said. "It's time we start placing our bet in this sector."

Pangilinan said that it was only in 2009 that the national budget started complying with Afma, which prescribes that agriculture must be allotted P20 billion a year on top of the regular agriculture budget.

He said agriculture is asking for a bigger budget next year and it is getting strong support from President Aquino.

"There are marching orders to the DBM to add to our budget," Alcala said.

The agriculture department is also investing in new programs.

Key innovations include new rice technologies (to achieve rice sufficiency by 2013), traceability for imported and local agricultural products, farm-to-sachet systems for vegetables (unsold vegetables from chosen regional centers will be cooked and packaged for the Department of Social Welfare and Development's food distribution programs), and consolidation of small farms for contract-growing arrangements with large food companies.

There is also a push to make the agriculture budget "more equitably distributed to other commodity groups."

Right now, rice takes up more than 40 percent of the agriculture budget.

Two of the "inclusive growth" success stories are Senen Bacani's La Frutera banana exporting firm and the Chen family's farm-to-retail poultry operation, Bounty Fresh.

La Frutera operates in the Autonomous Region in Muslim Mindanao (ARMM) and has succeeded in getting Muslims, Christians and some former rebels to work together.

"Most people in the private sector say there should be peace first before we invest. But our approach is that peace and investment go together and build on each other," said Bacani.

He noted how a World Bank study said that it takes one generation to stabilize conflict situations before the private sector can come in.

"In our case, we took a risk. Government helped in talking to all stakeholders, including rebel leaders. Now, seeing through our operations that businesses can flourish in Mindanao, a palm oil plantation has been established beside us," Bacani said.

'Chooks-to-Go'

Bounty Fresh director Edwin G. Chen said that from a small family operation, the poultry farming firm has ventured into food retail through company-owned rotisserie stores under the trade name "Chooks-to-Go" to ensure demand for the company's dressed chicken.

Chooks-To-Go now has 1,100 outlets, which were rolled out over three years. The target is to reach 1,500 stores within 2011, and to encourage small farm holders to go into contract growing with Bounty Fresh.

Chen, who is also president of the Pork Producers Federation of the Philippines, said the livestock industry is also in talks with government on possible PPPs for much-needed slaughterhouses and other out-of-farm facilities.

He said backyard farmers, which comprise 70 percent of the livestock industry, are stuck with the traditional way of just selling live swine, which means they usually lose out to the trader.

Cutting out middlemen

Alcala said the government is eager to invest in facilities that would cut out the middlemen or at least minimize the chances for undue price manipulation, which disadvantages both farmers and consumers.

The "old, traditional and safe" ways will no longer work, Alcala said. As government is now investing in innovative systems and facilities, so too must farmers and agribusiness owners, he said.

Only those who take the risks stand to reap the benefits of this inclusive, innovation-centered paradigm for agriculture, Pangilinan said.

And if agriculture earns a new face as an innovation-driven, profitable industry, it will surely attract the youth, the senator said.

This, Alcala said, is what will push the Philippines toward a food-secure future where those who do work need not be poor and hungry.

Saturday, June 18, 2011

Higher minimum wage in Metro Manila tax exempt: BIR

Higher minimum wage in Metro Manila tax exempt: BIR

THE HIGHER minimum wage for Metro Manila given the additional P22 cost-of-living allowance (COLA) is exempt from income tax, the Bureau of Internal Revenue (BIR) said.

The BIR has released Revenue Memorandum Circular No. 23-2011 dated June 8, affirming Republic Act 9504 which exempts minimum wage earners from paying income tax.

"Minimum wage earners are exempt from the payment of income tax on their taxable income, including their holiday pay, overtime pay, night shift differential pay and hazard pay," the circular stated.

However, income derived from other sources on top of the minimum wage will no longer be tax exempt, the bureau said.

The COLA raised the minimum wage for workers in the following sectors:

• non-agriculture, P426;
• agriculture, P389;
• private hospitals with bed capacity of 100 or less, P389;
• retail/service establishments employing 15 workers or less, P389; and
• manufacturing establishments regularly employing less than 10 workers, P389.

Wage boards in other regions have yet to announce decisions on wage increase petitions filed by labor groups.

Meanwhile, the BIR also streamlined the process of granting tax exemptions to officials and employees who have been retrenched due to physical disability, sickness, death or others cause beyond their control.

According to the National Internal Revenue Code of 1997, the separation pay will be exempted from income and withholding tax regardless of the employee’s age or length of service.

Employees, often from the private sector, previously had to request for a ruling from the BIR head office to attest to the tax exemption.

"Without a ruling, the employer deducts withholding taxes and remits the same to the BIR to avoid the possibility of being assessed. To the detriment of the employee, the recovery of the withheld taxes can only be made through tax refund," stated BIR’s Revenue Memorandum Order No. 26-2011 dated June 13.

The order effectively devolves the issuance of rulings to the 19 BIR Revenue Regions nationwide. Requesting officials and employees can apply for the tax break in their revenue district office. The BIR’s legal division will evaluate the certificates of tax exemption, before being issued by the regional director. --

Diane Claire J. Jiao

ENCASH taps Globe for ATMs

ENCASH taps Globe for ATMs

INDEPENDENT ATM deployer Electronic Network Cash Tellers, Inc.
(ENCASH) has partnered with telecommunication company Globe Telecom, Inc. (Globe) to enhance its automated teller machine services.

ENCASH has incorporated Globe’s virtual private network (VPN) into its ATMs to better monitor their performance.

Jose M. Valdes, ENCASH director for operations, in an interview said “the ATM business requires dispensing money, so making sure that your ATM network is secure and working is the priority.”

“Through Globe’s VPN we will be able to monitor the status of our ATMs in remote areas and make sure that transactions are done in a fast and secure manner,” he added.

Globe’s VPN is a wireless connectivity solution for companies that require connectivity from their headquarters to other sites where they are located.

As the VPN is installed in ENCASH’s ATM units, ENCASH can check if its ATMs are dispensing money and how much they have dispensed, among others.

The technology is internet-based, which allows real-time connection.

ENCASH currently has 293 ATM units deployed in various provinces nationwide. Mr. Valdes said ENCASH targets to put up 400 ATMs by the end of the year and 700 ATMs by 2012. -- ARRG

Friday, June 17, 2011

COOPERATIVE BANKING: RAISING THE BAR

COOPERATIVE BANKING: RAISING THE BAR

-Speech of BSP Dep. Gov. Nestor Espenilla, 15th Gen. Assembly of Metro South Co-op Bank, June 4, 2011

(Following is a transcription from the speech of Bangko Sentral ng Pilipinas Deputy Gov. Nestor Espenilla, who was the keynote speaker during the Metro South Cooperative Bank's 15th General Assembly, held last June 04, 2011 at the SMX Convention Center.

He tells of the 0pportunities, as well as of the challenges facing the banking system. He also commended Metro South Cooperative Bank as "one of the pillars of Philippine cooperative banking.)
____________________________________________________________________

" I am pleased to join you in this Annual General Assembly celebrating your 15 years of service to the cooperative sector. Let me congratulate you on this milestone.

My speech this morning is entitled Cooperative Banking: Raising the Bar.

As I stand before all of you, representatives from around 860-member primary cooperatives nationwide, as I understand, I am reminded of the unique ownership structure of cooperative bank. This unique structure immediately provides you the ability to tap into the large market of cooperatives and their members around the country.

In addition, your full understanding of the needs of your shareholder and the cooperative sector gives you strategic advantage in providing suitable financial services in this market. I am happy to note that you have successfully leveraged this unique ownership structure to carve up your niche in our increasingly competitive financial system.

Since starting operations in 1997, you continue to be instrumental in effectively addressing the financing needs of your member-cooperatives by directly contributing to their development and indirectly benefiting their individual members.

This business model has enabled you to raise financial intermediation within the cooperative sector and at the same time make sufficient profits. You have therefore remained fundamentally strong and stable.

You have a sufficient level of capital and your risk management systems are in place. You have a capable board and management who are intent in maintaining your bank's sound operations. Simply put, Metro South Cooperative Bank is doing very well.

Having said that, I wish to emphasize that this is not the time to be complacent on your laurels. I am sure you have noticed revolutionary changes on the way banks do their business.

Today, financial institutions are driven to adopt smarter business models, design novel products, aggressively expand their client bases, pursue new markets, and pioneer innovative delivery mechanisms to increase accessibility of their services in their identified markets.

Innovation, efficiency and excellence are the keywords that banks speak of and try to achieve in their effort to be at par with progressive industry leaders. The challenge, then, for Metro South Cooperative Bank is to leverage on your strong position and well-defined mission, to take advantage of the many opportunities in this increasingly competitive environment.

This challenge is to raise the bar. The Bangko Sentral ng Pilipinas remains supportive of the cooperative banking sector by providing the enabling regulations for you to do your job even better.

We allow you to engage in a wider range of activities to widen your physical network and improve your efficiency through technology-based delivery channels. You are now at par with other types of banks in terms of services you offer, from foreign deposit accounts to equity investments in ATM systems. Qualified cooperative banks can compete side by side with other types of banks.

More recently, we have issued a set of circulars that can help you reach new and more markets in a responsive and sound and sustainable manner.

First among these is our regulation on the establishment of other banking offices, or OBOs, to give any qualified bank, including cooperative banks, the chance to set up physical offices in areas where it may not be economically feasible.

With Circular 694, issued October of last year, a bank can now establish an OBO in areas where it is allowed to establish brances. Through an OBO, you can market products, accept loan applications, facilitate account opening, perform customer care services and host ATMs.

If interested to implement microfinance programs, any bank may apply for authority to establish what we now call as micro-banking offices, or MBOs, through which the bank can offer a whole range of transactions and services to serve the needs of its clients, overseas Filipinos and their beneficiaries; and other underserved customers.

Under Circular 694, MBOs may be authorized to accept small deposits or what we call micro-deposits and service withdrawals, disburse microfinance loans and collect payments; sell and market microinsurance products; receive and pay out remittance transactions; act as cash-in and cash-out points for electronic money; receive utility payments ; pay out benefits from social institutions and government conditional cash transfer programs; as well as purchase foreign currency.

These micro-banking offices will not only allow you to increase the value of your services to your existing clients, but will also allow you to tap new and underserved markets.

As technology permeates every aspect of business, the speed, convenience and cost of financial transactions have greatly improved.

For qualified and capable cooperative banks, such as the Metro South Cooperative Bank, the electronic money and mobile banking ecosystem provides many more possibilities. Our recent Circular establishes the electronic mobile banking system which banks can use to transact with their clients using your mobile phones.

With this electronic framework in place, we expect to see banks becoming electronic money issuers, with enormous opportunities to create their own local agent network in partnership with establishments, such as drug stores and groceries, to reach out to the underbanked communities through your mobile phones.

Further building on these regulations, we also upgraded our anti-money laundering regulations through the issuance of Circular 706. This issuance can be potentially ground-breaking as it addresses a main obstacle in serving the unbanked yet, the bankable Filipinos.

With this issuance, banks can outsource ordinary customer identification by agents that are located in unbanked communities. It, therefore, addresses the limitations of existing physical reach of banks and lowers the cost of acquiring new customers.

I have detailed a host of opportunities that are available to Metro South Cooperative Bank. We emphasize, however, that these opportunities may be seized by banks that are committed to institutional strength and stability.

It is incumbent that Metro South Cooperative Bank remains committed to maintaining a strong capital position, institutionalizing adequate risk management systems, practicing good governance and professional management and keeping high standards of business ethics.

These frequently-mentioned principles are reinforced in the Philippine Cooperative Code of 2008, where necessarily and without prejudice to the unique nature of cooperativism, the law stipulates that banking laws, rules and regulations take precedence.

Under authority of this law, the Bangko Sentral ng Pilipinas has issued Circular 682 to govern cooperative bank operations. We also recently issued a memorandum to banks, which is basically a gentle reminder on the need to comply with the Cooperative Code provisions on proportionate voting, based on the number of paid up shares and on the quorum requirements on the amendment of the Articles of Cooperation and By-laws.

Empowered by the new Cooperative Code, that puts strong cooperative banks on even playing field with other banks, coupled by our enabling policies and regulations, and regulatory environment, I am confident that Metro South Cooperative Bank will continue to flourish.

I commend your dedication in achieving your vision to become the leading cooperative bank in the country. I am counting on this dedication that you will continuously innovate and seize new opportunities and take you rightful place as one of the pillars of Philippine cooperative banking.

Above all, stay deeply committed to good governance, the Achilles heel of many banks that failed. I noticed that you are bound by the tenets of good governance in your motto - F-A-I-T-H, which are really built on the principles of fairness, accountability and transparency.

Continue along this path. Your Chairman, I noticed also mentioned certain changes that are being introduced into the cooperative banking system by your leaders, including those in Congress.

And the whole activity right now that is taking shape is an effort to help out those cooperative banks that are not as successful as you have been. So that strong cooperative banks, like Metro South Cooperative Bank can help out towards building a stronger cooperative banking system.

In all of these discussions, Metro South Cooperative Bank is always mentioned, not as the damsel in distress, but rather as a white knight. So, with this, I am confident that your leadership will take Metro South Cooperative Bank towards your objective of creating a truly strong cooperative banking system, with Metro South Cooperative Bank, as one of its key pillars.

Rest assured of the Bangko Sentral ng Pilipinas' commitment to provide the supportive environment to help you accomplish this mission. We will always be there. Consider us as your partners, as we work towards a shared goal of a stronger and most of all, inclusive banking system.

I will end with a quote that I came across recently: "It has been said that if you want to be incrementally better, be competitive. If you want to be exponentially better, be cooperative."

I would like to say that for Metro South Cooperative Bank and other cooperative banks, you can be equally competitive and cooperative and, thus, look forward to always being exponentially better. Thank you." (END)
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BSP to infuse P2.5B to coop banks

BSP to infuse P2.5B to coop banks
By BenCyrus G. Ellorin
Sunday| March 27, 2011

CAGAYAN DE ORO CITY (MindaNews/26 March) — The Bangko Sentral ng Pilipinas (BSP) will be infusing P2.5-billion rehabilitation fund to strengthen the country’s cooperative banking industry.

“The BSP rehabilitation fund will come as preferred shares in selected cooperative banks that are stable,” said Ating Koop party list Rep. Isidro Q. Lico.

These strong cooperative banks, he added, will invest this money in ailing cooperative banks in order to rehabilitate them, he added.

“We were able to convince BSP that these ailing coop banks should be rehabilitated so that equity funds invested by the ordinary people will be saved. We have asked the BSP to provide a P2.5-billion rehabilitation fund,” said Coop-NATCCO Party-list Rep. Cresente Paez.

The BSP had revealed in a recent congressional hearing that there are 15 cooperative banks around the country that are in danger of foreclosure and are now placed under “Prompt Corrective Action” (PCA) by the BSP.

The BSP rehabilitation program also encourages the participation of strategic third-party organizations like primary coops and coop federations and encourages mergers and consolidation to create strong a cooperative banking industry.

The country’s biggest community cooperative, the First Community Cooperative (Ficco), has already been rehabilitating ailing cooperative banks around Mindanao.

Ficco is now the majority shareholder of the Cooperative Bank of Misamis Occidental in Oroquieta City, Cooperative Bank of Davao del Sur in Digos City and Cooperative Bank of Surigao del Sur in Bislig City.

Ficco Chief Executive Officer Vicente Rana said they have invested about P200 million to rehabilitate these coop banks. Ficco’s net worth now is pegged P4.3-billion.

Rana said that they are now in the final stages of the merger of the three cooperative banks under the name First Consolidated Cooperative Bank.
“We are just awaiting final approval from the BSP to merge these three banks under the name First Consolidated Cooperative Bank. The Philippine Deposit Insurance Corporation has already approved our application,” Rana told MindaNews.

Meanwhile, at least two cooperative banks will be joining the First Consolidated Bank once it starts operations.

“We are expecting the BSP approval of the Ficco application to operate a bank next month,” said Isagani Daba, President and CEO of the Metro South Cooperative Bank based in Manila.

Once the BSP approves the Ficco application, Metro South and the Cooperative Bank of Cebu will join the merger to create the first cooperative bank with nationwide coverage, Daba told MindaNews.

This development is eventually geared towards creating a single cooperative banking industry in the country, Daba said. (BenCyrus G. Ellorin/MindaNews)

Biggest RP coop releases P13.1-B loans in five years in Mindanao

Biggest RP coop releases P13.1-B loans in five years in Mindanao

DAVAO CITY, March 11 (PNA) - The First Community Cooperative (FICCO), now considered as the biggest community cooperative in the country, has already released a total of P13.1 billion in five years in Mindanao alone.

FICCO Mindanao chairman Isagani B. Daba, in his message during the recently-concluded FICCO 55th Annual General Assembly over the weekend held in this city, said the cooperative has a total asset of P3.68 billion, deposits of P1.6 billion and common shares of P1.32 billion with a total membership of 129,493 at the end of 2009.

Daba said the cooperative has provided some P3.5 billion in loans in 2009 alone, while the total loans released for the last five years amounted to about P13.1 billion in Mindanao region.

With about 16 branches and business centers all over Mindanao, Daba emphasized that “FICCO keeps on growing stronger because of the members’ trust and confidence on its management, while we develop culture that focuses on quality service, good governance, sacrifice, volunteerism, and efficiency."

In respond to government’s call to provide assistance to the needy, FICCO offers many opportunities to its members by way of helping them in their daily needs, provide financial assistance in making members’ businesses grow with emphasis on unity and helping among each other, he said.

FICCO has established Mutual Benefit Association (MBA) in respond to government initiatives in pushing micro-insurance to help the poor mitigate risks.

It has generated a total premium of P50.6 million in 2009, up to 92 percent from the previous year’s P26.1 million.

One of the proposed resolutions which were approved during the General Assembly was that FICCO can now engage in real estate projects, in buying lots in strategic locations to be developed for commercial spaces or for condominiums.

Meanwhile, FICCO branch manager Ellen Dizon said FICCO has now taken over the Filipino Merchants Cooperative (FMCoop) management for purposes of helping the coop.

Dizon is calling on FMCoop members to coordinate with FICCO branch office located at Anda Street this city to update their membership. (PNA)
LDV/RBP/lvp

Vision to become the leading national coop bank hits a snag

VISION TO BE THE LEADING NATIONAL COOPERATIVE BANK HITS A SNAG

The dream of a Metro-based cooperative bank, to become the leading national cooperative bank by 2014 may not become a reality soon, or as expected.

This is unless the Bangko Sentral ng Pilipinas (BSP) and the Cooperative Development Authority (CDA)(the regulating agencies for this type of cooperative) are able to reconcile in the immediate future the apparent contradiction between the cooperative bank's vision and the present provisions of the Philippine Cooperative Code of 2008.

The item in question is found in Article 97 (l), Chapter XII of R.A. 9520. Among other things, this provision says that, and we quote: " xxx Only one cooperative bank may be established in each province, Provided, That an additional cooperative bank may be established in the same province to cater to the needs of the locality depending on the economic conditions of the province as may be determined by the BSP, Provided further, That the additional cooperative bank shall be located in the City or Municipality other than the City or Municipality where the first cooperative bank is located..xx"

Currently and prior to the enactment of R.A. 9520, this Metro-based cooperative bank has over 800 cooperative organizations, as members from all around the country. As part of its strategic plan, it aims to boost the growth of the cooperative bank via an aggressive membership recruitment campaign. And in the process, it also aims to further widen its capital base.

According to reports, this cooperative bank was already granted approval by the BSP for the former's amendments in its Articles of Cooperation and By-laws, to implement its vision to be the leading national cooperative bank sometime in 2007 yet. With this, it can now recruit members from anywhere in the country. The said amendments were also to be approved by the CDA, where the same is allegedly pending since November 2009. CDA, reportedly, is hard put in finding the legal bases to support any action to approve said amendments.

In the meantime, the cooperative bank's expansion program had hit a snag, hopefully only momentarily. Until things are finally ironed out, the cooperative organizations outside of the Metropolitan Manila Region who are waiting to become members of this cooperative bank, are now considered in the meantime as "coop depositor/borrower," instead of bona fide members. The cooperative bank's capital build-up, including its planned sale of preferred shares is also apparently affected.

It may be noted that the BSP issued last February 15, 2010 the implementing rules of Chapter XII of R.A. 9520. Contained in the BSP Circular No. 682, series of 2010, are basically the same prohibition contained in Article 97 of Chapter XII of R.A. 9520, this time reflected on Section 7 of the abovecited BSP Circular.

As of December 2009, the assets of the cooperative bank are reported to have reached P1-billion, 6% higher than that in 2008; networth rise by around P77-million. On the other hand, its paid-up capital rose by 19% with new and additional capital raised by the bank amounted to about P37-million.

So, will this cooperative bank's vision ultimately become reality, or just remain a dream? Let's watch and see. Your comments are welcome. (End)

Metro South Coop Banks wants to be the leading national coop bank

DABA HEADS METRO SOUTH CO-OP BANK, VOWS TO STEER IT TO BE THE LEADING NATIONAL CO-OP BANK ; CALLS FOR MERGER AND CONSOLIDATION

Isagani B. Daba, since last month (May 2, 2011) has assumed the presidency of the Metro South Cooperative Bank (MSCB), vowing to achieve the latter's vision to be the leading national cooperative bank and to implement the bank board's recently-approved resolution to go into merger and consolidation with other cooperative banks.

Addressing the 15th Annual General Assembly of MSCB, held last June 4, 2011, Daba said, "If we are to achieve our (MSCB's) mission as the leading cooperative bank, then, we should be leading in merger and consolidation with other co-op banks."

He informed that: "This is the fastest way we can be one strong co-op bank. We are aware of parallel efforts by other groups, like NATCCO, for example, and we are happy that somewhere down the road, we will be able to come up with only one cooperative bank that will really service the needs of all primary cooperatives in this country."

He also reported that there had been earlier discussions involving leaders of MSCB on going into merger and consolidation.

Merger is when we combine two entities or businesses and only one will survive, or remain. On the other hand, consolidation is where two or more entities will combine, but there will be a new entity absorbing the others which have agreed to consolidate.

Following are excerpts from Daba's remarks, explaining on MSCB's merger and consolidation plans:

"...Why are we moving into merger and consolidation? It is safe to say that MSCB is a big co-op bank, and a very stable co-op bank with a 'Camels' rating of 4. This is the best proof that we can offer in saying that we are very stable.

But the reality is that we are still a P1-billion bank. We sound big,but in reality, we are very, very small. Even if we combine the 40 remaining co-op banks out of the original 56 - even if we combine these, the total resources will not even reach P15-billion. Wala iyan sa pinakamaliit na commercial bank.

Our services are very limited. Until now, we are limited to lending only. Why can we not go into the ATM business? Because it needs a big capital requirement. What if it is a P15-billion bank? Do we have the capital outlay in relation to total resources? That is the advantage.

The Bangko Sentral ng Pilipinas is now offering incentives to encourage merger and consolidation among co-op banks. There are many advantages. One of these is that if we have sufficient capital requirements, we can open branches and offices anywhere we want to go.

Again, the reality of MSCB is that we are a one (1)-unit operation. Our address is auspicious -Makati, but we have only one office. If you are from Quezon City, will you go to Makati just to deposit your savings to MSCB at Makati?

If we are availing ourselves of the (merger and consolidation) incentives, we can have our branching license. Then, we will be able to continue our mandate as the bank of cooperatives. That is one of the results of merger and consolidation, because we can then comply with the BSP's capitalization requirements.

I think that the other thing that they are pushing now is how we can maximize our network of cooperatives in order to implement electronic banking -fund transfer. A big rural bank in Mindanao has for its big source of income is not from loans, but from fees.

Even in remote areas, this rural bank has ATMs. They earn fees from these ATMs. These are just some opportunities, in addition to those mentioned by our guest, BSP Deputy Gov. Nestor Espenilla, in his speech.

We believe that we will be able to do it, through this merger and consolidation. Through this, we can accomplish our mission - to be the leading co-op bank. If not, MSCB will remain in the sidelines at Eduque St, Makati City.

Thank you...."

(Note: From MSCB's souvenir program, Daba is described as follows: " Mr. Daba has been in the cooperative movement for 40 years. A seasoned co-op volunteer, advocate and professional, he is an experienced banker. Among the past positions Mr. Daba held include being the Executive Vice President and Chief Operating Offiers of Coop Life Insurance and Mutual Benefit Association (CLIMBS); Director of First Community Coop Bank; Coop Bank of Surigao Del Sur; Coop bank of Davao del Sur; and Coop Bank of Cebu. An active member of perhaps the biggest cooperative in the country (First Community Cooperative in Cagayan de Oro), with P5-billion asset, and over 142,000 members, Daba served said cooperative as Chairman, for five terms; Vice Chairman for 11 terms; and as its Treasurer for 6 terms. ). (END)

Five countries where microﬁnance works: Philippines is one of them

Five countries where microﬁnance works

ELISABETH RHYNE

Microﬁnance in India is suffering a serious crisis, stemming in part from uncontrolled loan growth by microﬁnance institutions (MFIs) in the southern state of Andhra Pradesh. This crisis and the Indian government's response to it (see the recent Malegam Committee Report to the Reserve Bank of India) have
captured the attention of top line media around the world.

Their reports up-end the traditional public narrative, in which microﬁnance ﬁgures as an important antidote to poverty. The substitute narrative, as
articulated by Mohammad Yunus of the Grameen Bank, puts blame for the crisis on commercialization and with it, the proﬁt motive.

But Indian microﬁnance is hardly a template for all. There are many paths to a successful microﬁnance sector that serves the ﬁnancial needs of low-income people well.

Herewith, the view from ﬁve countries, starting with troubled India.

Indian policymakers created a perfect storm for a microﬁnance shipwreck. Policy toward microﬁnance in India could hardly have been more problematic. Possibly the biggest mistake: although large MFIs were allowed to convert from non-proﬁts to commercial institutions, they were not licensed to take deposits.

Most people need savings alongside credit. The balance helps
clients become better ﬁnancial managers, build their own assets, and avoid falling into debt traps.

The MFIs, locked out of the ability to provide a range of services, had no other channel for growth than unbridled credit expansion. On top of this, the commercial banks were given "priority sector lending targets" – essentially a demand that they thrust money into the hands of the MFIs. With all that money ﬂowing in, the market overheated.

Cap it all of with lax oversight of governance when granting licenses to MFIs: there were few checks and balances to encourage restraint and responsible practices.

Tiny Bolivia got many things right. Bolivia developed a world class microﬁnance sector, starting with the conversion of the microﬁnance NGO Prodem into BancoSol in 1992. With support from the regulators, BancoSol became one of the world's ﬁrst private commercial banks dedicated to serving the poor. From then on, many microﬁnance institutions in Bolivia and around the world followed BancoSol's example, and several countries copied the legal framework in Bolivia that made it possible.

BancoSol now offers services from microenterprise loans to savings accounts, money transfers, home improvement loans and insurance.

So do many of its competitors. And the competition between these strong institutions brought interest rates in Bolivia below 20 percent, among the lowest microﬁnance rates in the world.

Cambodia and Mongolia followed Bolivia's example. Acleda Bank in Cambodia and Xac Bank in Mongolia developed in much the same way as BancoSol. Starting as non-proﬁt organizations, they converted into for-proﬁts and eventually commercial banks. They added savings and other services, offering a solid range of products. As market leaders and innovators, they inspired other institutions to enter and spark competition.

And this is very important: all these institutions are owned and governed by a carefully selected group of socially responsible shareholders who make explicit their intent to seek both social and ﬁnancial returns.

Indonesia showed what a state-owned bank can do. Back in the
1980s, Indonesia's government rural bank, Bank Rakyat Indonesia, was running a subsidized credit program called BIMAS to encourage farmers to grow more rice.

BIMAS performed poorly and cost the government budget so much money that policymakers decided to scrap it and start over with a new model. That model, the BRI Unit Desa System, involved very simple branches offering savings and microenterprise credit – basic banking services – to the self-employed across the country. BRI's Unit Desa System now serves tens of millions of clients, has been profitable since it began, and has never experienced a signiﬁcant crisis of overlending.

BRI succeeded because policymakers allowed it to run on sound banking principles, without political interference.

The Philippines took an eclectic approach. Appropriately for an archipelago nation, the Philippines encouraged many kinds of institutions to blossom, including small local banks, NGOs, and specialized microﬁnance banks.

This has encouraged local initiatives, with social entrepreneurs and social groups from many walks of life making personal contributions to create a vibrant marketplace. The Philippine government has offered them a
sound but supportive regulatory path, with attention to client protection. The government's nurturing approach led the Economist Intelligence Unit to rank the Philippines second in the world in its "Global microscope on the microﬁnance business environment 2010" which rates countries according to their microﬁnance regulatory and market infrastructure.

The lessons to draw from these examples are encouraging for the future of microﬁnance. The countries that have created microﬁnance "happiness" all recognized that savings needs to accompany credit, both to be truly beneﬁcial to clients and to prevent aggressive growth by lenders. They created specialized regulatory frameworks that were empowering to institutions wishing to serve the low end of the market.

It's not that they went easy on MFIs; rather, they made sure that requirements to ensure safety and solvency were a good ﬁt for institutions working with the tiny transactions of the poor.

Moreover, all the countries encouraged microﬁnance to develop as a commercial business, but not one where unbridled proﬁt seeking was the norm. They did this by placing the driving force into the hands of owners with social commitment alongside their requirements for ﬁnancial returns.

Microﬁnance still holds enormous promise for increasing the access to ﬁnancial services to the millions of people around the world who lack them. Good policies and supportive policymakers enable that promise to be realized.

AUTHOR: Elisabeth Rhyne is managing director of the Center for Financial Inclusion at ACCION.