Resolution 063/98 Approving Regulations for Properly Secured Microcredit Operations

BOARD RESOLUTION NO. 063/98 SUBJECT: ECONOMIC POLICY ADVISORY - APPROVES REGULATIONS FOR PROPERLY SECURED MICROCREDIT OPERATIONS

HAVING SEEN:

The Banking and Financial Entities Law No. 1488 of April 14, 1993. The Central Bank of Bolivia Law No. 1670 of October 31, 1995. The Popular Property and Credit Law No. 1864 of June 15, 1998. The Report APEC - ARNOR No. 112/98 from the Economic Policy Advisory dated June 24, 1998. The Report ALEG No. 019/98 from the Legal Advisory dated June 26, 1998.

CONSIDERING:

That Law No. 1488 in its Article 45, first paragraph, establishes that banking financial intermediation entities may grant loans, up to a limit of twice their equity, unless the credits are properly secured, according to regulations.

That Law No. 1670, in its Article 31, subsection a), authorizes the Central Bank of Bolivia to issue norms of general application regarding the placement of resources of financial intermediation entities.

That Law No. 1864, in its Article 15, states that microcredits granted with guarantees of popular shares will be considered as properly secured, for the purposes of Article 45 of the Banking and Financial Entities Law.

That the report APEC-ARNOR No. 112/98 from the Economic Policy Advisory recommends that up to a certain amount, microcredits with joint and several liability guarantees and individual microcredits with non-dispossessory pledges of movable goods not subject to registration, also qualify as properly secured credits.

That in order to favor access to microcredit, it is necessary to issue a norm of general application that expands and clarifies the concept of properly secured credits.

That the report ALEG No. 019/98 from the Legal Advisory states that there is no legal impediment for the Board of the Institution to approve the corresponding norm for properly secured microcredit operations.

THEREFORE

THE BOARD OF DIRECTORS OF THE CENTRAL BANK OF BOLIVIA

RESOLVES:

Article 1.- Approve the Regulations for Properly Secured Microcredit Operations, which, as an annex, forms part of this Resolution.

Article 2.- The attached Regulations will enter into force on August 3, 1998.

Article 3.- The Presidency and the General Management are charged with the execution and compliance of this Resolution.

La Paz, June 30, 1998

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Juan Antonio Morales A.

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Armando Pinell S. Jaime Ponce G.

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Fernando Campero P.

REGULATIONS FOR PROPERLY SECURED MICROCREDIT OPERATIONS

Article 1 (Object).

These Regulations aim to establish the requirements that microcredit operations must observe in order to qualify as properly secured credits.

Article 2 (Scope of Application).

These Regulations apply to all financial intermediation entities that hold a license to operate from the Superintendence of Banks and Financial Entities (SBEF).

Article 3 (Microcredit).

For the purposes of these Regulations, microcredit is understood as that granted to an individual borrower, whether a natural or legal person, whose amount does not exceed the equivalent of twenty-five thousand Bolivianos (Bs 25,000.-), or the loan granted to a group of borrowers, with joint and several liability guarantee, whose amount does not exceed the equivalent of seventy-five thousand Bolivianos (Bs 75,000.-).

Article 4 (Properly Secured Microcredit).

A properly secured microcredit is understood as one that falls under at least one of the following four categories:

A) That the credit is granted with real guarantees, pledges, popular shares, or sureties that ensure the lending entity an alternative source of repayment.

B) That the credit is granted with joint and several liability guarantee, provided that it meets the following conditions:

1. That the credit is granted to a group of people with the cross, joint and several guarantee of its members, for the total of the microcredit, regardless of the loan share each one receives.
2. That the group is composed of three (3) people as a minimum and seven (7) people as a maximum.
3. That the members of the group formally demonstrate individually: i. That they know each other, but there is no blood or affinity relationship up to the second degree according to civil computation. ii. That all have an independent activity, without direct commercial relationship between co-debtors. iii. That all develop their activities in the same Census Zone or contiguous Census Zones. iv. That the projected cash flow surpluses of each group member are at least fifty percent (50%) higher than their total obligations for debt service with entities of the financial system.

C) That the credit is granted to an individual borrower with a non-dispossessory pledge of movable goods not subject to registration, and that the lending financial entity additionally provides the SBEF with a report stating that the credit complies with the credit technology approved by the supervisory entity and developed by the entity. Said report must contain at minimum: i. The verification of the existence of the goods subject to the pledge. ii. The estimated value of the pledged good or goods. iii. That the projected cash flow surpluses of the debtor are at least fifty percent (50%) higher than their total obligations for debt service with entities of the financial system.

D) That the credit is granted based on new microcredit technologies, approved by the Financial Prudential Standards Committee (CONFIP), with the prior opinion of the SBEF, qualifying them as sufficiently prudent and adequate for their supervision. -o-