BSP extends regulatory relief to small firms

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) has extended a regulatory relief exempting micro and small-enterprises from the submission of documentary requirements to secure bank loans for another three years.

BSP Governor Amando Tetangco Jr. said in a statement that the Monetary Board agreed to extend the exemption of micro and small-enterprises from the submission of income tax return (ITR) and audited financial statements (AFS) when they apply for bank loans.

“Such a move by the Monetary Board is aligned with the BSP’s long-standing thrust of providing support to micro and small-enterprises by assisting these institutions gain greater access to credit from formal channels,” Tetangco said.

He pointed out that the extension would end on Dec. of 2014. The recently approved exemption extends the regulatory relief earlier granted by the BSP to the sector that is set to expire on Dec. 31.

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.

As of June 2011, banks with microfinance operations have outstanding loans to over 963,000 borrowers reaching over P7 Billion, or an average of P7,260.00 per microentrepreneur.

The Microfinance Council of the Philippines reported that in 2010, it had 2.3 million active borrowers with P13 billion in loans or an average of P5,650 per microentrepreneur. 

The BSP has issued Circular 678 and 680 aside from Circular 683 that authorized rural banks to market, sell and service microinsurance products subject to certain prudential rules and regulations.

BSP Circular 678 expanded the definition of microfinance by allowing qualified housing microfinance loans up to P150,000 for home improvement and up to P300,000 for lot acquisition and house construction while Circular 680 allowed banks to offer micro-agri loans as credit not exceeding P150,000 to small farmers.

The BSP has also issued Circular 685 supporting the commercialization of the industry by recognizing the importance of independent and third party ratings provided by Microfinance Institution Rating Agencies (MIRAs).

It has also issued Circular 683 issued in 2010 allowing rural banks to present, market and sell microinsurance products in their branches and offices. The BSP recently allowed Bangko Mabujay in Tanza, Cavite and Mallig Plains Rural Bank in Isabela to engage in microinsurance services.

At present, there are nearly 50 other rural banks that have signified their interest to provide microinsurance services.

Microinsurance is an activity providing specific insurance, insurance-like and other similar products and services that meet the needs of the low-income sector for risk protection and relief against distress, misfortune and other contingent events.