BSP orders banks to beef up defenses vs cyber attacks

The Bangko Sentral ng Pilipinas yesterday said the global ransomware attack over the weekend had no impact on any Philippine financial institution even as it urged all banks and nonbanks to step up their defenses.

Asked if BSP-supervised financial institutions were targeted during the cyber extortion attacks, Deputy Governor Nestor A. Espenilla Jr. replied: “Targeted? Possible. Successfully attacked? That’s another matter—none so far.”

Reports said that at least 100,000 groups in 150 countries had been hit by online extortion attacks as of Sunday.

Espenilla said the BSP had “previously alerted the system to the danger,” hence he was “sure” that “defensive initiatives have minimized the risk.”

Last week, the BSP issued Memorandum No. M-2017-017 reminding banks to adopt multifactor authentication (MFA) in response to “growing concerns on cyber attacks involving fraudulent e-mails and websites aimed at customers and employees of financial institutions.”

Last April, the BSP ordered all financial institutions in the country to implement MFA, especially for sensitive transactions, by September amid bigger risks coming from cyber attacks.

The BSP earlier explained that the MFA employed a combination of at least two authentication factors, namely inherence or something that is inherent to the user such as fingerprint and retinal pattern; knowledge or something that the user knows such as password or PIN, and possession or something that the user has in his/her possession, including payment card or a one-time password generated through a security token or sent via SMS.

The MFA “provides for a more reliable authentication method and a stronger fraud deterrent mechanism that limits unauthorized access,” the BSP had said.

In a new memorandum issued just last Monday, the BSP reiterated the need to beef up cyber defenses in light of the recent global ransomware attacks.

“With the alarming proliferation of ransomware, BSP-supervised financial institutions are at an increased risk of loss or unauthorized disclosure of proprietary or sensitive information, operational disruptions, financial losses incurred to restore affected systems and reputational damage. Given the perceived anonymity of threat actors in perpetrating ransom payment schemes, ransomware remains a viable threat that is expected to evolve to more sophisticated and destructive forms, such as crypto-ransom ware. Web-based applications, including legitimate cloud-based services, are particularly vulnerable to this type of threat,” Espenilla said in Memorandum No. M-2017-018 issued on May 15.

“In this regard, BSP-supervised financial institutions are advised to heighten their vigilance and ensure that robust protection against ransomware is in place. BSP-supervised financial institutions should provide multiple layers of defenses by implementing appropriate controls at the host, network, and endpoint level to prevent and detect malicious codes,” Espenilla said. — BEN O. DE VERA, Philippine Daily Inquirer

Source: http://business.inquirer.net/229689/bsp-orders-banks-beef-defenses-vs-cyber-attacks#ixzz4hIZ6B8LB

Eastern Visayas bank deposits post 11.23% growth in 2016

TACLOBAN CITY — Bank deposits in Eastern Visayas grew by 11.23 percent to P94.61 billion in 2016, showing a sustained economic recovery from the 2013 super typhoon’s devastation, the National Economic Development Authority (Neda) said.

Bank deposits in the region managed to maintain its double-digit annual growth rate in the past four years despite impacts of Super Typhoon Yolanda that worsened the region’s poverty incidence.

However, last year’s deposit portfolio growth in the region is lower than the 20 percent increase recorded since 2013, the Neda said, citing data from the Philippine Deposit Insurance Corporation (PDIC).

Neda has yet to verify with the Central Bank if election spending in 2016 “triggered withdrawals that are significant enough to slow down growth.”

Deposit liabilities in 2015 stood at P85.06 billion. It refers to money placed by an individual or corporation into a banking institution for safekeeping, according to the Central Bank.

The PDIC banking statistics, posted on its website, showed that total number of accounts grew by 7.74 percent from 805,624 in 2015 to 868,000 last year.

The number of banks increased to 206 in 2016 from 191 in the previous year. All provinces also posted significant growth in both accounts and deposits.

Data showed that of the total P94.61 billion deposit portfolio, P58.11 billion were in Leyte province, P10.03 billion in Southern Leyte, P10.01 billion in Samar, P7.73 billion in Northern Samar, P6.09 billion in Eastern Samar, and P2.41 billion in Biliran.

The remarkable growth in Leyte is largely contributed by the 45 banks in Tacloban City. The regional capital had P36.74 billion deposits as of end of 2016, higher than the P34.37 billion in 2015.

The number of accounts in the city rose to 284,884 in 2016 from 269,547 in the previous year.

Neda identified the sustained post-Yolanda recovery activities from the government and private sector as major contributors.

“The increase was also attributed to increase business activities, inflow of remittances and wider reach of banks due to additional branches, among others,” said Neda regional director Bonifacio Uy.

Leyte and Eastern Samar, which were badly hit by Super Typhoon Yolanda, posted a remarkable deposit growth from 2015 to 2016. Leyte’s bank deposits rose to P58.31 billion from P53.21 billion. In Eastern Samar, total deposits went up to P6.09 billion from P5.4 billion. (PNA)

Source: http://www.sunstar.com.ph/tacloban/business/2017/04/26/eastern-visayas-bank-deposits-post-1123-growth-2016-538649

BSP extends deadline for the exchange/replacement of old note series (NDS) at par with the new note series (NGC) until 30 June 2017

The Monetary Board approved the extension of the deadline for the exchange or replacement of New Design Series (NDS) banknotes with the Bangko Sentral ng Pilipinas (BSP) or its authorized agent banks at par with New Generation Currency (NGC) banknotes and without charge to 30 June 2017.

This recent decision of the Monetary Board, which was made in response to public clamor for a longer period of exchange of NDS banknotes, amends BSP Circular No. 935 dated 28 December 2016. It may be recalled that this earlier BSP Circular stipulates that after 31 March 2017, the NDS banknotes which have not been exchanged shall cease to be liability of the BSP and shall be demonetized.

demonetization 2

demonetization june 30, 2017demonetization 2

Source: http://www.bsp.gov.ph/publications/media.asp?id=4322

BSP Grants Regulatory Relief to Banks/Non-Bank Financial Institutions with Quasi-Banking Functions (NBQBs) Affected by Typhoon “Nina”

The Bangko Sentral ng Pilipinas (BSP) is granting temporary regulatory and rediscounting relief measures to banks/non-bank financial institutions with quasi-banking functions (NBQBs) with head offices (HOs) and/or branches/extension offices (EOs)/microfinance-oriented banking offices (MBOs) located in the areas which were devastated by Typhoon “Nina”, based on Situation Report No. 12 dated 2 January 2017 of the National Disaster Risk Reduction and Management Council, as follows:

Region Areas
IV-A Batangas, Cavite, Laguna, Quezon, Rizal
IV-B Marinduque, Occidental Mindoro, Oriental Mindoro, Romblon
V Albay, Camarines Norte, Camarines Sur, Catanduanes, Masbate, Sorsogon
VIII Northern Samar

Similar relief measures were extended by the BSP to banks/NBQBs with HOs and/or branches/EOs/MBOs in provinces/cities that were affected by natural calamities, such as last year’s El Niño Phenomenon and Typhoon “Lawin”.

As approved on 12 January 2017 by the Monetary Board, the BSP’s policy-making body, the temporary relief measures shall be made available to banks/NBQBs which will apply for the same:

For Thrift Banks (TBs)/Rural Banks (RBs)/Cooperative (Coop) Banks/NBQBs

a. Excluding outstanding loans of borrowers in affected areas from the computation of past due ratios provided these are restructured or given relief;

b. Non-imposition of penalties on legal reserves deficiencies of TBs/RBs/Coop Banks/NBQBs with HOs and/or branches/EOs/MBOs in the affected areas;

c. Moratorium on monthly payments due to BSP for banks with ongoing rehabilitation programs;

d. Subject to BSP approval, booking of allowance for probable losses on a staggered basis over a maximum period of 5 years for all types of credits extended to individuals and businesses directly affected by the calamity; and

e. Non-imposition of monetary penalties for delays in the submission of supervisory reports.

For All Banks

f. Allowing banks to provide financial assistance to their officers and employees who were affected by the calamity including those assistance that may not be within the scope of their existing BSP-approved Fringe Benefit Program.

For All Rediscounting Banks

g. Granting of a 60-day grace period to all rediscounting banks in the affected areas to settle their outstanding rediscounting obligations as of 25 December 2016 with the BSP; and

h. Allowing banks to restructure with the BSP, on a case-to-case basis, the outstanding rediscounted loans of end-user borrowers affected by the calamity.

These measures will be in effect for a defined period and covered by additional specific and other prudential conditions.

Source: http://www.bsp.gov.ph/publications/media.asp?id=4281

Electronic Processing of Checks to Start Soon

01.19.2017

The electronic processing of checks shall commence on 20 January 2017.

The Philippine Clearing House Corporation (PCHC) is set to implement the clearing of checks via electronic presentment through its Check Image Clearing System (CICS). Under the CICS, only the digital images of checks and their electronic payment information will be transmitted to the paying bank, allowing a shorter turnaround time for funds to be credited to the depositors’ accounts.

According to PCHC, depositors who transact with CICS-compliant banks/branches may already withdraw on the next banking day against their validated check deposits. Meanwhile, banks that are still on paper-based check processing will continue to render the service under existing timelines.

The public is likewise encouraged to get in touch with their banks about the new system and reminded on how to properly prepare checks under the CICS.

To achieve faster transition to the new process, the BSP enjoins the remaining non-CICS-compliant banks to take necessary measures to meet the technical requirements of CICS.

The implementation of CICS forms part of the reforms espoused by the Bangko Sentral to achieve a more efficient and safe payment system as this is critical to the promotion of the country’s Financial Stability.

Source: http://www.bsp.gov.ph/publications/media.asp?id=4277

BSP Issues Regulation Enabling Banks to Expand Service Delivery Channels

01.18.2017

In line with the thrust of the Bangko Sentral ng Pilipinas to create an enabling regulatory environment for innovations and allow banks to exponentially expand reach and serve clients more efficiently, the Monetary Board recently approved the guidelines for new bank service channels and relaxed existing regulations on deposit taking activities outside bank premises.

Under the new regulations, banks are now allowed, with prior BSP authorization, to serve clients through cash agents contracted by banks to accept and disburse cash in its behalf, facilitating online self-service deposits, withdrawals and fund transfers, as well as bills payment. Cash agents can also perform Know-Your-Customer procedures as well as collect and forward application documents for loan and account opening. They may also sell and service insurance as may be authorized by the Insurance Commission. These cash agents are typically cash rich third party entities with many outlets that conduct regular business in fixed locations anywhere in the country, such as convenience stores, pharmacies and other highly accessible retail outlets.

Cash agents enable banks to leverage on innovative digital solutions to serve a wider client base, particularly in the low-income and rural areas where there is limited commercial incentive to establish a full branch or even a micro-banking office (MBO). Through this new cost-efficient service channel, serving the currently unbanked and low-income segments can become more viable and sustainable for banks. Data from the BSP shows that more than 36% of all the municipalities in the country have no banking presence although most of these are served by a variety of non-bank financial institutions like pawnshops, cooperatives, and lending investors.

In addition to these new service delivery models, the Monetary Board also relaxed existing regulations on offsite deposit servicing as well as deposit solicitation, by removing highly prescriptive operational requirements and conditions before banks may engage and offer these services. The amended regulations provide banks with more flexibility in designing appropriate and cost-efficient ways to render deposit pick-up and delivery services and as a result, enhance client experience.

To ensure the safety and soundness of banks as well as to uphold consumer protection, the guidelines emphasize banks’ responsibility for ensuring the adequacy of risk management and internal control systems for these liberalized deposit servicing activities. The BSP will evaluate the quality and sufficiency of these risk management and control systems before granting authorization to perform banking services outside bank premises.

Source: http://www.bsp.gov.ph/publications/media.asp?id=4274

BSP Simplifies Guidelines on Establishment of Branches

Consistent with the BSP’s policy of promoting a competitive banking environment and ease of doing business, the Monetary Board (MB) approved the amendments to the guidelines on the establishment of branches to provide banks with more flexibility in expanding their branching network to strategic locations.

The new regulation removed the use of theoretical capital as well as the combined capital requirement tied to geographic location in evaluating branch applications since the branch network size and location of head office are already embedded in the latest minimum capital requirement for banks.

The MB also reaffirmed the general thrust of allowing banks to establish branches anywhere in the Philippines, including in the cities previously considered as restricted areas, namely, Makati, Mandaluyong, Manila, Parañaque, Pasay, Pasig, Quezon and San Juan.

The move is aligned with the initiatives on banking system liberalization which include the removal of the branch moratorium in restricted areas and the gradual lifting of the suspension on the establishment of new domestic banks.

Anchored on their overall business model and strategic direction, smaller banks may now establish branches in Metro Manila subject to higher capitalization and special licensing fee if said branches are to be located in the cities previously considered as restricted areas.

The policy initiative is aligned with the BSP’s banking reform agenda that is anchored on the promotion of sound risk management systems and Financial Stability.

Source: http://www.bsp.gov.ph/publications/media.asp?id=4234

Stand-Alone TBs and RCBs Remain Well-Capitalized

09.30.2016

Stand-alone thrift banks (TBs), and rural and cooperative banks (RCBs) remained well capitalized at end-December 2015.

The Capital Adequacy Ratio (CAR) of TBs stood at 19.80 percent at end-December last year, higher than the 19.56 percent posted by the banks a quarter earlier.

The TBs’ CAR rose quarter-on-quarter as the growth in the banks’ total qualifying capital (TQC) outpaced the rise in their risk weighted assets (RWAs) during the period amid profitable operations.

The RCBs, on the other hand, posted a CAR of 18.50 percent at end-2015. The RCBs’ CAR decreased from the 18.77 percent recorded at the end of the third quarter last year as their RWAs rose at faster rate than their TQC quarter-on-quarter.

The capitalization of stand-alone TBs and RCBs remained mainly composed of Tier 1 which refers to common equity and other qualified instruments.

At end-December 2015, Tier 1 ratios of stand-alone TBs and RCBs stood at 18.25 percent and 17.36 percent, respectively.

The stand-alone TBs and RCBs accounted for 3.2 percent of the Philippine banking system’s assets at end-2015. These entities adhere to the Basel 1.5 capital framework for stand-alone banks with simple operations.

The banks’ strong capital position indicates their continued effort to set aside sufficient buffer against unexpected losses that may arise in times of stress. This is in line with the mandate of the Bangko Sentral ng Pilipinas to promote financial stability.

Source: http://www.bsp.gov.ph/publications/media.asp?id=4191

Building on a strong 2nd-quarter 7% GDP

The good news is that the Philippine economy, as measured by Gross Domestic Product (GDP), grew by 7 percent in the second quarter of this year – April to June. Not so laudatory is the observation that this has not been inclusive growth, that the statistical gain has not been felt by most Filipinos who have seen no improvement in their daily lives.

The 7 percent quarterly rise – compared to only 5.9 percent in the same period last year – is largely attributed to the massive spending in the last presidential election campaign. As the election spending is over and we are back to the usual pace of economic activity, we can expect the rise in GDP in the rest of this year to return to normal.

But for now, we can take pride in knowing that in this second quarter of the year, the Philippines appeared to have the fastest growth among the countries of Asia, together with India which also had 7 percent. China had 6.7 percent; Vietnam, 5.6 percent; Indonesia, 5.2 percent; Malaysia, 4 percent; and Thailand, 3.5 percent. By way of further comparison, the world’s leading economies had even more modest second-quarter GDP growths – the United Kingdom, 2.2 percent; Singapore, 2.1 percent; the United States, 1.2 percent; and Japan, 0.2 percent.

The Philippines’ 7 percent GDP covered the last three months of the Aquino administration. “The previous administration gave us a strong and stable economy that we can build on further by maintaining the sound macro-economic, fiscal, and monetary policies already in place,” new Socio-Economic Planning Secretary Ernesto M. Pernia said.

The challenge now is for the new Duterte administration to build on this second-quarter growth and to make the growth inclusive. Pernia said the new administration has already pinpointed one area that must be developed – the farming and fishing sector, which has about 10 million workers and their families.

“Knowing that the majority of poor Filipinos rely on this sector for their livelihood, the administration will prioritize agricultural development,” Pernia said. Agriculture had been sorely ignored by the last administration, suffering five consecutive quarters of decline. In the last quarter of April-to-June, while the overall GDP was up 7 percent, agriculture declined 2.1 percent. A great deal of work is thus awaited from the new Secretary of Agriculture Emmanuel Pinol.

There will be other sectors of the economy that will be receiving considerable attention from the administration’s new economic managers. It may now be concentrating on fighting crime and drugs, in keeping with the principal campaign promise of President Duterte, but with along with peace and order, security and stability, the people will be looking forward to real economic growth that reaches down to touch them in their daily lives. – Manila Bulletin, August 24, 2016

Read more at http://www.mb.com.ph/building-on-a-strong-2nd-quarter-7-gdp/#xUW6jAh8LF4T0I7e.99

BSP Chief Seeks to Boost Financial Inclusion

Only 4% of Filipinos borrow from banks

By: Daxim L. Lucas

@inquirerdotnet

Philippine Daily Inquirer

12:17 AM August 15th, 2016

DESPITE the rapid growth of the Philippine economy in recent years, a large number of Filipinos still have no meaningful access to the formal financial system—a situation that makes it more difficult for them to move up the socioeconomic ladder and also leaves them vulnerable to scams.

Thus explained Bangko Sentral ng Pilipinas Governor Amando M. Tetangco Jr., who said that regulators would renew their drive toward greater “financial inclusion” in the country in his last 11 months in office.

“The need is really great,” he said in an interview with the Inquirer Friday evening. “There is no limit to what can and should be done to improve the situation, but there is a limit to what we can realistically achieve in terms of the time that we have.”

Tetangco—who ends his second and final term as central bank governor in July 2017—said the BSP was focusing on educating more Filipinos to help them become more financially savvy as well as in implementing structural reforms that would make the formal banking system more accessible to more citizens.

“There are many metrics we look at,” he said, explaining the improvements that still need to be done. “The number of bank accounts of Filipinos and the number of ‘un-banked’ Filipinos. We also look at different indicators like banks’ geographic concentration and distribution.”

Regulators estimate that a third of the country’s municipalities do not have access to banking offices. And while 47 percent of Filipinos borrow money regularly, most do so from informal lenders, relatives and friends. Only 4 percent of Filipinos borrow from banks.

Tetangco explained that it was not enough to have a large number of banks and branches, but stressed that regulators have to ensure that these banks’ services were available even to Filipinos who live far from large metropolitan areas.

“That’s why we have modified our regulatory framework to allow for the establishment of micro banking offices,” he said. “These are stripped down, low-operating cost banks manned by two or three people, situated in the countryside so they can be closer to the community.”

The BSP chief explained that the government’s strategy to bring the benefits of economic growth to more Filipinos has three “legs”, namely greater access to financial services, improved financial education and financial consumer protection.

“First, we have to make it easier for Filipinos to access the financial system,” he said. “Then we have to teach them how to use it, then, as people become more financially savvy, they’ll need consumer protection because they’ll start investing.”

At present, the BSP chairs the National Strategy for Financial Inclusion, which is an initiative shared by 14 government agencies.

“The idea is to coordinate all financial inclusion efforts of all agencies and avoid duplication and have a unified thrust,” Tetangco said. “At the same time, this involves working with the private sector, which also has its own initiatives. We work with the private sector and multilateral institutions to push the initiative.”

Read more: http://business.inquirer.net/213512/bsp-chief-seeks-to-boost-financial-inclusion#ixzz4HMsAakpS”>http://business.inquirer.net/213512/bsp-chief-seeks-to-boost-financial-inclusion#ixzz4HMsAakpS

5 more foreign banks to enter PH – BSP

Five foreign banks from Asia are expected to set up operations in the Philippines following the liberalization of the banking sector.

Bangko Sentral ng Pilipinas (BSP) Deputy Governor Nestor Espenilla Jr. who expressed this hope, however, did not identify the banks. But in a text message to reporters on Tuesday, he said that one application currently pending, while another is in process.

Yet another, he said, would soon apply, while two others have expressed interest.

“Five more possible. These are all Asian listed banks,” said Espenilla.

The banking sector began attracting foreign players after the country passed Republic Act (RA) 10641, or the Act Allowing the Full Entry of Foreign Banks in the Philippines, in July 2014.

The act lifted the prevailing equity limit of 60 percent for foreign partners and allowed 100 percent ownership of the voting shares in an existing domestic bank.

Foreign banks may now apply to operate in the Philippines either as a branch or as a wholly owned subsidiary.

The BSP’s Monetary Board will consider strategic relationships and reciprocity rights in accepting the applications of foreign bank entrants.

Besides BSP’s overall assessment, a separate assessment by the regulators in the banks’ respective countries of origin will also be required of the foreign applicants.

At present, seven foreign banks have been given the green light to take over a local bank or set up a branch in the country. They are: South Korean Woori Bank; Japanese lender Sumitomo Mitsui Banking Corp.; South Korea’s Shinhan Bank; Taiwan’s Cathay United Bank; Industrial Bank of Korea; Yuanta Commercial Bank Co.; and Singapore-based United Overseas Bank. – by MAYVELIN U. CARABALLO, The Manila Times, Aug. 9, 2016

CIC mandates three new credit bureaus for information system

Posted on July 26, 2016

THE CREDIT Information Corp. (CIC) has granted full accreditation to three credit bureaus to offer rating services using information from a national registry that is expected to come online by yearend.

In a Subscription Agreement signed yesterday, the CIC formally accredited local firm Credit Information Bureau, Inc., as its special accessing entities (SAEs) along with CRIF Philippines (of Italy’s CRIF S.p.A.), Compuscan Philippines (of South Africa’s Compuscan), bringing the number of accredited bureaus to four.
CIC President and CEO Jaime Casto Jose P. Garchitorena said six credit bureaus were provisionally accredited as SAEs by the CIC, meaning these firms have the qualifications of SAEs, but have not yet completed the requirements of accreditation as per SEC Memorandum Circular No. 7, Series of 2015.

United State’s TransUnion Information Solutions, Inc. was the first to execute the subscription agreement with the CIC last May 5.

Meanwhile, state-controlled CIC is also awaiting to formally accredit “by end of August or sometime in September.” Credit Bureau Singapore and Dubai’s Dun & Bradstreet South Asia Middle East Ltd. to become SAEs for the envisioned national credit information system.

Republic Act No. 9510 or the Credit Information System Act provides for the establishment of a comprehensive and centralized credit information system. It requires banks, life insurance companies, credit card companies and other entities providing credit facilities to regularly submit basic credit data to the CIC.

“Accreditation of this new set of SAEs is our offer that the CIC has a viable business model, that there is a need for credit information and other value added services in the financial sector and that the CIC is now set to move forward with our objectives and partnerships to reinforce its virtues of making credit easily available to the public through the alliance if both credit registry and bureau,” Mr. Garchitorena said yesterday.

The CIC chief said the accreditation was done both to assure the quality of services that the SAEs will deliver and to change the public’s perception about borrowing or utilization of credit. The USAID Advancing Philippine Competitiveness project and the International Finance Corp. (IFC) of the World Bank have been supporting the CIC as technical advisors in accrediting the credit bureaus.

“The interest of the international credit bureaus to do business in the Philippines is a good indication of confidence in the positive vision and direction of the CIC and the Philippines’ Credit Information ecosystem,” he added, noting that five of the six SAEs are foreign firms.

The accredited companies will have access to the data and use them to create credit scores, reports and other products, which lending institutions would then use to evaluate the creditworthiness of individuals and businesses.

The SAEs, while having presence in all major cities and economic centers, will also have different specific markets to their products ranging from serving banks to specialized lending in the unbanked market. Through this partnership with the credit bureaus, the CIC expects to have a wider scope in all categories of the mandated submitting entities, Mr. Garchitorena said.

The CIC said it could also consider accrediting two more credit bureaus should there be a “fairly good reason in the next few months” to do so, adding that currently, the six SAEs is seen to have a “fair nationwide coverage.”

Mr. Garchitorena noted that the CIC is still on track to its earlier target to have the system running by early 2017. “The CIC will be operational early 2017. The public may pull his or her own credit report from the CIC for P55.00.”

The CIC under RA 9510 is mandated to receive and consolidate basic credit data; act as a central registry or repository of credit information and provide access to reliable, standardized information on credit history and financial condition of borrowers. – Imee Charlee C. Delavin, BusinessWorld

Source: http://www.bworldonline.com/content.php?section=Finance&title=cic-mandates-three-new-credit-bureaus-for-information-system&id=130922

Gov’t pushes development to countryside

 

July 20th, 2016

IF INVESTORS and businesses were to take their cue from the new administration’s planned economic agenda, then the logical move is to invest outside Metro Manila and the bustling business centers of Cebu and Davao.

Based on the recent pronouncements by President Rodrigo Duterte and his Cabinet, there will be an aggressive thrust to ramp up economic activities in the rural areas, with special focus on calamity-stricken communities.

In doing so, the new administration believes it will be able to target the marginalized and achieve the elusive dream of an economic growth that will be felt by those who need it most.

In his 10-point economic agenda, Duterte cites as among his priorities: “Promoting rural and value chain development toward increasing agricultural and rural enterprise productivity and rural tourism.”

This further opens a myriad of opportunities for fresh investments in new industries in these rural areas, which have traditionally relied on the likes of agriculture, fisheries, furniture and handicraft for their livelihood.

Outsourcing, offshoring

As it is, industries like information technology and business processing outsourcing (IT-BPO) and tourism have long been present in the provinces. The IT-BPO industry, for one, has been at the forefront of stimulating growth in the countryside.

Earlier this year, the Department of Science and Technology-Information and Communications Technology Office (DOST-ICTO), the IT and Business Process Association of the Philippines (IBPAP), and Leechiu Property Consultants (LPC) released its new list of Next Wave Cities.

These 10 cities have been identified as prime, prospective hubs that will not only provide alternative locations for IT-business process management companies seeking to expand outside Metro Manila, but will also support the stellar growth of the industry.

A scorecard was used to rate a location’s ability to enable and support the entry and growth of IT-BPM companies.

These so-called Next Wave Cities (NWCs) were identified as Baguio, Cagayan De Oro, Dagupan, Dasmariñas, Dumaguete, Lipa, Malolos, Naga, Sta. Rosa and Taytay.

Also identified were 10 Emerging Cities, which have the potential to attract IT-BPM locators and soon become next wave cities.

These were Balanga, Batangas, Iriga, Laoag, Legazpi, Puerto Princesa, Roxas, Tarlac, Tuguegarao and Zamboanga.

In identifying these locations, the industry is able to spread its economic benefits to provinces where capable talent is available.

At the same time, this will stimulate the growth of other industries and sectors as the presence of outsourcing and offshoring companies will likely spur the development of more residential and commercial projects, retail, dining and entertainment complexes, among others.

More opportunities

For the Department of Trade and Industry, there are unquestionable investment opportunities in rural areas.

Trade Secretary Ramon Lopez said there were bright prospects in the agriculture sector, for example.

The plan is not just develop the production side but also strengthen the processing of high value added products, including coconut oil and coffee.

The DTI also wants to lure more manufacturing activities to the countryside.

It wants to amend the Investment Priorities Plan (IPP) to include a provision on investing in least-developed and calamity-devastated areas.

This means that companies that will choose to locate in identified areas will be given incentives such as income tax holiday, duty free importation of capital equipment, and extra tax deductions for research and development activities.

It is believed that should the agro-business and manufacturing industries take off, these will naturally stimulate the growth of other industries such as logistics, trucking and freight services, design-based services, and utilities—all of which are envisioned to generate quality jobs for the countryside.

Similarly, the development of these industries will fuel the growth of residential, commercial and industrial projects, as well as spike the demand for consumer goods, on the back of rising per capita income in provinces.

Consequently, the increased demand will prompt businesses to set up more retail, dining and entertainment establishments or mall complexes, all of which could generate even more jobs for the host province and surrounding communities.

Other promising industries are shipbuilding and mineral ore processing, Lopez added.

The DTI also wanted to highlight the inclusive business (IB) model in the IPP, which means that large companies will engage the poor and low income communities as partners, customers, suppliers and employees in their operations not out of charity but because good business sense.

This means, for example, that a micro, small and medium sized enterprise (MSME) will be tapped to supply a particular product such as onions for a large fast food company, or it can provide the chairs and tables for corporate offices.

Government investments

A wide array of opportunities for trade and investment in the rural areas has always been available and can potentially be highly lucrative given the right support from both the private sector and the government.

But for companies to start tapping into these prospects, the government will have to make it more economically feasible for them to make that leap from the city to the countryside.

On the part of the DTI, Lopez said the agency would prioritize the needs of MSMEs, given the Duterte administration’s commitment to promote inclusive growth.

The DTI also has its own projects aimed at pushing growth outside traditional business centers.

For instance, the Board of Investments had bared plans to set up an “ecological industrial zone” in Leyte to help boost economic activity in the province, and ensure sustainable employment in the region, which was devastated by Supertyphoon “Yolanda” almost three years ago.

The proposed zone will promote the integrated development and competitiveness of the copper and related industries, given rehabilitation efforts in the region.

There are other concerns, however, that need to be addressed to fulfill the dream of decentralized growth.

The government, for example, must ramp up infrastructure projects such as roads, seaports and airports; boost science, technology, research and development to ensure the availability of skilled and talented labor pool; secure continued good governance; further ease the process of starting  and doing business in the country, and ensure connectivity, safety and security.

Once these are in place, there is reason to be optimistic that the provinces will finally see the economic growth they have long been waiting for. – Amy R. Remo, Philippine Daily Inquirer

 
Source: http://business.inquirer.net/212129/govt-pushes-development-countryside#ixzz4EvPXPzog

Big banks fail to meet lending quota

ONLY RURAL and cooperative banks met the required amount of credit extended to micro-, small- and medium-scale enterprises (MSMEs) during the first quarter, central bank data showed, despite an overall increase in total loans from a year ago.

 
Universal, commercial, and thrift banks failed to comply with the required level of lending to small firms set at 8% of their total loan portfolio, according to data from the Bangko Sentral ng Pilipinas (BSP), though they went above quota for credit to medium-sized entities.

Passed in 1991 and last amended eight years ago, Republic Act 6977 or the Magna Carta for Micro, Small and Medium Enterprises mandates banks to allot 10% of their total loanable funds to these small firms to help boost the sector. Broken down, banks must set aside 8% of their loan portfolio for micro and small-sized firms and 2% to medium-scale companies.

The law seeks to boost financial support to MSMEs and maximize their contribution to the local economy by addressing the problems of lack of capital and poor access to credit.

Philippine MSMEs account for 99% of local firms and 60% of employment but contribute only 36% of gross value added, according to the May 2016 Investment Policy Review of the Organization for Economic Cooperation and Development.

Loans extended by big banks to micro and small companies stood at P128.516 billion for the first three months, or just 3.02% of their P4.251-trillion total loanable amount.

This total’s share against banks’ entire loan book went down from 3.38% last year, although the figure rose from P125.056 billion.

Thrift banks also lent P41.808 billion to small firms as of March, just 6.55% of P638.612 billion in loanable funds. This share is also lower than the 7.03% ratio tallied during the comparable year-ago period, data showed.

In contrast, rural and cooperative lenders extended nearly three times the required amount to be lent small firms, reaching nearly a fourth of their loan portfolio. The banks handed out P21.874-billion credit to MSMEs, well above the P7.438 billion minimum.

These banks also allotted more than a tenth of their loan funds as credit to medium-scale firms, reaching P9.571 billion against the P1.859-billion floor. Rural and cooperative banks had a combined total loan portfolio of P92.969 billion, based on BSP data.

In terms of lending to medium-sized firms, big banks and thrift lenders handed out more than the 2% mandatory share of total loans. Universal and commercial banks extended P217.862 billion in loans to these entities or 5.12% of their loanable funds, while thrift lenders handed out P39.847 billion, or 6.24% of their portfolio.

Under the law, banks are penalized P500,000 a year if they do not set aside funds to be loaned out to MSMEs. If a bank falls short of the credit quota, the penalty will depend on how close they are to meeting the percentage requirement. Some lenders simply opt to pay fines for non-compliance rather than take the risk of loaning to the small firms.

Overall, the local banking system freed up P459.478 billion for MSME credit, which made up 9.22% of the P4.983 trillion in total loanable funds during the quarter. This amount is higher than the P427.047 billion in MSME loans granted last year, though slightly lower than the previous 9.85% share.

Total loans granted to MSMEs reached P495.779 billion in 2015, roughly 10.5% of total loanable funds amounting to P4.703 trillion. – Business World Online, July 19, 2016

Source: http://www.bworldonline.com/content.php?section=Finance&title=big-banks-fail-to-meet-lending-quota&id=130581

P1-B MSME credit line pushed

TRADE Secretary Ramon Lopez plans to push for the establishment of a P1-billion regional credit access for micro, small and medium sized enterprises (MSMEs) to help address one of the biggest hurdles faced by local firms.

This was one of the poverty-alleviation measures proposed by President Duterte during his campaign earlier this year.

“I will have to ask the President about that. That will benefit the MSMEs and so hopefully, we can get that support from the President and reflect that immediately in the next budget,” Lopez said in an interview with the Inquirer.

According to Lopez, the additional amount would also help fund more shared services facilities (SSF), a flagship program of the Department of Trade and Industry that provides MSMEs with equipment or infrastructure that can be used by a number of beneficiaries such as cooperatives, institutions and communities.

A portion of the fund can also be used for the Negosyo Centers for productivity enhancement programs and for further training, seminars and mentoring activities.

“This [additional credit] only means that we will be able to do more. This is exciting for us because in teaching the nation how to fish, we will be able to feed the nation many lifetimes. This is the mantra that we are following. What we want is to empower our MSMEs,” Lopez explained.

During the campaign, the Duterte camp promised that MSMEs would be able to borrow capital from the government to expand their business. Currently, small businessmen have nobody to turn to but loan sharks while rich businessmen could get capital from their family, bank or by selling their properties. – Inquirer.net

Source: http://business.inquirer.net/211987/p1-b-msme-credit-line-pushed