Capacity requirements for banks
- The BSP reviews a bank’s application using two basic principles: (1) bank capacity and technical capability to offer micro-agri loans, and (2) micro-agri loans must uphold adequate and appropriate risk management systems and procedures and microfinance best methodologies and technologies.
- A bank’s micro-agri loans may be treated as microfinance loans only upon satisfaction of requirements on record, documentation, and training.
- A bank must have a track record of at least two years implementing sustainable microfinance programs with acceptable portfolio-at-risk (PAR) levels as evaluated against prevailing BSP standards.
- A bank must maintain an appropriate micro-agri loan product manual included in the bank’s microfinance manual as a product/service type offered to prospective clients.
- Loan/account officers must be trained on the micro-agri loan product so that program details can be communicated clearly to clients.
Core product characteristics and limits
- A micro-agri loan product must meet the criteria/characteristics of a microfinance loan under existing regulations and must also meet additional product characteristics.
- The loan is for short-term purposes only with a term up to 12 months, for farm activities, agri-business, agri-related fixed assets, among others.
- Eligibility requires multiple income generation activities (farm and off-farm).
- Eligibility requires farm activities at least 2 years in operation.
- Eligibility requires existing borrowers with a good track record based on the bank’s policies.
- Loan amount is up to PhP 150,000.
- Loans must start small and increase incrementally based on the bank’s policies.
- Loan value must be based on capacity to pay using household cash flow analysis.
- Payments must be by frequent amortization: weekly, semi monthly, or monthly.
- Lump sum payment is an option up to 40% of loan amount.
- Collateral substitutes may be required, consistent with the treatment of collateral in microfinance loans.
Risk management and controls
- Micro-agri loans must follow the same risk management mechanisms required for microfinance loans, including but not limited to the listed requirements.
- Repayment assessment must use cash flow analysis and affordability—especially for new clients—requiring sufficient other sources of income for periodic payments during the period when the loan project is not yet generating income.
- Loan monitoring, collection, and control must be supported by appropriate provisioning, consistent with existing BSP regulations.
- The micro-agri loan product must be included in the bank’s microfinance manual as a type of service/product offered to prospective clients.
- Micro-agri loans must maintain a sub-control ledger.
Regulatory treatment of approved products
- An approved micro-agri loan product is considered a microfinance loan.
- An approved micro-agri loan product receives the same regulatory treatment as provided under existing microfinance regulations.
Effectivity and publication rule
- The Circular takes effect fifteen calendar days after publication in either the Official Gazette or a newspaper of general circulation.
- The Circular is adopted on 3 Feb. 2010 and signed by the Officer-in-Charge for the Monetary Board, Armand o L. Surat o s (SGD.).