BSP: Microfinance lenders may be converted into regular banks

CEBU, Philippines - The Bangko Sentral ng Pilipinas has already allowed the conversion of microfinance-oriented lenders into regular thrift and rural banks.

The Monetary Board released Resolution 1855, allowing the conversion of microfinance-oriented thrift and rural banks to regular thrift and rural banks

The amendment also includes the conversion of their microfinance-oriented branches into regular branches.

According to the resolution signed by central bank governor Amando Tetangco Jr., microfinance-oriented banks have to comply certain requirements to have a regular thrift or rural bank license.

Among them is that microfinance-oriented lenders should furnish a certification signed by the president or officer of equivalent rank, stating that "the allocation of at least 50 percent of the gross loan portfolio to microfinance is no longer feasible due to changes in market condition."

This certification, according to BSP, should be supported by a market study citing the changes in demographic, social, and economic factors, among others.

The central bank also requires microfinance-oriented lenders to submit a strategic plan and business strategy contemplating the conversion to regular banks.

Furthermore, these banks are also required to present a certified true copy of the resolution of the banks’ board of directors authorizing the conversion of the microfinance bank into a regular bank.

To realize its conversion into a regular bank, the microfinance-oriented lender should also change its business name.

This development forms part the banking sector's liberalization process.

It was in February this year when the central bank announced the gradual lifting of the 17-year-old moratorium on the grant of licenses to establish new local banks through 2018 to allow the entry of more foreign capital into the domestic banking industry.

Last Wednesday, it said it approved a two-phased lifting of the moratorium in effect since 1999.

The BSP is adopting a two phases to lift the moratorium.

The first phase allows the existing thrift banks to apply for a license to convert into a universal or commercial bank and this takes effect until the end of 2017.

Meanwhile, the second phase will fully remove all restrictions on the grant of all new bank licenses and this will take effect by 2018. (FREEMAN)