BSP allows microfinance banks to set up MM branches

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) has allowed microfinance-oriented thrift and rural banks to establish branches in Metro Manila, opening up restricted areas including the cities of Makati, Mandaluyong, Manila, Paranaque, Pasay, Pasig, Quezon, and San Juan.

BSP Governor Amando Tetangco Jr. issued last week Circular 727 amending the Guidelines on Branching and Voluntary Closure/Sale/Acquisition of Branches/Other Banking Offices.

Under the new guidelines, thrift banks with combined capital accounts of at least P1 billion and rural banks or cooperative banks with combined capital accounts of at least P100 million could now establish microfinance-oriented branches in Metro Manila and the eight restricted areas.

Banks are allowed to establish branches anywhere in the Philippines except in the restricted areas. Rural banks or cooperative banks are not allowed to establish branches in Metro Manila.

Tetangco said a thrift bank with head office located outside the restricted areas, or a rural bank with head office located outside the restricted areas but within Metro Manila, with combined capital accounts of at least P1.5 billion, is now allowed to establish one branch anywhere within the restricted areas if it has no existing branch in those areas.

He pointed out that a rural bank with head office located outside Metro Manila with combined capital accounts of at least P1.5 billion is now allowed to establish one branch anywhere in Metro Manila, including in the restricted areas if it has no existing branch in Metro Manila.

Furthermore, the BSP said a thrift bank with head office outside Metro Manila with combined capital accounts of at least P1 billion is now allowed to set up branches in Metro Manila except in the restricted areas, while a thrift bank with head office outside Metro Manila and cities of Cebu and Davao with combined capital accounts of at least P500 million is now allowed to establish in Cebu and Davao.

On the other hand, a rural bank with combined capital accounts of at least P10 million could now establish branches in cities or municipalities of higher classification and with corresponding higher capitalization requirements except in Metro Manila, provided that where the majority of its total assets and majority of its total deposit liabilities are regularly accounted for by branches located in such cities or municipalities of higher classification.

The BSP said a rural bank or cooperative bank would only be allowed to establish branches if its combined capital accounts is at least P10 million wherein a rural bank with combined capital accounts of at least P10 million but less than P50 million could establish branches anywhere within two-hour normal travel time by land or sea public transport from the head office except in Metro Manila.

Furthermore, a rural bank with combined capital accounts of at least P50 million but less than P100 million could establish branches in any island group (Luzon, Visayas or Mindanao) where the head office is located except in Metro Manila while those with capital accounts of at least P100 million could establish branches anywhere in the Philippines except in Metro Manila.

The guidelines also stated that universal, commercial or thrift banks could be allowed to purchase or acquire branches or other banking offices anywhere, including in Metro Manila and in the restricted areas.

The rules said a thrift bank with a combined capital accounts of at least P1 billion could purchase or acquire branches or other banking offices in Metro Manila, including in the restricted areas, and those with capital accounts of P500 million could buy branches or other banking offices in the cities of Cebu and Davao.

Latest data from the central bank showed that loans extended by banks engaged in microfinance breached the P7-billion level as financial institutions involved in microfinance continue to move out of urban areas in Luzon to far-flung areas in the Visayas and Mindanao.

About 202 banks all over the country that are providing microfinance services extended P7.1 billion worth of loans to 942,072 clients. The savings of the microfinance clients have reached P3.5 billion.

The BSP was mandated by the General Banking Law in 2000 to recognize microfinance as a legitimate banking activity and to set the rules and regulations for its practice within the banking sector.