MB approves new measure to expand access to finance
MANILA – The Monetary Board has approved amendments to banking to allow the establishment of micro banking offices (MBOs).
This approval presents an opportunity for banks to deliver microfinance oriented banking services to areas that are hard to reach and remain underserved.
At present, about 37 percent, or 610 out of 1,635 of the country’s cities and municipalities do not have a single banking office, leaving its population wanting for much-needed financial services.
Establishing full-blown bank branches in these areas may not be economically justified. MBOs, on the other hand, allow an established bank to extend the reach of its services in a cost-effective manner to overcome such barriers.
“We anticipate that strong rural banks and thrift banks that have been focusing on microfinance will lead the way in taking advantage of this new opportunity to deliver a wide array of financial services to underserved and unbanked areas,” BSP Deputy Governor Nestor Espenilla Jr. said.
Other banking offices, or OBOs, in general refer to a permanent office or place of business of a bank with less requirements to set up as compared to a head office, branch or extension office. The newly approved regulations now recognize two classifications of such OBOs.
A regular OBO is one that undertakes purely non transactional banking related activities such as marketing, customer care services, acceptance of loan applications, among others.
The other classification is a Microfinance OBO (MF-OBO) or Micro-banking Office (MBO) which provides a wide range of transactional activities which reflect the particular needs of the unserved and underserved market, particularly microfinance clients, overseas Filipinos and their beneficiaries.
This MBO is authorized to provide services that are appropriately designed for the target market such as to accept micro-deposits, disburse micro-loans and collect payments, sell, market and service micro-insurance products, receive and pay out authorized remittance transactions, act as cash in/out points for electronic money, receive utility payments, collect premiums and pay out benefits from social security institutions and other benefit systems including government conditional cash transfer programs, and purchase a limited level of foreign currency.
The MBO shall only perform the activities for which it has specifically applied for and had been authorized to perform.
Complementary to these amendments, the Monetary Board also broadened the scope and definition of microfinance to include micro-deposits, which is a simplified account that is appropriately designed and priced to fit the needs and capacity of the underserved market.
The features include a minimum balance requirement not exceeding P 100, non-applicability of dormancy charges and an average daily savings account balance not exceeding P15,000.
This is another significant enhancement to current regulations, which previously only rather narrowly defined microfinance as loans. This recognizes the importance and significant need for accessible and safe savings instruments especially for this market.
While the regulations have liberalized the scale and scope of OBO operations, it ascertains that the banks that apply and maintain such offices are strong and stable banks that have necessary processes and systems in place to ensure timely record keeping, adequate internal controls and security measures. Such requirements will be proportionate to the level of activities that the MBO will undertake.*PNA
