Philippines: BSP Raises Ceiling on Micro-Credit
Manila, Philippines, December, 29 2011 -
The Bangko Sentral ng Pilipinas (BSP) has raised the existing cap on microfinance loans to allow banks to provide more financing to clients.
In Circular No. 744 dated Dec. 28 and posted on its Web site yesterday, the BSP added “microenterprise loan plus” or “microfinance plus” to the types of microfinance loans that banks may extend to their clients.
Whereas microfinance loans are capped at P150,000, the microenterprise loan plus or microfinance plus are capped at double that or at P300,000.
“We created the microfinance plus concept in recognition of the success of a growing number of microenterpreneurs,” said BSP Deputy Gov. Nestor A. Espenilla, Jr. in a text message yesterday. “They need bigger loans.”
Pia Roman-Tayag of the BSP’s Inclusive Finance Advocacy Staff, said the P300,000 limit is still less than what traditional banks offer.
She said those who need the bigger loans have been “largely unserved.”
“The borrowers that will qualify as recipients of Microfinance Plus shall have a track record of at least two microfinance loan cycles in the P50,000 to P150,000 range, demonstrating the success of the business,” Circular 744 read.
These borrowers should also demonstrate their increasing demand for loans and increased capacity to pay for these.
Furthermore, the borrowers should have savings accounts.
Circular 744 will take effect 15 days after its publication in a newspaper.
The circular amends Annex A of Circular 694, series of 2010, which defined microfinance and microfinance loans, and details the features of microfinance loans, among others.
A microfinance loan is a “small loan granted to basic sectors, on the basis of the borrower’s cash flow, and other loans granted to the poor and low-income households to enable them to raise their income levels and improve their living standards,” the annex read.
Aside from microfinance loans, banks may also extend housing microfinance loans and micro-agri loans.
A housing microfinance loan, capped at P300,000, may be used for home improvements, house construction, and house and/or lot acquisition.
A micro-agri loan, meanwhile, is a “short-term loan granted for farming activities, agribusiness, and agri-related fixed assets, among others…”
Microfinance loans are usually unsecured and may require the guarantee of one or more persons.
The BSP said that 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.