BSP  MAY  ALLOW  RURAL  BANKS  TO  SELL  INSURANCE

MANILA, OCTOBER 11, 2009
(STAR) By Lawrence Agcaoili - The Bangko Sentral ng Pilipinas (BSP) is poised to allow rural banks and other community-based banks to sell simple insurance products, BSP officer-in-charge Nestor Espenilla Jr. said.

He told members of the Rural Bankers Association of the Philippines that a formula allowing rural banks to sell simple insurance products like mortgage redemption, protection of farm equipment and services vehicles as well as health insurance would soon be presented to the Monetary Board for approval.

“We believe that this is an important piece in ensuring the sustainability of the structurally vulnerable microfinance clients. We believe we have found a formula for doing this and we will soon be presenting our proposals to the Monetary Board,” Espenilla said.

He pointed out that the central bank carefully studied how rural banks and other community-based banks could offer simple insurance products by reputable insurance companies to their microfinance clients to enable them to offer a wider range of financial services to underserved areas of the country.

Universal and commercial banks are currently the only entities allowed to sell the insurance products of affiliates where the banks hold at least a five percent stake.

However, rural banks lamented that they do not have the resources to invest in an insurance company unlike universal and commercial banks.

In 2008, the policy-making Monetary Board approved the housing microfinance product as a type of microfinance loan with incentives such as no collateral requirements and simpler documentary requirements. It also issued a circular that provides opportunities for banks including those with microfinance operations to reach new and larger markets with a liberalized branching regime.

Meanwhile, the Monetary Board decided last Thursday to make financial services more accessible and less costly to microfinance clients by allowing Loan Collection and Disbursement Points (LCDPs) of microfinance-oriented banks and microfinance or barangay microbusiness enterprise (BMBE)-oriented branches of banks not to only accept deposits from but also to service withdrawals of existing borrowers.

Under the new rule, LCDPs of microfinance banks and microfinance or BMBE-oriented branches of banks may now service withdrawals of microfinance clients in addition to the acceptance of deposits.

However, the total amount of withdrawals would be limited to the total collections of the LCDP for the day and would only apply to savings deposit accounts covered by passbooks with no ATM feature.

The new rule replaces the previous regulation wherein banking offices other than the head office or branch are not generally allowed to accept deposits and service withdrawals through tellers or other authorized personnel.


Chief News Editor: Sol Jose Vanzi

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