Step 1: Preparation and Strategic Planning
- Create a detailed business plan that includes:
- Mission and vision of the organization – focused on serving low-income and underserved communities.
- Target market and client profile.
- Financial products such as microloans, microsavings, or microinsurance.
- Marketing strategy and operational growth plan.
- Financial projections for the next 3–5 years.
- Operational model and risk management framework.
- Identify the legal structure of your microfinance organization (MFO):
- Microfinance NGO (MF-NGO): A non-stock, non-profit organization that usually enjoys tax benefits.
- Stock Corporation (Lending Company): A profit-oriented corporation that extends loans using its own capital.
- Form a team of founders and key officers. Most members of the board should have experience in microfinance or banking.
- Ensure you have sufficient paid-up capital:
- For a Lending Company: minimum of ₱1,000,000.
- For an MF-NGO: no fixed amount, but must demonstrate financial stability.
Step 2: Registration with the Securities and Exchange Commission (SEC)
- Reserve a company name. It must be unique and clearly indicate the nature of your business. For example, it should include “Lending Company” or “Lending Investor” if applicable.
- Prepare and submit registration documents in accordance with the Revised Corporation Code of the Philippines (RA 11232):
- Articles of Incorporation
- By-Laws
- Treasurer’s Affidavit (proof of paid-up capital)
- Bank certificate of capital deposit
- Obtain a Certificate of Registration from the SEC to become a legally recognized entity.
Step 3: Securing Special Permits and Accreditation
- Apply for a Certificate of Authority (CA) from the SEC to operate as a lending company, in accordance with the Lending Company Regulation Act of 2007 (RA 9474).
- For MF-NGOs, obtain accreditation from the Microfinance NGO Regulatory Council (MNRC) under the Microfinance NGOs Act (RA 10693).
- Requirements for accreditation include:
- Proof of service to low-income or marginalized sectors.
- At least three years of experience operating microfinance programs.
- Clear operational and financial management manuals.
- Compliance with Client Protection Principles.
Step 4: Other Permits and Registrations
- Secure permits from the local government unit (LGU):
- Barangay Clearance
- Mayor’s/Business Permit
- Register with the Bureau of Internal Revenue (BIR):
- Obtain a Tax Identification Number (TIN).
- Register your accounting books.
- Get authorization to print official receipts and invoices.
- Comply with the Anti-Money Laundering Act of 2001 (RA 9160):
- Register with the Anti-Money Laundering Council (AMLC).
- Develop a Money Laundering Prevention Program (MLPP).
- Appoint a Compliance Officer.
- Ensure transparency in lending activities under the Truth in Lending Act (RA 3765):
- Disclose all loan details — such as interest rates, fees, and charges — to clients before signing any contract.
Important Laws to Know
- Revised Corporation Code (RA 11232): Governs the formation and management of corporations.
- Microfinance NGOs Act (RA 10693): Sets the rules for non-profit microfinance institutions.
- Lending Company Regulation Act (RA 9474): Regulates companies providing loans from their own funds.
- Anti-Money Laundering Act (RA 9160): Prevents illegal and suspicious financial transactions.
- Truth in Lending Act (RA 3765): Protects the rights of borrowers through full disclosure.
- Data Privacy Act of 2012 (RA 10173): Ensures the safe and responsible handling of clients’ personal information.