Providing an Enabling Regulatory Environment to Enhance Access to Finance for MSMEs. A Joint Regional Symposium: "Best Practice Regulatory Principles Supporting MSME Access to Finance" June 2011 Mary Rose A. Contreras Core IT Specialist Group Supervision and Examination Sector

AGENDA Current Financial Landscape and Mobile Penetration E-Money and Business Models E-money: Enhancing MSMEs access to finance Creating an Enabling Environment with Proportionate Regulations Tasks Ahead

99% mobile phone coverage KBs, TBs, RBs and 9000 ATMS are located in cities and big towns 26% of Filipinos have access to formal financial channels More than 75% of the population have mobile phones 610 out of 1635 municipalities do not have banks 2B text messages/day 90M Population Financial Landscape & Mobile Penetration

CIRCULAR 649 – Guidelines on E-Money Issuance and Operations of E-Money Issuers Monetary value Monetary value as represented by a claim on its issuer, that is – a.Electronically stored in an instrument or device; b.Issued against receipt of funds of an amount not lesser in value than the monetary value issued; c.Accepted as a means of payment by persons other than the issuer; d.Withdrawable in cash or cash equivalent; and e.Issued in accordance with BSP Circular No. 649 dated 9 March 2009

Redeemable at Face Value Not a Deposit Total loaded cash value not to exceed P100 thousand/month Compliant with AMLA Electronic Money Basic Features

Forms of E-Money Prepaid Cash Cards Electronic Wallet

ACCREDITE D REMCO OUTLET Remittance -11h-10h-09h-08h-07h-06h-05h-04h-03h-02h- 01h00h +01h+02h+03h+04h+05h+06h+07h+08h+09h+10h+ 11h Expanding Financial Access Through Innovative Technology Purchase of Goods Payment of Fare Banking Products - Deposits - Loans - Bills Payment Utility Bills Payment Payment of School Fees Payment of Taxes and Licenses Person-to- Person Transfer

E-money: Enhancing Access to Finance for MSMEs Loan Release Loan Payment Deposit Build-up

Loan Release 1 Upon loan application, client already indicates his e-money/e- wallet account number 2 Upon loan release, client shall receive an SMS notification on the credited loan proceeds to e-wallet 3 Client can go to any Cash Out center to convert electronic money to actual cash Loan amount has been credited to XXXXXXXXXX0005. Thank you for using this service

Loan Payment 1 Client chooses loan payment from menu, enters the amount to be paid, enters his PIN to authorize the transaction 2 Client and the lending bank shall receive an SMS notification upon fund transfer from client’s e-wallet to lending bank’s e- wallet 3 Lending bank records the loan payment made in step 2 Amount of P100 has been transferred to/from XXXXXXXXXX Thank you for using this service

Deposit build-up 1 Client chooses text-a-deposit from menu, enters the amount, enters his PIN to authorize the transfer of e- money value from his wallet to bank’s wallet 2 Client and the depositary bank shall receive an SMS notification upon fund transfer from client’s e-wallet to depositary bank’s e-wallet 3 Depositary bank records the amount to the client’s deposit account. Amount of P100 has been transferred to/from XXXXXXXXXX Thank you for using this service

Benefits to Users Reduced travel time & cost Reduced risk Convenient Availability Time saving

1.Allow non-banks to offer e-money 2.Remittance Agents allowed to perform Cash-In/Cash-Out 3.Simplification of requirements for KYC 4.Formalized guidelines on issuance of electronic money 5.Allowed microfinance-oriented OBO limited transactional banking activities Creating an Enabling Environment with Proportionate Regulations

Latest BSP Regulatory Initiatives Circular 649 (January 2009)- Regulating the issuance of electronic money –Definition of e-money and EMIs –EMI as the supervised entity of Bangko Sentral –Qualification standards of both bank/ non bank issuers such as Capital, Risk Management and Liquidity Cover –Compliance to AML rules –Consumer protection standards including Adequate Disclosure

Latest BSP Regulatory Initiatives Circular 704 (December 2010)- Electronic Money Network Service Providers (EMNSP) –Smaller banks aiming to be EMIs can engage services of EMNSP –Stressed Due Diligence and Continuing Operational Review Circular No. 706 (January 2011) – Updated AML rules and regulations –Reduced due diligence for low risk clients –Reliance on third-party KYC Circular 694 (October 2010)- Microfinance-oriented other banking offices (MF-OBO) –MF-OBO can perform limited transactional banking activities: micro-deposits, release micro-loans, etc.

TASKS AHEAD Success breeds new challenges and risks. Steady advocacy for responsible finance Price transparency Consumer Protection Close monitoring of market practices and developments Financial literacy promotion

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