LENDING POLICY OF BANKS INPHILIPPINES Nikita Pandey Roll no.- 775
LENDING COMPANY? Lending companies or lending investors are those engaged in granting direct loans with interest and charges, whether on a secured or unsecured basis. They are the ones that provide credit to borrowers who are left out of the sophisticated formal financial system. However, Lending companies are different from banks and quasi-banks in that they lend their own funds. Although they may source the funds from other persons, such sources do not exceed 19 at any single time.
SYSTEM IN PHILIPPINES Micro-finance, as recognized by the Bangko Sentral ng Pilipinas (BSP), is the provision of a broad range of financial services such as deposit, loans, payment services, money transfers and insurance products to the poor and low income households, for their micro-enterprises and small businesses, to enable them to raise their income levels and improve their living standards. Institutions providing microfinance services in the Philippines include: pawn shops, credit unions, rural banks, microfinance NGOs(NGO-MFIs), thrift banks, cooperative banks and commercial banks.
REGULATORS Bangko Sentral Ng Pilipinas (BSP)Several of these institutions (ex. thrift banks, rural banks, pawnshops) are regulated by the Bangko Sentral ng Pilipinas (BSP) Cooperative Development AuthorityCredit unions are regulated by the Cooperative Development Authority. NGO-MFIs, which cannot accept deposits, are not regulated by any government regulatory agency. The government is in the process of establishing an extensive credit information system. The Philippines is at the forefront of the development of a branchless banking industry and has focused significant regulatory attention to this growth area.
HISTORY In 1972, the Central Bank of the Philippines had the jurisdiction and authority over the entire credit system. Consequently, lending investors, although they do not obtain funds from the general public, were placed under the regulatory umbrella of the old Central Bank. However, when the BSP Charter was enacted, lending investors were removed from the regulatory powers of the Bangko Sentral. While most non-bank financial institutions are governed by special laws like the Financing Company Act, the Investment Company Act and the Pawnshop Regulation Act, lending companies were left in limbo.
RESULT OF BSP CHARTER The lack of regulation resulted in a host of unacceptable practices. High-lending rates were charged, official receipts were not issued, and charges were not wholly disclosed to the borrowers. A number of multibillion scams were pulled off by unscrupulous lending investors against the public, in large part due to the lack of appropriate in industry regulation.
CORRECTIVE MEASURE Securities and Exchange Commission issued a circular directing lending, investors to incorporate as financing companies and conform to the requirements of the Financing Company Act, including the minimum capitalization of P10 million for Metro Manila and other first-class cities.
CURRENT SCENE We now find the industry again back to the non- regulatory regime. Housing, automobile, personal, business and other types of loans have become cheaper in the Philippines, with bank lending rates falling by an average of about one- fourth of one percent since the start of the year.(2012) This was according to the Bangko Sentral ng Pilipinas, which said lending rates for all types of bank loans and all maturities had dropped by an average of 25.3 basis points since January.
The average bank lending rate now stands at only 6.34 percent, BSP data as of July 13 2012 . Now, the lower interest rates were expected to accelerate growth in demand for loans and in the loan portfolio of banks in the country. The outstanding loans of universal and commercial banks were originally expected to grow by 15 percent this year, but are now seen to rise by a faster pace with the latest round of policy-rate cut by the BSP
BIBLIOGRAPHY http://www.bu.edu/bucflp/countries/philippines/ Veronica B.Bayangos, Does the bank credit channel of monetary policy matter in the Philippines, Bangko Sentral ng Pilipinas, 23 April 2010 http://www.adb.org/site/public-sector- financing/lending-policies http://dirp3.pids.gov.ph/ris/pdf/pidsdps0210.pdf