Microfinance has emerged as a critical tool for poverty alleviation and financial inclusion in the Philippines. The government has recognized its potential and has enacted several laws and regulations to promote and regulate the sector (Llanto & Fukui, 2015). This paper examines the key regulations governing microfinance in the Philippines and their implications for the sector.<\/p>\n\n\n\n
Covered institutions<\/strong><\/p>\n\n\n\n In the Philippines, microfinance services are provided mainly by banks (mainly rural and thrift), non-governmental organizations (NGOs), cooperatives, financing companies and lending companies. The focus of regulation is on portfolio quality, outreach, efficient and sustainable operations, and transparent information. <\/p>\n\n\n\n Banks with microfinance operations are under the regulation and supervision of the Bangko Sentral ng Pilipinas (BSP), cooperatives are under the supervision and the regulation of the Cooperative Development Authority (CDA) and microfinance NGOs, financing companies and lending companies are regulated by the Securities and Exchange Commission (SEC). <\/p>\n\n\n\n Regulatory framework<\/strong><\/p>\n\n\n\n Republic Act No. 10693, or the Microfinance NGOs Act, provides a regulatory framework for non-governmental organizations engaged in microfinance activities (Congress of the Philippines, 2015). It established the Microfinance NGO Regulatory Council, which oversees the accreditation, regulation, and supervision of microfinance NGOs.<\/p>\n\n\n\n The Bangko Sentral ng Pilipinas (BSP), the central bank of the Philippines, has issued several circulars related to microfinance. For instance, Circular No. 272 provides guidelines for the establishment of banks’ microfinance operations, while Circular No. 744 provides the framework for microfinance products and services (Bangko Sentral ng Pilipinas, 2001; 2013).<\/p>\n\n\n\n In 2010, an amendment to circular 694 was approved which recognizes from PhP150,001 to PhP300,000 to still be categorized as a microfinance loan (Bangko Sentral ng Pilipinas, 2010). This was done to accommodate the increasing demand for higher loan amounts from growing microenterprises. This policy increased the scope of those who can be microfinance clients, consequently increasing the potential market.<\/p>\n\n\n\n
The regulatory framework for microfinance in the Philippines is multi-faceted, involving several laws and regulatory bodies. The Republic Act No. 8425, also known as the Social Reform and Poverty Alleviation Act, is a landmark legislation that recognized microfinance as a key strategy for poverty alleviation (Congress of the Philippines, 1997). It mandated government financial institutions to allocate a portion of their loan portfolio for microfinance.<\/p>\n\n\n\n