BSP approves rules on housing microfinance

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) has issued Circular 678 on Jan. 6, 2010, strengthening the expansion of housing microfinance among banks.

BSP Circular 678 expands 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. It likewise allows for housing microfinance loans to have longer terms than traditional microfinance loans.

As part of the justification for the new rules and regulations, the BSP circular states that “the provision of housing microfinance is also seen as a way to improve the living conditions of the enterprising poor and the low-income households which will contribute to better health, productivity and quality of life.”

Rural Bankers Association of the Philippines (RBAP) president Joseph Omar Andaya described the new circular “as a tremendous support to the rural banking industry to expand microfinance services.”

Andaya added that BSP circular 678 will help the industry roll out the microfinance housing product to qualifed and interested member rural banks that have been implementing sustainable microfinance services for at least two years and have acceptable portfolio-at-risk levels.

The microfinance product is the initiative of the Microenterprise Access to Banking Services (MABS) program of the United States Agency for International Development (USAID) and the RBAP. The two entities had been working on the development of housing microfinance products over the past year.

Based on market research conducted by the RBAP-MABS and Mercy Corps, more than half of the microenterprise clients of the rural banks have plans to make home improvements in the next two years.

Likewise, the study indicated that a substantial percentage of these clients would seek a housing microfinance loan from the bank if such a product were made available to them.

The RBAP and MABS collaboration has produced sustainable microlending programs in the countryside for several decades. The two entities were likewise responsible in introducing mobile banking in the countryside.       — TPT