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FinTechs belonging to this category act as a loan creditor (even short and very short-term loans), are broking loans or receivables or conduct factoring of loans, which were given to private or business customers. In this business area you also find “peer-to-peer” (P2P) services, in which FinTechs enable a multitude of users to give loans (and brokered by the FinTech-platform) to other users or companies.
Finetrading is hereby a financial service of FinTechs, where they buy due receivables and grant the debtor an extension of payment time.
As an ancillary service some FinTechs offer alternative credit assessment services to check the solvency of a borrower.
Introduction
Attitude of the country towards loan-giving-, factoring-, brokerage-, finetrading- and ancillary services
During the height of lockdowns caused by the COVID-19 pandemic, the SEC saw an increased reliance on Online Lending Platforms (OLPs). This led the regulator to closely review OLP activities and to address the proliferation of unregistered personal loan apps. On 2 November 2021, the SEC imposed a moratorium on the registration of new OLPs. OLPs are mobile lending applications, websites, and other FinTech-enabled programs or systems where the services and products of financing companies and lending companies are made available. In April 2022, Google stated that, beginning 11 May 2022, it will require OLPs targeting Philippine users to prove registration with the SEC and submit declarations of compliance with laws before they can publish their apps on the Google Play Store. While the regulators are generally open to FinTech solutions, there appears to be greater regulation for FinTech-enabled lending and financing activities.
Legal affairs
Obligations and requirements to provide loan-giving-, factoring-, brokerage-, finetrading, and ancillary services described above
In addition to the General Banking Law (Republic Act No. 8791), other laws on banking, and the regulations promulgated and implemented by the BSP in connection with loan giving, factoring, and ancillary services rendered by financial institutions under its jurisdiction, the SEC also implements the Financing Company Act (Republic Act No. 8556, as amended) and Lending Company Regulation Act (Republic Act No. 9474, as amended) which are intended to regulate the activities of financing companies and lending companies. Under both laws, an entity intending to engage either as a financing company or a lending company needs to obtain a certificate of authority from the SEC.
Financing companies are required to be organised in the form of stock corporations, may be owned up to 100% by foreign nationals, and should have a paid-up capital of not less than PhP10 million (approx. US$191,828) in case the financing company is located in Metro Manila and other first-class cities, PhP5 million (approx. US$95,914) in other classes of cities and PhP2.5 million (approx. US$47,957) in municipalities. In addition to the foregoing, a financing company is required to put up minimum additional capital for each branch, agency, extension office or unit in the amount of PhP1 million (approx. US$19,183) if it will be located in Metro Manila and other first-class cities, PhP500,000 (approx. US$9,591) in other classes of cities, and PhP250,000 (approx. US$4,796) in municipalities.
On the other hand, a lending company is required to have a minimum paid up capital of PhP1 million (approx. US$19,183) unless the SEC prescribes a higher minimum capitalisation, if warranted by the circumstances. Should a branch, extension, satellite office or unit be established, the excess of the required minimum paid-up capital may be applied to the additional capital requirement for the proposed branch, extension, satellite office or unit, as follows: PhP300,000 (approx. US$5,7