In issuing the circular dated January 6, the central bank said the housing microfinance provision is “seen as a way to improve the living conditions of the enterprising poor and the low-income households, which will contribute to better health, productivity and quality of life.”
The BSP, which approved the housing microloan product in February 2008, added this “spurs economic activity and creates employment through the multiplier effects generated in the downstream industries by the procurement of construction materials.”
In a circular dated January 6, a document of which was acquired by reporters on Friday, the BSP said banks that plan to offer a housing microfinance product must comply with the following requirements:
- have a track record of at least two years of implementing a sustainable microfinance program;
- have a housing microfinance manual and trained loan officers who can properly explain the product to clients;
- have at least a CAMELS rating of 3, a capital adequacy ratio not lower than 12%, have not been subjected to a prompt corrective action by the BSP and have no arrearages in microfinance borrowing; and
- a certificate from the bank on its commitment to implement its housing microfinance product based on its submitted manual.
The CAMELS rating measures a bank’s capital adequacy, asset quality, earnings, liquidity and sensitivity to market risk. The scores ranges from 1 for best and 5 for worst.
The BSP also said that since the risk profile of the new product may be different from regular microfinance loans, banks must carefully study the ability of clients to repay the loan, especially the new customers.