Republic of the Philippines
CONGRESS OF THE PHILIPPINES
Metro ManilaSixteenth Congress
Third Regular SessionBegun and held in Metro Manila, on Monday, the twenty-seventh day of July, two thousand fifteen.
REPUBLIC ACT No. 10693
AN ACT STRENGTHENING NONGOVERNMENT ORGANIZATIONS (NGOs) ENGAGED IN MICROFINANCE OPERATIONS FOR THE POOR
Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:
SECTION 1. Short Title. – This Act shall be known as the “Microfinance NGOs Act”.
SECTION 2. Declaration of Policies. – It is hereby declared the policy of the State to pursue a program of poverty eradication wherein poor Filipino families shall be encouraged to undertake entrepreneurial activities to meet their minimum basic needs including income security. Towards this end, the State recognizes the indispensible role of nongovernment organizations (NGOs) in fostering local enterprise development and social entrepreneurship, including the provision of microfinance services to microenterprises. In pursuance of this policy, the State shall support and work in partnership with qualified NGOs in promoting financially inclusive and pro-poor financial and...
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Amends
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Amended by
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Republic Acts
Microfinance NGOs Act
Republic Act No. 10693
Summary of the Microfinance NGOs Act
Objectives and Policies (Section 2):
- Pursue poverty eradication by encouraging poor Filipino families to undertake entrepreneurial activities.
- Recognize the role of NGOs in fostering local enterprise development, social entrepreneurship, and providing microfinance services.
- Support and partner with qualified NGOs in promoting financially inclusive and pro-poor financial and credit policies and mechanisms.
Definition of Terms (Section 3):
- Defines key terms such as "accreditation", "compensating balance", "gross receipts from microfinance operations", "low-income", "microenterprise development strategy", "microfinance", "microfinance loans", "microfinance NGO", "microsavings", "NGO", "poor", "social performance", and "social welfare promotion/purposes".
Scope of Application (Section 4):
- The Act applies to NGOs with the primary purpose of implementing a microenterprise development strategy and providing microfinance programs, products, and services for the poor, referred to as "Microfinance NGOs".
Core Principles of Microfinance NGOs (Section 5):
- Recognizes Microfinance NGOs as partners in promoting social welfare, poverty alleviation, and holistic transformation.
- Provides the poor with access to appropriate, convenient, flexible, and reasonably priced financial services.
- Undertakes microfinance on a sustainable basis, allowing providers to recover costs for regular service provision.
- Aims to provide financial and social protection programs to an increasing number of disadvantaged and underprivileged people.
- Abides by Client Protection Principles, such as appropriate product design, prevention of over-indebtedness, transparency, responsible pricing, fair treatment of clients, privacy, and complaint resolution mechanisms.
- Develops financial, social, and governance performance standards.
- Provides appropriate community development projects and programs for social welfare and holistic transformation of the poor.
Basic Features and Purposes of Microfinance NGOs (Section 6):
- Provides the poor with direct access to reasonable and affordable credit, microfinance, microinsurance, microenterprise development, health care, and microhousing services.
- Provides business development opportunities, such as leadership training and entrepreneurial skills enhancement.
- Provides human development services to help the poor achieve sustainability and empowerment.
- Collects compulsory savings or compensating balance (CBU) from clients for maintaining the compensating balance, but does not engage in deposit-taking activities.
- Prohibited from directly engaging in the insurance business but may establish partnerships with authorized microinsurance agents/entities.
- Charges reasonable interest and fees incidental to microfinance operations.
- Borrows money or incurs obligations for the purpose of relending to microfinance borrowers, but not deemed as engaged in quasi-banking activities.
- Accepts donations, grants, or contributions in accordance with existing laws and regulations.
- Invests funds in sound, nonspeculative enterprises and instruments.
- Maintains a transparent and comprehensive management information system.
- Publishes and discloses audited accounts at the end of every financial year.
Minimum Core Programs and Services (Section 7):
- Microfinance NGOs shall provide at least:
a) Microcredit and financial literacy programs (Section 7a).
b) Microcredit and CBU or microsavings (Section 7b).
Other Programs and Services (Section 8):
- Microfinance NGOs may undertake the following, subject to existing laws and regulations:
a) Agricultural microfinance (Section 8a).
b) Housing microfinance (Section 8b).
c) Microinsurance, in partnership with authorized microinsurance companies, agents, and/or entities (Section 8c).
d) Electronic payment systems, such as mobile or innovative digital platforms or channels (Section 8d).
e) Money transfer and other related remittance services, in partnership with authorized agents and/or entities (Section 8e).
f) Other relevant and/or innovative programs, products, and services that address social welfare purposes and are not contrary to existing laws and regulations (Section 8f).
Establishment of the Microfinance NGO Regulatory Council (Section 9):
- The SEC shall establish the Microfinance NGO Regulatory Council (the "Council") as the accrediting body.
- The Council shall be composed of four (4) permanent members and three (3) members from the Microfinance NGO sector.
- The permanent members are representatives from the SEC, DTI, DOF, and DSWD.
- The three Microfinance NGO sector representatives shall be chosen by at least a majority of the permanent members and serve for a term of three (3) years.
- The Council shall be assisted by a secretariat lodged in the SEC.
Accreditation of Microfinance Institutions Registered as Nonstock, Nonprofit Corporation (Section 10):
- Microfinance NGOs shall be required to obtain accreditation from the Council to avail of the incentives under this Act.
- Upon the Act's effectivity, Microfinance NGOs certified by the SEC to have no derogatory information shall be deemed accredited for one (1) year, unless earlier revoked by the Council for good cause.
Functions and Responsibilities of the Microfinance NGO Regulatory Council (Section 11):
- Institute and operationalize a system of accreditation for Microfinance NGOs, with criteria including sound and measurable standards of financial performance, social performance, and governance.
- Issue certificates of accreditation as a Microfinance NGO, valid for a prescribed period.
- Monitor the performance of Microfinance NGOs to ensure continuing compliance with the Act and its implementing rules and regulations.
- Place under probation, suspend, or revoke any certificate of accreditation upon due determination of non-compliance with accreditation criteria.
- Require regular submission of reports by Microfinance NGOs.
- Collect reasonable accreditation and monitoring fees from Microfinance NGOs.
- Submit an annual report to the President of the Philippines and the concerned committees of both Houses of Congress.
- Perform other functions necessary to accomplish the purposes and objectives of this Act.
Financial Performance Management (Section 12):
- Microfinance NGOs shall develop and implement systems, practices, and controls for efficient, effective, and sustainable financial operations through prudent resource management, asset-liability management, liquidity management, and financial information management.
Social Performance Management (Section 13):
- Microfinance NGOs must have an institutionalized process of translating social mission into practice, including setting clear social goals, monitoring progress, and using information to improve performance and practice.
- Social performance information must be integrated into the Microfinance NGO's work, operational routines, and value system to affect decision-making practices at both operational and strategic levels.
Financial Performance Standards (Section 14):
- The Council shall establish a set of parameters for assessing the financial performance of Microfinance NGOs, such as portfolio quality, efficiency, sustainability, and outreach.
Social Performance Standards (Section 15):
- The Council shall establish a set of parameters for assessing the social performance of Microfinance NGOs, such as their social objectives, governance and accountability mechanisms, transparency, product design, services and delivery channels, and ethical treatment of clients.
Governance Standards (Section 16):
- The Council shall establish the standards and principles of good corporate governance for Microfinance NGOs, such as fairness, management responsibility, respect for rights, corporate integrity, loyalty, compliance with regulations, and transparency.
Initiative of the Concerned Regulatory Authorities to Examine Microfinance NGOs (Section 17):
- The Bangko Sentral ng Pilipinas and the Insurance Commission may request the Council to examine the operations of Microfinance NGOs to determine if they are engaged in unauthorized undertakings or activities subject to their respective jurisdictions.
- If the Council finds that an accredited Microfinance NGO is engaged in unauthorized undertakings or activities, it shall place on probation, suspend, or revoke the accreditation based on the circumstances.
Access to Government Programs and Projects (Section 18):
- Duly accredited Microfinance NGOs shall be given ready access to related government programs and projects.
- Government agencies and financial institutions shall develop and make available support programs for Microfinance NGOs operating in areas and sectors with poverty, or affected by or vulnerable to natural disasters or armed conflicts.
- Support programs may include the provision of operational and capacity building grants, low-interest loans, and guarantee funds.
Technical Assistance (Section 19):
- Duly accredited Microfinance NGOs are entitled to access any form of technical assistance from the government, donors, and other support organizations in facilitating linkages between the poor households/microenterprises and microfinance institutions, community organizations, and capacity building of the target clientele, social preparation activities, and those that will lead to the broadening and deepening of microfinance services.
Taxation of Microfinance NGOs (Section 20):
- A duly registered and accredited Microfinance NGO shall pay a two percent (2%) tax based on its gross receipts from microfinance operations in lieu of all national taxes.
- Preferential tax treatment shall be accorded only to NGOs whose primary purpose is microfinance and only on their microfinance operations catering to the poor and low-income individuals.
- The non-microfinance activities of Microfinance NGOs shall be subject to all applicable regular taxes.
- Duly registered and accredited Microfinance NGOs, as well as their clients, shall be required to have a Taxpayer Identification Number (TIN) within a reasonable time prescribed by the Council.
Appropriations (Section 21):
- The amount necessary to carry out the initial implementation of this Act shall be included in the General Appropriations Act.
Implementing Rules and Regulations (Section 22):
- Within ninety (90) days after the Act's effectivity, the SEC, in coordination with the DTI, DOF, DSWD, and relevant organizations, shall promulgate rules and regulations for the implementation of this Act and/or for the public interest or for the protection of accredited or regulated Microfinance NGOs, including the requirement of cooperation within and among all Microfinance NGOs and the adoption of appropriate corporate governance principles and practices.
Separability Clause (Section 23):
- If any provision or part of the Act is declared invalid or unconstitutional, the other provisions not affected shall remain in full force and effect.
Repealing Clause (Section 24):
- All laws, issuances, rules, and regulations inconsistent with any provision of this Act shall be deemed amended, modified, or repealed accordingly.
Effectivity (Section 25):
- This Act shall take effect fifteen (15) days after its publication in any newspaper of general circulation.
Objectives and Policies (Section 2):
- Pursue poverty eradication by encouraging poor Filipino families to undertake entrepreneurial activities.
- Recognize the role of NGOs in fostering local enterprise development, social entrepreneurship, and providing microfinance services.
- Support and partner with qualified NGOs in promoting financially inclusive and pro-poor financial and credit policies and mechanisms.
Definition of Terms (Section 3):
- Defines key terms such as "accreditation", "compensating balance", "gross receipts from microfinance operations", "low-income", "microenterprise development strategy", "microfinance", "microfinance loans", "microfinance NGO", "microsavings", "NGO", "poor", "social performance", and "social welfare promotion/purposes".
Scope of Application (Section 4):
- The Act applies to NGOs with the primary purpose of implementing a microenterprise development strategy and providing microfinance programs, products, and services for the poor, referred to as "Microfinance NGOs".
Core Principles of Microfinance NGOs (Section 5):
- Recognizes Microfinance NGOs as partners in promoting social welfare, poverty alleviation, and holistic transformation.
- Provides the poor with access to appropriate, convenient, flexible, and reasonably priced financial services.
- Undertakes microfinance on a sustainable basis, allowing providers to recover costs for regular service provision.
- Aims to provide financial and social protection programs to an increasing number of disadvantaged and underprivileged people.
- Abides by Client Protection Principles, such as appropriate product design, prevention of over-indebtedness, transparency, responsible pricing, fair treatment of clients, privacy, and complaint resolution mechanisms.
- Develops financial, social, and governance performance standards.
- Provides appropriate community development projects and programs for social welfare and holistic transformation of the poor.
Basic Features and Purposes of Microfinance NGOs (Section 6):
- Provides the poor with direct access to reasonable and affordable credit, microfinance, microinsurance, microenterprise development, health care, and microhousing services.
- Provides business development opportunities, such as leadership training and entrepreneurial skills enhancement.
- Provides human development services to help the poor achieve sustainability and empowerment.
- Collects compulsory savings or compensating balance (CBU) from clients for maintaining the compensating balance, but does not engage in deposit-taking activities.
- Prohibited from directly engaging in the insurance business but may establish partnerships with authorized microinsurance agents/entities.
- Charges reasonable interest and fees incidental to microfinance operations.
- Borrows money or incurs obligations for the purpose of relending to microfinance borrowers, but not deemed as engaged in quasi-banking activities.
- Accepts donations, grants, or contributions in accordance with existing laws and regulations.
- Invests funds in sound, nonspeculative enterprises and instruments.
- Maintains a transparent and comprehensive management information system.
- Publishes and discloses audited accounts at the end of every financial year.
Minimum Core Programs and Services (Section 7):
- Microfinance NGOs shall provide at least:
a) Microcredit and financial literacy programs (Section 7a).
b) Microcredit and CBU or microsavings (Section 7b).
Other Programs and Services (Section 8):
- Microfinance NGOs may undertake the following, subject to existing laws and regulations:
a) Agricultural microfinance (Section 8a).
b) Housing microfinance (Section 8b).
c) Microinsurance, in partnership with authorized microinsurance companies, agents, and/or entities (Section 8c).
d) Electronic payment systems, such as mobile or innovative digital platforms or channels (Section 8d).
e) Money transfer and other related remittance services, in partnership with authorized agents and/or entities (Section 8e).
f) Other relevant and/or innovative programs, products, and services that address social welfare purposes and are not contrary to existing laws and regulations (Section 8f).
Establishment of the Microfinance NGO Regulatory Council (Section 9):
- The SEC shall establish the Microfinance NGO Regulatory Council (the "Council") as the accrediting body.
- The Council shall be composed of four (4) permanent members and three (3) members from the Microfinance NGO sector.
- The permanent members are representatives from the SEC, DTI, DOF, and DSWD.
- The three Microfinance NGO sector representatives shall be chosen by at least a majority of the permanent members and serve for a term of three (3) years.
- The Council shall be assisted by a secretariat lodged in the SEC.
Accreditation of Microfinance Institutions Registered as Nonstock, Nonprofit Corporation (Section 10):
- Microfinance NGOs shall be required to obtain accreditation from the Council to avail of the incentives under this Act.
- Upon the Act's effectivity, Microfinance NGOs certified by the SEC to have no derogatory information shall be deemed accredited for one (1) year, unless earlier revoked by the Council for good cause.
Functions and Responsibilities of the Microfinance NGO Regulatory Council (Section 11):
- Institute and operationalize a system of accreditation for Microfinance NGOs, with criteria including sound and measurable standards of financial performance, social performance, and governance.
- Issue certificates of accreditation as a Microfinance NGO, valid for a prescribed period.
- Monitor the performance of Microfinance NGOs to ensure continuing compliance with the Act and its implementing rules and regulations.
- Place under probation, suspend, or revoke any certificate of accreditation upon due determination of non-compliance with accreditation criteria.
- Require regular submission of reports by Microfinance NGOs.
- Collect reasonable accreditation and monitoring fees from Microfinance NGOs.
- Submit an annual report to the President of the Philippines and the concerned committees of both Houses of Congress.
- Perform other functions necessary to accomplish the purposes and objectives of this Act.
Financial Performance Management (Section 12):
- Microfinance NGOs shall develop and implement systems, practices, and controls for efficient, effective, and sustainable financial operations through prudent resource management, asset-liability management, liquidity management, and financial information management.
Social Performance Management (Section 13):
- Microfinance NGOs must have an institutionalized process of translating social mission into practice, including setting clear social goals, monitoring progress, and using information to improve performance and practice.
- Social performance information must be integrated into the Microfinance NGO's work, operational routines, and value system to affect decision-making practices at both operational and strategic levels.
Financial Performance Standards (Section 14):
- The Council shall establish a set of parameters for assessing the financial performance of Microfinance NGOs, such as portfolio quality, efficiency, sustainability, and outreach.
Social Performance Standards (Section 15):
- The Council shall establish a set of parameters for assessing the social performance of Microfinance NGOs, such as their social objectives, governance and accountability mechanisms, transparency, product design, services and delivery channels, and ethical treatment of clients.
Governance Standards (Section 16):
- The Council shall establish the standards and principles of good corporate governance for Microfinance NGOs, such as fairness, management responsibility, respect for rights, corporate integrity, loyalty, compliance with regulations, and transparency.
Initiative of the Concerned Regulatory Authorities to Examine Microfinance NGOs (Section 17):
- The Bangko Sentral ng Pilipinas and the Insurance Commission may request the Council to examine the operations of Microfinance NGOs to determine if they are engaged in unauthorized undertakings or activities subject to their respective jurisdictions.
- If the Council finds that an accredited Microfinance NGO is engaged in unauthorized undertakings or activities, it shall place on probation, suspend, or revoke the accreditation based on the circumstances.
Access to Government Programs and Projects (Section 18):
- Duly accredited Microfinance NGOs shall be given ready access to related government programs and projects.
- Government agencies and financial institutions shall develop and make available support programs for Microfinance NGOs operating in areas and sectors with poverty, or affected by or vulnerable to natural disasters or armed conflicts.
- Support programs may include the provision of operational and capacity building grants, low-interest loans, and guarantee funds.
Technical Assistance (Section 19):
- Duly accredited Microfinance NGOs are entitled to access any form of technical assistance from the government, donors, and other support organizations in facilitating linkages between the poor households/microenterprises and microfinance institutions, community organizations, and capacity building of the target clientele, social preparation activities, and those that will lead to the broadening and deepening of microfinance services.
Taxation of Microfinance NGOs (Section 20):
- A duly registered and accredited Microfinance NGO shall pay a two percent (2%) tax based on its gross receipts from microfinance operations in lieu of all national taxes.
- Preferential tax treatment shall be accorded only to NGOs whose primary purpose is microfinance and only on their microfinance operations catering to the poor and low-income individuals.
- The non-microfinance activities of Microfinance NGOs shall be subject to all applicable regular taxes.
- Duly registered and accredited Microfinance NGOs, as well as their clients, shall be required to have a Taxpayer Identification Number (TIN) within a reasonable time prescribed by the Council.
Appropriations (Section 21):
- The amount necessary to carry out the initial implementation of this Act shall be included in the General Appropriations Act.
Implementing Rules and Regulations (Section 22):
- Within ninety (90) days after the Act's effectivity, the SEC, in coordination with the DTI, DOF, DSWD, and relevant organizations, shall promulgate rules and regulations for the implementation of this Act and/or for the public interest or for the protection of accredited or regulated Microfinance NGOs, including the requirement of cooperation within and among all Microfinance NGOs and the adoption of appropriate corporate governance principles and practices.
Separability Clause (Section 23):
- If any provision or part of the Act is declared invalid or unconstitutional, the other provisions not affected shall remain in full force and effect.
Repealing Clause (Section 24):
- All laws, issuances, rules, and regulations inconsistent with any provision of this Act shall be deemed amended, modified, or repealed accordingly.
Effectivity (Section 25):
- This Act shall take effect fifteen (15) days after its publication in any newspaper of general circulation.