Microfinance Program

This section:

The People’s Credit and Finance Corporation (PCFC) was established by virtue of Memorandum Order 261 and Administrative Order No. 148 to provide affordable credit to the marginalized sector. Republic Act 8425 of 1998 or the Social Reform and Poverty Alleviation Act further strengthened the role of PCFC as the lead government entity specifically tasked to mobilize resources for microfinance services for the exclusive use of the poor.

Following its mandate to provide the poor access to credit and other microfinance services to uplift their economic status, PCFC wholesales short, medium and long term investment loans to accredited Microfinance Institutions (MFIs). These are rural banks, cooperative banks, thrift banks, non-government organizations and cooperatives that implement credit assistance programs using any proven microfinance lending methodology to finance livelihood projects that can augment the income of targeted poor clients.

PCFC also provides institutional credit to program partners for capability building activities as well as for expenditures or asset acquisitions related to the lending program.

Terms	Investment Credit	Institutional Credit
Tenor	One (1) year omnibus credit line via PNs of up to five (5) years depending on purpose	One (1) year credit line via PNs of up to four (4) years depending on purpose
Interest Rate	10% to 12% p.a. plus 1% service charge based on credit guidelines	3% p.a. 1% service charge p.a.
Credit Line Amount to MFIs	Based on Evaluation/Credit Needs	Not more than 20% of investment credit line
Sub-Loans to End-Borrowers	Up to P150,000	Not Applicable
Collateral	Mainly assignment of sub- borrowers' PNs and all underlying collaterals; PDCs and/or others as may be required	DCM of assets to be financed, if any; PDCs and/or others as may be required

TARGET END-CLIENTS

PCFC’s credit facilities coursed through MFIs are meant to augment the income of poor households as defined by the National Economic Development Authority (NEDA) and as identified by the government’s Social Reform Agenda through the National Anti-Poverty Commission (NAPC).

Loan sizes for sub-borrowers organized in groups or centers start from P3,000 gradually increasing per loan cycle to P150,000. For individual borrowers, loan size may range from P10,000 to P150,000 depending on project requirements.

ACCREDITATION CRITERIA

INSTITUTIONAL
Legal Personality	Duly Registered
Track Record	At least 3 years lending experience or majority of directory/officers have at least 3 years experience in lending with 1 year in microfinance
Board of Directors	Competent and qualified as Director under the law and pertinent regulations
Core Management Team	Presence of full time Head, Auditor, Cashier & Bookkeeper
Microfinance Lending Group	Willing to put up a separate unit for the program with full-time staff
Staff Development	Presence of staff development program including microfinance and credit and financial management
Operating Systems	Presence of MIS, Accounting and Internal Control Systems
Results of Credit and Background Investigation	No adverse findings on the MFI; no past due loans and derogatory records on key officers

OPERATIONAL AND FINANCIAL CRITERIA

A. Over-All Operations

Total Resources At least P5.00 Mn resources;
In case of decrease, it should not be more than 5% per year

Net Worth/Fund Balance At least P2.00 Mn

Liquidity

    Liquid Ratio

    Current Ratio

Not less than 25%

At least 2:1

Leverage

    Capital/Fund
   Balance-to-Risk

    Asset Ratio
At least 10% after PCFC and other creditors

Portfolio Quality

    Past Due Rate

    Loan Valuation Reserve

Not more than 15% of valuation reserves for over-all-operations

100% compliance based on standards

Profitability
   Net Income

   Bills Payable to Total Liabilities

Profitable for the last 3 years

Not to exceed 80%

B. MICROFINANCE OPERATIONS
Outreach	At least 500 existing borrowers
Savings Mobilization	Presence of savings mobilization program
Capability Building Intervention	None Required
Portfolio Quality 1. Portfolio-at-Risk Rate 1-Day (PAR 1)	Not more than 5%
2. Loan Valuation Reserves Rate	100% compliance based on standards
3. Collection Rate	Annual collection rate of at least 95%
Profitability 1. Net Income (Before and After Grants)	Profitable micro-finance operations before and after grants

PERFORMANCE RATINGS

NCC PESO Rating	At least 70%
CAMELS Rating	At least 3

PROJECTS

Types of livelihood projects to be funded by the MFIs depend upon the needs and capabilities of the sub borrowers or clients. The client shall decide on the type of project to be undertaken with the advise of the program partner. However, the following guidelines must be followed in determining the type of project of the clients:

Viable and has a ready market for the product or service;
Able to generate income for the clients within a short period of time (i.e. daily, weekly, monthly cash flows);
Within the capability of the clients to manage;
Able to generate savings for the clients;
Complies with government rules and regulations.

APPLICATION PROCEDURE

Potential program partners should submit the following:

Information on the organization including plans and programs;
Certificate of Registration, Articles of Incorporation and By-Laws;
Information Sheet on the members of the Board of Directors and Principal Officers;
Audited Financial Statements for the last three (3) years and latest interim financial statements;
Credit Application Form;
Board resolution authorizing the Borrowing and the officers to sign loan applications and other loan documents