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)
• 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.
• 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."
• 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 user 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."
• 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 terms 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.

• The Future Competitors- this includes the currently established

lending institutions available to the target market and the
trends with the financing business.

• 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 support 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 terms 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.

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

the business.

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

• 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 support 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

TARGET MARKET POPULATION PERCENTAGE

Student 5 6%
Private Employee 28 33%
Gender Population Percentage Government Employee 34 40%
Not Working: 1 1%
Male 21 25% Others: 17 20%

Female 64 75% (including small business

owners & pensionners)
Total 85 100% 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.
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
% over the % over the
Not
Interested in total total
TARGET MARKET Interested in
Microfinance population population
Microfinance
size size
Target Market Population Percentage
Student 0 0% 5 24%
Private Employe 21 34% 7 29%
Interested 64 75% Government Employee 26 42% 8 33%
Not Not Working: 0 0% 1 5%
Interested 21 25% Others: 17 23% 0 10%
(including small
business owners &
Total 85 100%
pensioners)
TOTAL 64 100% 21 100%

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.
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
• 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 terms 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.
• 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
• 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 account, house amortization statement, etc.
• Finger Print
• Proof of Income or Support
*For Employed: Updated 1 month Pay slip/Latest Income Tax
Return/COE
*For Pensioners- Passbook/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% Loan amount: P5,000

advance interest and P5 service charge are deducted. 5% of 5000 is 250 so 5000-
Qualified applicants can loan a minimum of P5,000- 250+P50=
10,000 depends on your salary or source of income that P4,700 total amount
is payable in 3 to 5 months. Interest rate per month is received.
4%. You need to avail 5 cycle of 1st loan before you
proceed to much higher amount of loan.

Loan Terms of Payment Choice A: Loan Terms of Payment Choice B:

Every 15th & 30th day of the month Payable in Every 1stday of the month Payable in 3
3 months. months.

P5,000/ 6= P833.33 P5000/ 2= P1,666.66

5% of 5000 is P250 5% of 5000 is P250
Add 5% of principal. Add 5% of principal.

P833.33+125= P958.33 P1,666.66+250= P1,916.66

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.
P1,916.66 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 Terms:
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 Terms: 6 months
Payment Terms: 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
Contact #: 0922.897.0919
Email: ffclucena@fundline.ph
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
Terms: 100 days
Processing Time: 3-4 days
Loan Release: Cheque
Payment Terms: 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)
Terms: 100 days, 120 days
Processing Time: 3-5 days
Loan Release: Cheque
Payment Terms: 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%)
Terms: 3 months
Processing Time: 3-4 days
Loan Release: Cheque
Payment Terms: 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
Terms: 3 Months
Processing Time: 3-5 working days
Loan Release: via Cebuana Lhuillier Branch
Payment Terms: monthly
Requirements: Application Form
1 Valid ID
Proof of Billing
Proof of income or support
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 terms up to 12
months, while Lucky Loans covers loans from P50,000 to P2 million with loan terms 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 !