Micro Finance 413i4k

Microfinance Program

Introduction of the Study Before we start, Let us know first the BASICS OF THE LENDING COMPANY REGULATION ACT OF 2007 (R.A 9474) •

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On 22 May 2007, Republic Act No. 9474, also known as the “Lending Company Regulation Act of 2007,” was approved. The law is consistent with the declared policy of the State to regulate the establishment of lending companies and to place their operation on a sound, efficient and stable condition to derive the optimum advantages from them as an additional source of credit; to prevent and mitigate, as far as practicable, practices prejudicial to public interest; and to lay down the minimum requirements and standards under which they may be established and do business. Here’s a basic discussion of the new law: What is a Lending Company? It refers to a corporation engaged in granting loans from its own capital funds or from funds sourced from not more than nineteen (19) persons. It shall not be deemed to include banking institutions, investment houses, savings and loan associations, financing companies, pawnshops, insurance companies, cooperatives and other credit institutions already regulated by law. The term shall be synonymous with lending investors. What is the form of organization for a lending company? A lending company shall be established ONLY as a corporation. Existing lending investors organized as single proprietorships or partnerships shall be disallowed from engaging in the business of granting loans to the public one year after the date of effectivity of the law. No lending company shall conduct business unless granted an authority to operate by the SEC.

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What is the capital required for lending companies? The minimum paid in capital of any lending company established under the law is One Million Pesos (P1,000,000.00). Existing lending companies established and in operation prior to the effectivity of this law shall comply with the required minimum capitalization within such time as may be prescribed by the SEC which time shall, in no case, be less than three years from the date of effectivity. The SEC may also prescribe a higher minimum capitalization if warranted by circumstances. What is the citizenship requirement? Upon the effectivity of the law, at least a majority of the voting capital stock shall be owned by citizens of the Philippines. The percentage of foreign-owned voting stock in any lending company existing prior to the effectivity of the law, if such percentage is in excess of forty-nine percent (49%) of the voting stock, shall not be increased but may be reduced and, once reduced, shall not be increased thereafter beyond forty-nine percent (49%) of the voting stock of the lending company. The percentage of foreign-owned voting stocks in any lending company shall be determined by the citizenship of the individual stockholders. In the case of corporations owning shares in a lending company, the citizenship of the individual owners of voting stock in such corporations shall be the basis in the computation of the percentage. No foreign national may be allowed to own stock unless the country of which he is a national accords reciprocal rights to Filipinos. What are the prescribed amount and charges on loans? A lending company may grant loans in such amounts and reasonable interest rates and charges as may be agreed upon between the lending company and the debtor. However, the agreement shall be in compliance with the provisions of Republic Act No. 3765, otherwise known as the “Truth in Lending Act” and Republic Act 7394, otherwise known as the “Consumer Act of the Philippines”. The Monetary Board of the Bangko Sentral ng Pilipinas, in consultation with the SEC and the industry, may prescribe such interest rate as may be warranted by prevailing economic and social conditions.

https://jlp-law.com/blog/basics-of-lending-company-regulation-act-of-2007-ra-9474/

Lending Business Policy "Truth in Lending Act." • • • •

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REPUBLIC ACT No. 3765 AN ACT TO REQUIRE THE DISCLOSURE OF FINANCE CHARGES IN CONNECTION WITH EXTENSIONS OF CREDIT. Section 1. This Act shall be known as the "Truth in Lending Act." Section 2. Declaration of Policy. It is hereby declared to be the policy of the State to protect its citizens from a lack of awareness of the true cost of credit to the by assuring a full disclosure of such cost with a view of preventing the uninformed use of credit to the detriment of the national economy. Section 3. As used in this Act, the term (1) "Board" means the Monetary Board of the Central Bank of the Philippines. (2) "Credit" means any loan, mortgage, deed of trust, advance, or discount; any conditional sales contract; any contract to sell, or sale or contract of sale of property or services, either for present or future delivery, under which part or all of the price is payable subsequent to the making of such sale or contract; any rental-purchase contract; any contract or arrangement for the hire, bailment, or leasing of property; any option, demand, lien, pledge, or other claim against, or for the delivery of, property or money; any purchase, or other acquisition of, or any credit upon the security of, any obligation of claim arising out of any of the foregoing; and any transaction or series of transactions having a similar purpose or effect. (3) "Finance charge" includes interest, fees, service charges, discounts, and such other charges incident to the extension of credit as the Board may be regulation prescribe. (4) "Creditor" means any person engaged in the business of extending credit (including any person who as a regular business practice make loans or sells or rents property or services on a time, credit, or installment basis, either as principal or as agent) who requires as an incident to the extension of credit, the payment of a finance charge. (5) "Person" means any individual, corporation, partnership, association, or other organized group of persons, or the legal successor or representative of the foregoing, and includes the Philippine Government or any agency thereof, or any other government, or of any of its political subdivisions, or any agency of the foregoing.

Lending Business Policy "Truth in Lending Act." • • • • • • • • •

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Section 4. Any creditor shall furnish to each person to whom credit is extended, prior to the consummation of the transaction, a clear statement in writing setting forth, to the extent applicable and in accordance with rules and regulations prescribed by the Board, the following information: (1) the cash price or delivered price of the property or service to be acquired; (2) the amounts, if any, to be credited as down payment and/or trade-in; (3) the difference between the amounts set forth under clauses (1) and (2); (4) the charges, individually itemized, which are paid or to be paid by such person in connection with the transaction but which are not incident to the extension of credit; (5) the total amount to be financed; (6) the finance charge expressed in of pesos and centavos; and (7) the percentage that the finance bears to the total amount to be financed expressed as a simple annual rate on the outstanding unpaid balance of the obligation. Section 5. The Board shall prescribe such rules and regulations as may be necessary or proper in carrying out the provisions of this Act. Any rule or regulation prescribed hereunder may contain such classifications and differentiations as in the judgment of the Board are necessary or proper to effectuate the purposes of this Act or to prevent circumvention or evasion, or to facilitate the enforcement of this Act, or any rule or regulation issued thereunder. Section 6. (a) Any creditor who in connection with any credit transaction fails to disclose to any person any information in violation of this Act or any regulation issued thereunder shall be liable to such person in the amount of P100 or in an amount equal to twice the finance charged required by such creditor in connection with such transaction, whichever is the greater, except that such liability shall not exceed P2,000 on any credit transaction. Action to recover such penalty may be brought by such person within one year from the date of the occurrence of the violation, in any court of competent jurisdiction. In any action under this subsection in which any person is entitled to a recovery, the creditor shall be liable for reasonable attorney's fees and court costs as determined by the court. (b) Except as specified in subsection (a) of this section, nothing contained in this Act or any regulation contained in this Act or any regulation thereunder shall affect the validity or enforceability of any contract or transactions. (c) Any person who willfully violates any provision of this Act or any regulation issued thereunder shall be fined by not less than P1,00 or more than P5,000 or imprisonment for not less than 6 months, nor more than one year or both. (d) No punishment or penalty provided by this Act shall apply to the Philippine Government or any agency or any political subdivision thereof. (e) A final judgment hereafter rendered in any criminal proceeding under this Act to the effect that a defendant has willfully violated this Act shall be prima facie evidence against such defendant in an action or proceeding brought by any other party against such defendant under this Act as to all matters respecting which said judgment would be an estoppel as between the parties thereto. Section 7. This Act shall become effective upon approval. Approved: June 22, 1963

https://www.lawphil.net/statutes/repacts/ra1963/ra_3765_1963.html

Scope of the Study •

The Future Market- the employees, the small entrepreneurs, and pensioners in the area.

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The Future Competitors- this includes the currently established lending institutions available to the target market and the trends with the financing business.

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The Guidelines and Implementing Rules in establishing a lending business.

What is Micro Finance? Microfinance initially had a limited definition - the provision of microloans to poor entrepreneurs and small businesses lacking access to banking and related services. The two main mechanisms for the delivery of financial services to such clients were: (1) relationship-based banking for individual entrepreneurs and small businesses; and (2) group-based models, where several entrepreneurs come together to apply for loans and other services as a group. Over time, microfinance has emerged as a larger movement whose object is "a world in which as everyone, especially the poor and socially marginalized people and households have access to a wide range of affordable, high quality financial products and services, including not just credit but also savings, insurance, payment services, and fund transfers. For many, microfinance is a way to promote economic development, employment and growth through the of micro-entrepreneurs and small businesses; for others it is a way for poor to manage their finances more effectively and take advantage of economic opportunities while managing the risks. The have evolved - from micro-credit to micro-finance, and now 'financial inclusion'. https://www.slideshare.net/Reymar27/project-study-on-establishing-lending-business-18725428

Objectives •

To be able to identify the effectiveness of the proposed business in the market by catering their financial needs.

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To be able to formulate the most effective management techniques in operating the business.

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To find out how the business be practically put into effect.

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To introduce new type of business.

Rationale As the need for money increases to sustain the financial needs of different individuals in the area such as the need to studies, basic needs and etc. Many of them choose to avail loans from underground financing (e.i. bombay 5-6) which offer as high as 20% interest rate which makes borrowers sunk from their financial obligations. I other words it cannot really help the individuals for their financial shortcomings in the long run. In this regard the main essence of this study is to establish a micro financing company that offer a reasonable interest rate to cater the financial shortcomings of the market. To determine the worthwhileness of the study it ought to answer the following aspect: • Marketing Aspect • Management Aspect • Technical Aspect • Financial Aspect

Marketing Aspect - Who will benefit the proposed lending business? -What method should the business ratify in order to introduce and compete with the existing lending business?

Management Aspect - How would the business be managed successfully and maintain it?

Technical Aspect - How the business can be practically put into effect?

Financial Aspect - How can the business earn profit and underrate its cost?

Marketing Aspect Target Market

Gender Population

Percentage

Male

21

25%

Female

64

75%

Total

85

100%

Table shows the gender of future target market. Total of 85 respondents,64 or 75% are female while 21 or 25% are male.

TARGET MARKET Student Private Employee Government Employee Not Working: Others: (including small business owners & pensionners) TOTAL

POPULATION PERCENTAGE 5 6% 28 33% 34 40% 1 1% 17 20%

85

100%

Table shows total target market of 85.And 34 or 40% are coming from employee of government,28 or 33% are from private employee, 17 or 20% will be coming from small business owners and pensioners and the remaining 6% are the student and not working within the area.

Marketing Aspect Target Market

Target Market Population Percentage

Interested Not Interested

64

75%

21

25%

Total

85

100%

% over the % over the Not Interested in total total TARGET MARKET Interested in Microfinance population population Microfinance size size Student 0 0% 5 24% Private Employe 21 34% 7 29% Government Employee 26 42% 8 33% Not Working: 0 0% 1 5% Others: 17 23% 0 10% (including small business owners & pensioners) TOTAL

The table shows a total of 85 respondents. And 64 or 75% of them are interested in getting microfinance (without collateral) services in the future, while 21 or 25% of them answered not interested.

64

100%

21

100%

Base on interviews and questions conducted, A total of 26 out of 34 government employee are interested in microfinance while 8 of them are not interested and said that they have other source of income which they can use in the event they needed it. There have also 7 out of 28 private employee that are not interested for the same reason and the rest of 21 are all interested. On the other hand, all the small business owners and pensioners in the area are very much interested .

Management Aspect •

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The business will grant loan to borrowers with a reasonable interest rate of 5%. The company will also deduct an advance one (1) month interest rate and P5 pesos service charge from the proceeds of loan. The loan must be payable within one (1) month up to twelve (12) months base on the amount borrowed and agreement between the borrower and the company. Only those in the Philippines are allowed to loan. If applicant do not work or don’t have any business but regularly receive international remittance, he/she is also qualified to loan Also one of the requirements to avail a loan, borrower must have a co-maker and must have basic requirements which is 2 valid ID’s and a proof of income. To ensure that whenever the borrower fails to settle his/her obligation , the co-maker will be liable for that obligation. Existing borrower that has a good record can also be a co-maker. We will provide a promissory note stating the amount of loan , the interest rate, the term of loan, other fees and other and conditions and this will be signed by both the representatives of the company and the borrower same as with his/her co-maker. Finger Print scanner is also provided by company for any security purposes.

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Processing time is 3-5 working days for complete requirements. Note: Processing time may be extended depends on number of application. If approved, customer will received a text message or a phone all from Raquel Pawnshop loan processing team. Applicant must have only 7 days to go to branch where his/her applied to claim loan, if not the approved loan will be cancelled. If disapproved, Raquel Pawnshop loan processing team will also text or call to alert applicant with the disapproval of loan. 1st application Interest rate for 3-5 months term of payments is 5% monthly . 5cycle before to proceed in much higher amount of loan. after 5 cycle 2nd loan can avail. Where you can loan amount of 10,000-15,000 payable in 5 to 8 months with interest rate of 7% monthly.

Loan Requirements • •

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Loan Applicant must be 21 to 65 years old living in the Philippines. Application Form from Raquel Pawnshop branch with Signature of borrower and co-maker. 2 valid id’s Proof of Billing – Meralco Bill, Water Bill, PLDT, Credit card statement of , house amortization statement, etc. Finger Print Proof of Income or *For Employed: Updated 1 month Pay slip/Latest Income Tax Return/COE *For Pensioners- book/Bank Statement *For Self Employed - Barangay Business Permit /Mayor’s Business Permit

Loan Offer 1st Loan Application

Loan Sample Computation:

No collateral required. .In applying to this loan, 5% advance interest and P5 service charge are deducted. Qualified applicants can loan a minimum of P5,00010,000 depends on your salary or source of income that is payable in 3 to 5 months. Interest rate per month is 4%. You need to avail 5 cycle of 1st loan before you proceed to much higher amount of loan.

Loan amount: P5,000 5% of 5000 is 250 so 5000250+P50= P4,700 total amount received.

Loan of Payment Choice A:

Every 15th & 30th day of the month Payable in 3 months.

Loan of Payment Choice B: Every 1stday of the month Payable in 3 months.

P5,000/ 6= P833.33 5% of 5000 is P250 Add 5% of principal.

P5000/ 2= P1,666.66 5% of 5000 is P250 Add 5% of principal.

P833.33+125= P958.33 P958.33 every 15th and 30th P 958.33 x 4 = P 3,833.32 for 2 months. P833.33 X 2 = P1,666.66 P 3,833.32+ 1,666.66 = P5,499.99 + 250 + 50 = 5,799.99 Total of P799.99 return of debt.

P1,666.66+250= P1,916.66 P1,916.66 every 1st day of the month P 1,916.66 x 2 = P 3,833.33 for 2 months P 1,666.66 last Payment P 5,499.99 – 5000 = 499.99 499.99+ 250+5= P799.99 Total of P799.99 return of debt.

Source of Data The primary source of data is through distributing and conducting of questionnaires and interviews from the future target market. The employees of LGU’s, offices, pensioners, schools, and small business owner within the area of Lucena City Quezon.

COMPETITORS

Radiowealth Finance Corporation Address: G/F Sonny J. Rivere Bldg, Merchant Extension, Brgy. 2, Lucena, 4301 Quezon Province Operating Hours: 8AM–5:30PM Phone: (042) 710 7169 https://rfc.com.ph

They provide the financial assistance to make a business grow and prosper. Collateral: Not required Loan Amount: Php 30,000 – Php 100,000 Payment : 3 months to 12 months. Requirements: Basic Requirements and any of the following documents: Copy of Stall Rights or Rental Agreement Mayor’s, Barangay, or Business Permit SEC/DTI Registration (if applicable) Partnership Contract / Agreement (for partnerships – if applicable)

Onepuhunan CreditAccess Philippines Financing Company Inc. Address: P & N Building, Merchan St. Brgy. 2, Lucena, 4301 Quezon Province Operating Hours: 8:00AM – 5:00PM http://onepuhunan.com.ph Micro-loan for business owners. Per group – 10 per group Loan Amount: P6,000, 9,000, 12,000, 15,000 Interest: 6.27% monthly Payment : 6 months Payment : Every 2 weeks Deductions: None Loan Release: Cash on office Requirements: Business Permit or Brgy. Permit Application Form (upon orientation) Valid ID’s Co-maker (Family Member)

Fundline Finance Corporation Address: GRANJA ST. COR. LAKANDULA ST., BRGY. 7, LUCENA CITY #: 0922.897.0919 Email: [email protected] Operating Hours: Mon to Sat 8:00am - 5:00pm http://www.fundline.com.ph

Fundlite was primarily designed to assist micro and small scale entrepreneurs grow their existing business. FFC Fundlite program provides very affordable and convenient rates.

No collateral With Advance Interest Amount: Minimum of 8k to 12k, second loan is up to 20k Interest: 16% Deductions: Notarial Fee (P20), Doc Stamp , Interest : 100 days Processing Time: 3-4 days Loan Release: Cheque Payment : Daily - A collector will collect the money Requirements: Business Permit or Brgy. Permit Application Form Valid ID’s

Northpoint Development Bank Address: 32 Profugo Corner Bonifacio St. Brgy. 5, Lucena City Hours: 8AM–5:00PM Phone: 0932-863-4548 http://www.northpoint.ph

Micro Finance Loan Microfinance loans are small loans granted to the basic sectors, on the basis of the borrower's cash flow and other loans granted to the poor and low-income households to enable them to raise their income levels and improve their living standards. These loans are typically unsecured but may also be secured in some cases. No Collateral No Advance interest Amount: Maximum of P150,000 Minimum of P5,000 Interest: 4%, 16%, 20% (depends on the term and type of loan) Deductions: Notarial Fee (P25), Doc Stamp (P20) : 100 days, 120 days Processing Time: 3-5 days Loan Release: Cheque Payment : Daily, weekly or monthly (PDC) A collector will collect the money Requirements: Business Permit or Brgy. Permit Application Form ID’s

First Inner Trade Credit Corporation Address: Alleray St. Brgy 1, Lucena City Tel. No: 0933-231-5817 No Collateral With Advance interest

Amount: Maximum of P150,000 Minimum of P5,000 Interest: 16% Deductions: Advance Interest and Loan discharge (1%) : 3 months Processing Time: 3-4 days Loan Release: Cheque Payment : Daily - A collector will collect the money Requirements: Application Form Barangay, or Business Permit 2 Valid ID 2 Pcs 1x1 Picture

Cebuana Lhuillier Happy Loan No Collateral Amount: P 5,000 Interest: 5% per month and 4% service charge upon availment : 3 Months Processing Time: 3-5 working days Loan Release: via Cebuana Lhuillier Branch Payment : monthly Requirements: Application Form 1 Valid ID Proof of Billing Proof of income or Brgy Business Permit (for business owners) Mayor’s Permit (for business owners) 3- Month current bank statement (for business owners)

Cebuana Lhuillier Happier Loan Can be availed after 3 cycles of Happy Loan Amount: P 10,000 Interest: 5% per month and 4% service charge upon availment

Happiest Loan Can be availed after 3 cycles of Happier Loan Amount: P 15,000 Interest: 5% per month and 4% service charge upon availment

Easy loans offers loanable amounts from P1,000 to P49,000 with loan up to 12 months, while Lucky Loans covers loans from P50,000 to P2 million with loan of 6-24 months.

PROGRAM ANALYSIS • Customers interviewed through survey questionnaire are very interested in microloan services. • Target Market are the employees, pensioners and small business owners. •

RECOMMENDATIONS • It is recommended to provide finger print scanner as one of the requirements. •It is recommended that the operation is handle by the branch. •It is recommended that interest rate are monthly base with 5% interest. • It is recommended to have an advance interest rate and P5 service charge upon avail. • It is recommended to have insurance in every loan transaction.

Thank you !