Savings, loan associations getting stiff competition from fintech firms

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) is urging non-stock savings and loan associations (NSSLAs) to innovate and leverage on information technology amid intense competition with fintech (financial technology) companies that offer the same products and services.

Arifa Ala, assistant governor of the BSP’s Financial Supervision Sub-Sector II, said several fintech companies are now doing lending activities as well just like NSSLAs.

“We expect them to innovate and make use of information technology to keep themselves competitive relative to fintech companies. These NSSLAs should also take that into consideration if they want to remain competitive and also reduce the cost of doing their businesses,” Ala said.

NSSLAs are non-stock, non-profit corporations engaged in the business of accumulating members’ savings for lending to households by providing long-term financing for home building or development and for personal finance.

BSP Governor Benjamin Diokno said the financial condition and operations of the NSSLA industry remains sound and stable as assets rose by 4.3 percent to P271.2 billion from the end-2019 level of P260 billion.

Likewise, the industry’s loan book stood at P238.9 billion, while capital contributions amounted to P132.55 billion as of end- March.

Diokno said the regulator continues to enhance the corporate governance guidelines for NSSLAs to foster the soundness and stability of the industry.

“Effective corporate governance is the foundation of safe and sound business operations, and it embodies the principles of fairness, accountability and transparency. It also provides a crucial anchor for sound risk governance practices that enables NSSLAs to be responsive in identifying, understanding, measuring, and managing risks,” Diokno said.

The enhanced rules promote the value of a strong board of trustees and board-level committees coupled with effective control functions. The board is expected to oversee the implementation of effective risk governance and management systems.

“Since corporate powers are exercised through an NSSLA’s board of trustees, the enhanced guidelines aim to ensure that trustees shall hold their office for the best interest of the association. Trustees and officers must be fit and proper for their respective positions to warrant that the management of business affairs are carried out with utmost integrity,” Diokno said.

To promote independence and instill accountability, a percentage of independent trustees are required for NSSLAs and that the chairperson of the board of a complex NSSLA must not have any management position.

Moreover, there are mandatory board-level committees depending on an NSSLA’s complexity and size to increase efficiency and allow deeper focus in specific areas.

The revised corporate governance guidelines are also seen to promote public trust in the NSSLA industry, which continues to have sound and stable operations and financial condition amid the pandemic.