Back
Lender information
August 19, 2024
Entering the lending market in the Philippines offers exciting opportunities but comes with regulatory requirements that can be both intricate and demanding. As one of the largest emerging markets globally, the Philippines has seen its GDP increase by 7 percent over 2023 and is expected to grow 6.5 to 7.5 percent in 2024. This steady economic expansion is fueling the rise of the country’s consumer lending sector. According to Fitch Ratings, household consumer lending has been on the upswing throughout the past year, reflecting a growing demand for financial services.
However, capitalizing on this growth requires a clear understanding of the regulatory landscape. Navigating the process to secure a lending license in the Philippines involves several key steps, including meeting the requirements set by the Securities and Exchange Commission (SEC) and the Bangko Sentral ng Pilipinas (BSP) and ensuring compliance with anti-money laundering (AML) regulations.
Whether you’re a newbie lender with big dreams or an established lender looking to expand, This guide will walk you through the essential steps to obtaining a lending license in the Philippines.
Featured read: Starting a lending business in the United Kingdom
Under the Lending Company Regulation Act of 2007 (RA 9474), a lending business in the Philippines is defined as a corporation that provides loans using its capital or funds sourced from no more than 19 individuals. Typically, these are smaller joint-stock companies that offer consumer loans, with many focusing on payday loans and other short-term loans with high interest rates that are in high demand.
The RA 9474 definition excludes several financial entities, such as:
The Securities and Exchange Commission (SEC) regulates lending businesses. It is responsible for certifying and overseeing them to ensure they operate within legal and regulatory frameworks.
Featured read: How to obtain a moneylender’s license in Nigeria
Starting a lending business in the Philippines offers several advantages:
Legal and regulated environment: Lending is a legal and heavily regulated sector in the Philippines. The Securities and Exchange Commission (SEC) enforces stringent regulations to ensure a fair playing field, reducing competition from illegal operators. The SEC maintains a publicly accessible list of licensed lending companies, which you can use to demonstrate your business’s credibility to potential customers.
Attractive interest rates: Despite legal limits on interest rates, you can earn up to 6 percent per month, not including additional charges.
Growing industry: The lending industry has been experiencing steady growth over the years, and this upward trend is expected to continue in the foreseeable future.
Opportunities for foreign investors: Foreign citizens can legally establish and own a lending business in the Philippines, opening up opportunities for international entrepreneurs.
Featured read: How to get a lending license in Kenya
As the lending industry moves beyond traditional manual processes, an effective loan management system is essential for optimizing operations, managing risks, and enhancing customer service.
Two of the foremost providers of this technology — Loandisk and Lendsqr — offer distinct loan management solutions. Loandisk, launched in 2015, is geared toward microfinance with features like SMS reminders, basic loan tracking, and a calendar view. However, it has limits on loans and users and relies on manual risk profiling. It offers a double-entry accounting system and allows for basic integrations via API.
Lendsqr, on the other hand, launched in 2018, provides a more comprehensive platform with no limits on loans or users. It includes advanced features like Oraculi for detailed risk assessment, automated payment processing with direct debit, a myriad of high-level API integrations, and extensive customization options. Lendsqr also supports multiple channels, including web and mobile apps and offers integration with various messaging services for enhanced functionality. See how Lendsqr’s advanced features and broader capabilities compare with Loandisk.
Understanding the legal framework is essential when launching a lending business in the Philippines. Here’s a deeper look at the fundamental laws and regulations you need to be aware of:
This law forms the foundation of the regulatory framework for lending businesses in the Philippines. It outlines:
This law focuses on protecting the rights of borrowers. It mandates that lending businesses in the Philippines must clearly disclose the following to potential borrowers:
Other regulations and laws include:
Featured read: How to obtain a lending license in Rwanda
Here’s a breakdown of the key steps involved in registering and licensing a lending business in the Philippines:
Your chosen business name must include the terms “Lending Company” or “Lending Investor” to clearly signify the nature of your business. You must submit it to the Securities and Exchange Commission (SEC) for verification and reservation.
The Lending Company Regulation Act of 2007 mandates that newly established lending companies have a minimum paid-up capital of one million pesos (PHP 1,000,000.00), which must be deposited in a bank account under the business’ official name. Proof of this deposit is required by the SEC during registration.
The articles of incorporation outline your corporation’s basic information, such as its name, purpose, duration, principal address, capitalization, and the names of the incorporators and directors. By-laws set out the internal rules for operations, covering areas like shareholder and board meetings, officers, and conflict resolution. It’s advisable to seek legal assistance to ensure both documents are accurately drafted and meet legal requirements.
To complete the formal registration process, ensure you are prepared to pay the necessary registration fees to the SEC and submit the following essential documents to the SEC:
Registering your lending company with the SEC establishes it as a corporation, but you must submit a separate application for a Certificate of Authority; the SEC will then review your application and supporting documents to ensure compliance with the Lending Company Regulation Act and other relevant regulations, and upon approval, will issue the Certificate of Authority, officially licensing your business to offer loan services.
Register with other Government agencies: You must also register your lending company with the following government agencies:
Getting a lending license in the Philippines might feel overwhelming, but it’s a necessary step to enter this fast-growing market. It’s a bit like getting your paperwork sorted before starting a new job. It is important and sometimes tedious but essential for success. By understanding and following the requirements, you’re not just ticking boxes but setting up your loan business to thrive and serve your future clients better. It’s all about ensuring you’re compliant and ready to make a real impact. With the right approach and patience, you’ll be on track to turn your loan business vision into reality. Start here
Read how direct debit is simplifying payment collection!
Read how 234Loan is transforming lives, one loan at a time
Read about how the government can drive economic growth through the credit ecosystem
