DIGITAL finance group Fintech Alliance PH is supporting a plan by the Securities and Exchange Commission (SEC) to raise the minimum capitalization requirement for lending companies.
The group has over 150 corporate members — including GCash, Maya, Grab, Mastercard, and Visa — which collectively account for more than 95 percent of digital retail financial transactions in the country.
“We are pushing for [raising capitalization] because we need serious players,” Fintech Alliance founding chairman Lito Villanueva told reporters on Monday. “How would you expand your lending when your capital is too low? In fact, even the capital has to be based; it could be tiered.” The SEC last week released a draft circular that would lift and replace SEC Memorandum Circular 10, which previously stopped the registration of new online lending platforms (OLPs).
The proposal also seeks to raise the minimum paid-up capital for financing and lending firms, especially those with OLPs. Financing companies without OLPs would be required to have at least P20 million in capital, while lending companies need P10 million.
For OLPs, the required capital would increase based on their number of platforms.
Financing companies need P30 million for one platform; P60 million for two to five; and P100 million for up to 10.
Lending companies must have P20 million, P30 million, and P50 million, respectively.
The draft also limits companies to a maximum of 10 OLPs and gives existing firms three years to meet the new requirements.
Villanueva, however, said the proposed capital requirement for lending companies is still too low, considering that many firms are operating with just P1 million.
“With such low capital, how can you properly underwrite loans?” he said, adding that P10 million should limit a company’s lending to a specific area, similar to how rural banks operate, rather than allowing nationwide lending.
He emphasized that capital requirements should match the company’s coverage: bigger capital allows wider operations; smaller capital should limit them to a “playground” they can manage without overextending.
Higher capital won’t stifle online lending growth, Villanueva noted.
“If they're really dead serious about it, we need more serious players in the industry, so we don't want these online lending companies to fold up,” he said.