(NAR) VOL. 21 NO.1/ JANUARY - MARCH 2010
1. To ensure that the banks have the capacity and technical capability to offer housing microfinance
2. To ensure that the provision of housing microfinance uphold adequate and appropriate risk management systems and procedures as well as the microfinance best methodologies and technologies
1. The bank must have a track record of at least two years in implementing sustainable microfinance programs, including acceptable portfolio-at-risk (PAR) levels as evaluated against prevailing BSP standards.
2. The bank must have an appropriate housing microfinance product manual where the product will be included in the bank’s microfinance manual as one of the types of services or products offered to prospective clients. Loan/ account officers must be trained about the housing microfinance product and that the details of the program can be communicated clearly to the clients.
3. Appropriate verification of the following:a. latest CAMELS rating of at least 3 and a management score of at least 3
b. capital adequacy ratio (CAR) of not lower than 12
c. no major supervisory concerns as to warrant initiation of Prompt Corrective Action (PCA) under existing regulations
d. no arrearages in microfinance borrowings
4. Appropriate certification of the banks’ commitment to implement the housing microfinance product following the guidelines set forth in the submitted manual.
The product must share the characteristics of the microfinance loans, as found in Circular 272, Series of 2001, except for the following:
Subject Particulars Purpose √ House Construction √ House and/or lot acquisitions should be for housing/business √ Home improvement/repairs Eligibility √ Existing microfinance clients √ New clients who will normally be eligible for microfinance loans base on banks' policies √ Borrowers who have qualified for the Credit Surety Fund credit enhancement program provided they qualify with the banks' policies Loan Amount √ Up to P300,000 for house construction and/or lot acquisition (must show tenure security)
√ Up to P150,000 for home improvement/repairs √ Incremental loan amounts to support incremental building Loan Value √ Up to 90% of the appraised value in case of REM √ Acceptable valuation in cases of usufruct, leases, etc. √ Capacity to pay based on household cash flow analysis Payment √ Frequent amortization √ With savings component √ Loan payments should not exceed a reasonable percentage of clients' income as determined by cash flow analysis and to determine capacity to pay as well determined through a clear credit process Terms √ Up to 15 years for house construction and house and/or lot acquisition, subject to bank's credit policies √ Up to 5 years for home improvement/repairs
1. The maximum loan amount may be PhP 300,000.
2. The loans have longer terms with a maximum of five years for home improvement/repairs and fifteen years for house construction and house/lot acquisition.
3. For House construction and house/lot acquisition loans, secure tenure instruments will be used as collateral. (See attached Secure Tenure Instruments and Valuations, Annex A* )
1. Clients’ ability to repay based on cash flow analysis and affordability,especially the new clients.
2. Opening of a savings account shall be required for clients with no existing savings account
3. Secure Tenure instruments as collateral/ collateral substitutes for loans over PhP150,000
4. Adequate loan monitoring, collection, control, provisioning which is to also be included in the banks’ housing microfinance manual.
5. Additional risk cover may be availed from government guarantee programs
6. A lien or mortgage covering the house and/or lot financed by the loan shall be executed by the borrower in favor of the lending bank
7. Mortgage redemption insurance shall be required to cover against death or permanent disability
1. The bank shall apply for specific product approval of its housing microfinance lending program with the BSP.
2. The bank may submit a housing microfinance lending program as a participant in a broader housing microfinance lending program based on a common business model and organized by a group of banks or industry association.
1. Housing microfinance loans shall be eligible as alternative compliance to mandatory credit allocation to agrarian reform and other agricultural credit. These are also eligible for rediscounting with the BSP subject to existing rules and regulations governing rediscounting.
2. The loans shall have an assigned risk-weight of 50% risk when not guaranteed and as low as 0% when guaranteed by duly recognized government guarantee programs.
3. For housing microfinance loans secured by REM, a 90% loan valuation may be allowed for loans with a government guarantee component.
4. Secure tenure instruments such as freehold, usufruct, leasehold and right to occupy and/or build shall be recognized as collateral/ collateral substitute subject to approved loan valuations. (Annex A* )
1. The bank must maintain a sub-control ledger for the housing microfinance product
2. The housing microfinance loans shall not exceed 30% of the total loan portfolio
3. Recording of portfolio at risk (PAR) and the provisioning requirements shall be strictly in accordance with applicable BSP regulations