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Market Expansion Training Date Place New Circulars Related to MBOs

Market Expansion Training Date Place New Circulars Related to MBOs. Training on Expansion Strategies Date Place. Objectives of the Session: Highlight major provisions of BSP Circ. 694 & pertinent Memos. Encourage proper bank compliance.

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Market Expansion Training Date Place New Circulars Related to MBOs

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  1. Market Expansion TrainingDatePlaceNew Circulars Related to MBOs Training on Expansion Strategies Date Place

  2. Objectives of the Session: Highlight major provisions of BSP Circ. 694 & pertinent Memos. Encourage proper bank compliance

  3. Circular 694, Amendment of Regulations on the Establishment of OBOs & Notes to MF

  4. Circular 694, Amendment of Regulations on the Establishment of OBOs & Notes to MF What is MF? L – D- I- O Regular Loan/Deposit Transactions – Not Allowed

  5. What is Microfinance? • Is the provision of a broad range of financial services such as deposit, loan, payment services, money transfers and insurance products to the poor and low income households, generally for their microenterprises and small businesses, to enable them to raise their income levels and improve their living standards.

  6. Circular 694, Amendment of Regulations on the Establishment of OBOs & Notes to MF • Expand the products and services that can be offered: • Micro-credit (release and collection) • Micro-deposits (initial & succeeding deposits and withdrawals) • Check deposits of existing microfinance clients • Micro insurance (present, market, sell & service) • Remittances • E-money conversion such as G-cash, Smart Money (see circular # 704 & 706) • Collection/Pay out of benefits from government (e.g. SSS, GSIS, PHIC, CCT) • Utility payments • Purchase of foreign currency (≤USD 300 per client/day)

  7. Circular 694, Amendment of Regulations on the Establishment of OBOs & Notes to MF • Subject to the ff conditions: • MF-OBO/MBO shall only perform the transactional activities it has specifically applied for and had been authorized by the BSP to perform. Subsequent enhancements are likewise subject to prior BSP approval; • The bank shall ensure timely accounting and proper recording of all financial transactions of its OBOs and observe adequate internal control procedures to ensure the safety of funds and reliability of financial records and reports emanating from all transactions; and,

  8. Circular 694, Amendment of Regulations on the Establishment of OBOs & Notes to MF • Subject to the following conditions: c. The bank president shall submit within 30 calendar days from the end of financial year a comprehensive statement under oath that all bank’s OBOs and their activities are duly authorized by the BSP.

  9. Requirements for an MBO: • Camels rating not less than 3 • Not under Prompt Corrective Action • No major supervisory concern on soundness & safety of operations as of application date

  10. Additional requirements for an MBO: -At least 50 % of the transaction generated are from MF transactions -Maximum on-site cash limit of not more than P 500 K per day -Adequate physical facilities and security arrangement. -Managed by experienced and trained MF people.1 -Manual of Operations

  11. A1 .Continuation of Circular 694:Notes on Microfinance • Microfinance Loans or Micro Credit • Microenterprise Loans – small and short term loans granted to basic sector, based on cash flows and principal amount of which can be generally pegged at P 150,000.00. • Housing Microfinance – house construction and/or lot acquisition is generally pegged at P 300,000.00. Home improvements not more than P 150,000. Circular # 678 dated January 6, 2010. • Micro-agri Loans – short term loans granted for farming activities, agri business and agri-related fixed assets utilizing microfinance principles and methodologies. Loan amount can be up to P 150,000. Circular 680 dated February 3, 2010 • Microfinance Savings Deposit Account or Micro Deposit • Micro insurance (Circular 683 Feb 23, 2010)

  12. Amendment to Circular 694: Circular 744: Inclusion of Microfinance Plus • What is Microfinance Plus? - Loans are from Php150,000 to Php 300,000. Conditions to Qualify: 1. Track record of at least 2 MF loan cycles in the Php 50,000 to Php 150,000 range demonstrating the success of the business. 2. With increase credit demand & capacity to pay. 3. The borrowers must have savings account. The circular was issued last December 28, 2011.

  13. Con’t of Circular 694: Microfinance Savings Deposit Account Micro-deposits are savings accounts that cater to the needs of the basic sectors, low-income clients and those that are unserved or underserved by the financial system. With general features as ff: • Minimum maintaining balance not exceeding One Hundred Pesos (P 100) • Not subject to Dormancy Charges • Only for individual microfinance clients whose average daily savings account balance does not exceed Fifteen Thousand Pesos ( P 15,000)

  14. Micro Insurance • Micro insurance 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. • The marketing, sale and servicing of micro insurance products by thrift, rural and cooperative banks shall be governed by existing BSP regulations.

  15. Micro Insurance • Premiums, contributions, fees or charges are collected/deducted prior to the occurrence of a contingent event. • Premiums – the amount of which shall be computed on a daily basis and does not exceed five percent (5%) of the current daily minimum wage for non-agricultural workers in Metro Manila. (Approx – P 5,252) • Guaranteed Benefits – not more than 500 times the daily minimum wage for non-agricultural workers in Metro Manila. (Approx – P 202,000) (Minimum wage basis: as of October 2010 & computed at 25 days in a month)

  16. Micro InsuranceM-2011-027 – Guidance for the Implementation of Circular 683 • Eligible for Micro insurance • Individuals with microfinance loan or micro credit • Individuals with microfinance savings deposit account or micro deposit. • Other existing bank clients who are classified by the bank as poor or low-income not exceeding P 204 K.

  17. Memorandum-2011-032– Guidance for the Implementation of Circular 694 • Item 3 of the list of Limited transactional banking activities which reads as (3)Disburse/release proceeds of micro-loans and collect loan amortization payment and related charges”the collection includes the MF borrowers embedded deposits that are part of the loan amortization payments.

  18. Memorandum-2010-040– Processing Guidelines for MBOs pursuant to Circular 694 • The processing of applications will be undertaken in a two-stage process: • Stage 1 : Letter of Intent & Pre-qualification • Stage 2 : Business Plan (Strategic & Operational Plan Assessment)

  19. Letter of Intent Template • Date ___________ • Mr. Nestor Espenilla, Jr. • Deputy Governor • Bangko Sentral ng Pilipinas • Through: Central Application and Licensing Group • Supervision and Examination Sector • Dear Governor Espenilla: • We are respectfully expressing our interest to convert to Microbanking Offices (MBOs) the OBOs listed in Table 1, in accordance with BSP Circ. 694 and Memorandum No. M-2010-040. • (If banks wants to retain OBOs that will do non-transactional functions, add this paragraph) We have also indicated in Table 2 the bank’s existing OBOs that will retain their non-transactional functions. • We are also attaching copy of the previous Board approvals for the establishment of the OBOs. • We look forward to your favorable consideration of our request and permission to proceed to Stage 2 for the preparation of the Business Plan. • Thank you very much. • Very truly yours, • Name • Designation • Attach.: Tables 1 & 2

  20. Questions Need to be Answered in the Business Plan • Why is the bank establishing MBO & how does it relate to the overall corporate strategy? • How many are to be established in the next 1,3,5 years? Where are these to be established? Why have these areas been identified? • What are the products and services to be offered?

  21. Con’t…Questions Need to be Answered in the business plan • How is the expansion to be funded? • How does the bank plan to maintain adequate command and control over the expanded network? • The proposed MBOs are to be linked operationally to which branches?

  22. Con’t…Questions Need to be Answered in the business plan • How does the bank propose to comply with the minimum 50 % MF transaction requirement per MBO? • What is the policy on the minimum cash position of the MBO? This shall include arrangement for replenishment. • What are the management and organizational arrangements for the MBO? (Staffing pattern, functions & qualification of personnel

  23. Con’t…Questions Need to be Answered in the business plan • What are the Management Information System (MIS) and financial accounting arrangements to support customer handling and proper recording and reporting of transactions? • What are the physical security arrangements? These arrangements shall be included in the overall security program of the bank.

  24. Memorandum-2010-040– Processing Guidelines for MBOs pursuant to Circular 694 • A bank may apply for additional MBOs after 6 months from approval of the initial set/batch • All MBOs must be opened within 1 year from their approval • If denied, re-application shall only be allowed after 6 months from the date of receipt of denial

  25. Thank you! Good Luck!!

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