Question & AnswerQ&A (Republic Act No. 10693)
The short title of Republic Act No. 10693 is the "Microfinance NGOs Act."
The primary policy is to pursue a program of poverty eradication by encouraging poor Filipino families to undertake entrepreneurial activities and recognizing the role of NGOs in fostering local enterprise development and microfinance services for microenterprises.
A Microfinance NGO is defined as a nonstock, nonprofit organization duly registered with the SEC, with the primary purpose of implementing a microenterprise development strategy and providing microfinance programs, products, and services such as microcredit and microsavings for the poor and low-income clients.
Core principles include recognition as partners in poverty alleviation, providing accessible and affordable financial services to the poor, sustainability of operations, adherence to Client Protection Principles, and promotion of financial, social, and governance performance standards among others.
Microfinance NGOs are prohibited from directly engaging in deposit-taking operations and the insurance business; however, they may establish partnerships with authorized microinsurance agents or companies.
The Council is the accrediting body responsible for accrediting Microfinance NGOs, monitoring their compliance with the Act, setting financial and social performance standards, issuing certificates of accreditation, and revoking accreditation if necessary.
They include providing affordable credit and related services to the poor, offering business development and human development services, collecting compensating balances but not deposits, borrowing funds for relending, accepting donations, investing in sound enterprises, maintaining transparency, and publishing audited accounts.
Accredited Microfinance NGOs pay a two percent (2%) tax based on their gross receipts from microfinance operations in lieu of all national taxes. This tax treatment applies only to their microfinance operations catering to the poor and low-income individuals. Non-microfinance activities are subject to regular taxes.
Microfinance NGOs must provide at least microcredit and financial literacy programs, or microcredit combined with compensating balance units (microsavings).
Duly accredited Microfinance NGOs shall have ready access to related government programs and projects. Government agencies are mandated to support Microfinance NGOs operating in poverty-stricken or disaster-affected areas through grants, low interest loans, and guarantee funds.