Reaching out to the 'unbanked' (Concluded for last week)

IN A speech at the Asian International Banking Conference last year, Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. said: “Microfinance and financial inclusion are advocacies which we have pursued well before it became popular to do so.”

Indeed, the BSP remains at the forefront of establishing a policy and regulatory environment conducive to financial inclusion.

“This stems from the recognition that financial inclusion is a worthy policy objective that could and should be pursued alongside the promotion of stability and efficiency in the financial system,” according to the 2012 Year End Report on BSP Financial Inclusion Initiatives.

Believing that financial inclusion is a key component of inclusive growth, the BSP is actively implementing policy and program initiatives to realize the Philippine government’s vision for the financial sector.

This vision is highlighted in the Philippine Development Plan 2011-2016: “an inclusive financial system which provides for the evolving needs of a diverse public.”

One of the notable policy and regulatory actions undertaken by the BSP is the implementation of the enhanced rules on true and transparent lending.

To improve the implementation of the Truth in Lending Act (Republic Act No. 3765), protect consumers from lack of awareness of the true cost of credit, and ensure that they make informed decisions when they borrow, the BSP and other regulatory agencies issued similar regulations to cover all credit providers.

These regulations mandate full disclosure of all charges related to the extension of credit.

Credit granting entities are presently required to charge interest on the outstanding balance of a loan at the beginning of an interest period and consider all charges incident to the loan in computing the Effective Interest Rate (EIR). The EIR, whether quoted annually or monthly, should be the only rate quoted in all loan documents, including marketing materials.

All credit granting entities are likewise required to use a standard and simple format of disclosure to ensure that borrowers are provided with the information they need to understand their loan transactions.

The Bangko Sentral has also amended the rules on the provision of micro-agri loans, providing banks with the flexibility to innovate the design of their micro-agri loan products.

The liberalization of earlier rules through the issuance of BSP Circular 748 has allowed banks to better attune product design to the peculiarities and cycles of various types of crops.

Product innovations in micro-agri shall now be approved for as long as the banks demonstrate that they have the appropriate risk management systems in place.

The BSP has likewise issued Circular 746, which allows microfinance clients to continue to enjoy exemption from the submission of documents such as income tax returns and financial statements when availing of a loan.

This exemption, which will continue through December 31, 2014, will ensure that microentrepreneurs and SMEs continue to be able to access financial services through simple documentation.

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