MB okays 1st microfinance bank with P800-M capital

The Monetary Board (MB), the policy-making body of the Bangko Sentral ng Pilipinas (BSP), has approved the establishment of the country’s first microfinance bank with an authorized capital of P800 million.

BSP Deputy Governor Alberto Reyes said the thrift bank, to be called Opportunity Microfinance Bank (OMB), is the first microfinance bank to be developed under BSP Circular 273 issued last Feb. 27. The circular exempts microfinance-oriented thrift or rural banks from the general moratorium on the establishment of new banks.

"This is a step in the right direction since this will encourage small businesses and retailers to tap microlending facilities," Reyes said, adding that, hopefully, the lending scheme will spur bigger economic activities, especially among the marginalized sectors.

OMB is composed of non-government organizations (NGO) that include the Alliance of Philippine Partners in Enterprise Development, Opportunity International Network, Alalay sa Kaunlaran sa Gitnang Luzon, Kabalikat Para sa Maunlad na Buhay Inc. Taytay sa Kauswagan, Inc., and Daan sa Pag-unlad Inc.

Reyes said OMB will grant collateral-free microfinance loans and other associated banking services to their target clients.

The size of the loans will range anywhere from a minimum of P4,000 to P15,000, granted on the basis of the borrower’s cash flow to help finance microenterprises and small businesses.

Reyes said OMB will be a better alternative for borrowers.

"The bank will be mainly competing against informal lenders who often victimize their poor clients with usurious lending rates," Reyes said.

Reyes said the bank’s target borrowers are vendors, small sari-sari stores and other small businesses which produce daily and/or weekly income and which do not require a big capital outlay.

To ensure borrowers will be diligent in their payments, Reyes said borrowers should group themselves into 30 members for the purpose of making loan processing and loan repayment easier.

"The group will impose peer pressure. In case a member fails to pay his obligation on time, the other members of the center will raise the uncollected amount from among themselves to cover its payment. This is in accordance with the center promissory note executed by the entire center membership to ensure a 100 percent collection of all loans," Reyes said.

The group of lenders will also be required among others to be subjected to a weekly monitoring by program officers, including surprise visits by branch managers to center meetings; daily reporting system; conduct of weekly branch management meeting, and incentive system based on the performance of the entire branch helps promote both peer pressure and teamwork.

Reyes said the bank will also use a sophisticated portfolio management system custom-built for microfinance systems.