BSP identifies clients entitled to microfinance

MANILA, Philippines - The Bangko Sental ng Pilipinas (BSP) has issued an order defining microfinance clients entitled to the presentation, marketing, sale, and servicing of microinsurance products by thrift, rural, and cooperative banks.

BSP Deputy Governor Nestor Espenilla Jr. said Memorandum M-2011-027 defines microfinance clients as individuals with microfinance loan or microcredit as well as individuals with a microfinance savings deposit account or microdeposit.

Espenilla said microfinance clients could also be existing bank clients who are classified by the bank as poor and low income or those with annual family income below the national average based on the latest available National Statistics Office (NSO) Family Income and Expenditures Survey (FIES) that stood at P206,000 in 2009.

Earlier, the BSP cautioned thrift, rural, and cooperative banks against the unauthorized conduct of microinsurance as well as other insurance-related activities and warned that regulatory authorities would not hesitate to impose sanctions and penalties against bank officers violating the law.

The BSP issue Memorandum M-2011-015 that only authorized banks are allowed to engage in the presentation, marketing, sale, and servicing of microinsurance products.

Banks interested to offer microinsurance services are required to enter into an agreement with a duly authorized insurance provider responsible for ensuring that each of the microinsurance product to be marketed or sold by the bank is approved by the Insurance Commission.

A bank also needs to acquire appropriate license from the Insurance Commission to be able to act as microinsurance agent of an authorized insurance provider.

The Insurance Commission defines microinsurance as an act providing specific insurance, insurance-like and other similar products and services that meet the needs of low-income sector for risk protection and relief against distress, misfortune, and other contingent events.

Microinsurance products that cater to the needs and capacity of low-income sector features limited amount of premiums, contributions, fees, and charges that do not exceed five percent of the current daily minimum wage and a ceiling on guaranteed benefits not to exceed 500 times the current daily minimum wage.

Early last year, the BSP gave more than 3,500 rural, thrift, and cooperative banks the green light to sell microinsurance products as part of efforts to eliminate informal insurance schemes and at the same time put an end to the unauthorized provision of insurance products.