SEC drafts framework for Microfinance NGOs

THE SECURITIES and Exchange Commission has drafted the framework to govern non-government organizations (NGOs) engaged in microfinance operations, mapping out the accreditation process for such entities which will benefit from fiscal incentives.

The draft implementing rules and regulations (IRR) for the Microfinance NGO (non-government organization) Act was released in order to seek and possibly incorporate feedback from all organizations and stakeholders in the NGO sector.

The SEC invited all interested parties to submit their comment on the draft – which was done in coordination with the Department of Finance (DOF), Department of Trade and Industry (DTI), Department of Social Welfare and Development (DSWD) and other organizations – no later than January 25 this year.

Among the salient features of the IRR was creation of the Microfinance NGO Regulatory Council, the accrediting entity which will institute a system of accreditation for microfinance NGOs. This process is crucial because duly accredited microfinance NGOs will be eligible to the preferential tax treatment of 2-percent based on its gross receipts from microfinance operations in lieu of all national taxes. The preferential tax treatment will only apply to those catering to the poor and low-income individuals.

Accredited microfinance NGOs will also be given ready access to related programs and projects of the government. Support programs include provision of operational and capacity building grants, low interest loans and guarantee funds, based on the IRR.

The Microfinance NGO Regulatory Council is composed of four permanent members and three members from the microfinance NGO sector. The four permanent members are: the SEC chair or designated representative as chair of the Council; DTI Secretary or representative; DOF Secretary or representative and DSWD Secretary or representative.

The three representatives from the microfinance NGO sector will be chosen by the permanent members of the council from among the nominees of organizations, associations, and alliances of microfinance NGOs duly registered with the SEC. Under the transitory provision, for the first three representatives of microfinance NGO, the permanent members of the council will appoint one representative each from Luzon, Visayas and Mindanao.

A microfinance NGO was defined as a non-stock, non-profit duly registered with SEC with primary purpose of implementing a microenterprise development strategy and providing microfinance programs, products and services such as microcredit and microsavings for the poor and low-income clients.

A microfinance NGO is deemed accredited when it is issued an accreditation certificate endorsed by the Microfinance NGO Regulatory Council and approved by the chair. The criteria for accreditation shall include sound and measurable standards for financial performance, social performance, audit and governance. The certificate of accreditation is valid for three years until suspended or revoked by the Council.

Microfinance NGOs which are certified by SEC to have no derogatory information shall be deemed accredited for one year unless revoked.

A microfinance NGO is allowed to grant loans for as low as P2,000 to a maximum of P150,000 subject to such reasonable and conscionable interest rates and charges as maybe agreed upon by the microfinance NGO and its debtor-client.

The maximum individual loan amount provided for microfinance loans is subject to periodic determination by Department of Trade and Industry to reflect economic changes.

Microfinance NGOs are required to submit annually general information sheet (GIS), audited financial statements (GIS), sworn statement of the amount and application of funds and program planned, ongoing and accomplished as well as certificate of existence of program/activity to be issued by concerned government agencies.