REFACS,

Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

SEVENTEENTH CONGRESS
First Regular Session

HOUSE BILL No._ 9629

EXPLANATORY NOTE

Financial inclusion means that individuals and businesses have access to
useful and affordable financial products and services that meet their needs —
transactions, payments, savings, credit and insurance — delivered in a responsible
and sustainable way.’ It is considered a key enabler to reduce poverty and boost
prosperity. However, a major obstacle toward financial inclusion is cost — especially
those incurred by customers living in far-flung areas in reaching bank branches. In
the Philippines, more than 36% of all the municipalities have no banking presence*
and the World Bank estimates that about 60% of the country's adult population
remains unbanked. Only 28% of Filipino adults own a bank account and only about
15% save money with a formal financial institution over a 12-month period, while
only 10% borrow money from formal institution over a similar timeframe? Thus,
there is a definite opportunity and need to reach the financially excluded

In view of the foregoing, the State shall create an enabling regulatory
environment for innovations and allow banks to exponentially reach and serve clients
more efficiently. In January 2017, the Bangko Sentral ng Pilipinas, through its
Monetary Board, approved the guidelines for new bank service channels and relaxed
existing regulations on deposit taking activities outside bank services * Under the
new regulations, banks are now allowed, with prior BSP authorization, to serve
clients through cash agents contracted by banks to accept and disburse cash in its
behalf, facilitating online self-service deposits, withdrawals and fund transfers, as
well as bills payment.Cash agents can also perform Know-Your-Customer
procedures as well as collect and forward application documents for loan and
account opening. They may also sell and service insurance as may be authorized
by the Insurance Commission.

* World Bank. (2016, October 02). Financial Inclusion. Retrieved from
hittp:/Awww.worldbank org/en/topioffinancialinclusion/overview

? Per Bangko Sentral ng Pilipinas data, 2017

3 Asian Development Bank. (2017, January). Accelerating Financial Inclusion in Southeast Asia with Digital
Finance. Retrieved from hitps:/www.adb.org/publicationsifinancial-inclusion-south-east-asia-digital-finance
4 Bangko Sentral ng Pilipinas (2017, January 18). SP Issues Regulation Enabling Banks to Expand Service
Delivery Channels. Retrieved from http:/www. bsp. gov. ph/publications/media asp?id=4274


This bill, “Bangko sa Baryo Act of 2017” shall incorporate the new BSP
guidelines and further enhance the concept of banking through cash agents. It shall
Provide various incentives to any person (applies to both natural and legal) who shall
establish its business in the remote areas of the country such as waiver of
government fees, free training for personnels, tax benefits, among others. The local
government unit shall play a crucial role in assigning areas as “remote” and assess
the same for necessity of banking presence.

Further, the bill shall define who are cash agents and provide for the
corresponding eligibility requirements. The bill shall ensure that agents, as
extensions of the banking system, are able to provide professional serice, keep
records, handle cash and manage liquidity.

Cash agents should be able to assist in performing a broad range of bank
services, including forwarding account opening applications, cash-in and cash-out
services, and initial customer identity verification — especially for anti-money
laundering and combating financing of terrorism efforts. The contracting bank shall
ensure that the cash agent follows standard bank protocols and exercise due
diligence when dealing with customers. Ultimately, the banks remains liable for agent
actions.

The “Bangko sa Baryo Act’ endeavors to attain financial inclusion for the
Filipino people and to establish robust financial consumer protection frameworks. It
shall increase citizen's financial literacy and capablity so they understand different
financial services. Soon, an average barrio folk will be able to make sound financial
decisions and put his hard-earned money to beneficial use.

The immediate approval of this bill is earnestly sought.

F. VILLAFUERTE, JR.


Republic of the Philippines

HOUSE OF REPRESENTATIVES
Quezon City

SEVENTEENTH CONGRESS
First Regular Session

HOUSE BILL No._9629

AN ACT ENABLING BANKS TO EXPAND SERVICE DELIVERY CHANNELS
THROUGH CASH AGENTS AND PROVIDING GUIDELINES THEREFOR

Be it enacted by the Senate and House of Representatives of the Philippines in
Congress assembled:

SECTION 1. Short Title. — This Act shall be known as the "Bangko sa Baryo Act
of 2017"

SECTION 2. Declaration of Policy. — The State recognizes the vital role of banks
in providing an environment conducive to the sustained development of the national
economy. Towards this end, the State shall create an enabling regulatory environment
for innovations and allow banks to exponentially expand reach through cash agents and
serve a wider client base, particularly in the low-income and rural areas

SECTION 3. Definition of Terms. — For purposes of this Act, the following
definitions shall apply to the following terms:

a. Cash Agent means any person with a retail outlet such as but not limited to
convenience stores, pharmacies and other highly accessible retail outlets that
deliver bank services provided in Section 7 of this Act.

b. Contracting Bank means any bank requesting authority from the Bangko
Sentral ng Pilipinas to expand service delivery channels through cash agents

c. Remote area means an area that either is a long distance from highly
populated settlements or lacks transportation links that are typical in more
populated areas duly-identified by the concerned Local Government Unit in
coordination with the Bangko Sentral ng Pilipinas.

d. Person means natural or juridical person

The Monetary Board may, by regulation, further define or clarify terms used in this Act
consistent with the declared state policies above.

SECTION 4. Eligibility Requirements for Cash Agents. — A Cash Agent may file
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an application to a Contracting Bank provided that the following requirements are met:

a. Itis a duly-registered business in the Philippines;

b. It has a well-established commercial activity existing for at least three (3)
months;

c. It has a permanent establishment and sufficient capacity to properly operate
electronic devices; and

d. Ithas the necessary infrastructure to possess banking operations.

SECTION 5. Preliminary Screening. — Upon satisfying submission of the
eligibility requirements for a cash agent, the Contracting Bank shall conduct a
preliminary screening of the documents ensuring that

a. The result of the preliminary screening shall be released within five (5) working
days;

b. In case Cash Agent fails the preliminary screening, the Contracting Bank shall
return the documents and notify Cash Agent of the grounds of failure. The Cash
Agent may re-submit documents within thirty (30) days from denial; and

¢. In case Cash Agent passes the preliminary screening, the Contracting Bank shall
forward the application to the Bangko Sentral ng Pilpinas (BSP)

Provided, That, the Contracting Bank shall have an electronic banking solution to
implement its cash agent operations and comply with the requirements of Part Seven of
the Manual of Regulations for Banks (MORB), on the Guidelines on Electronic Banking
Services and Operations. The bank shall deploy to its cash agents a device through
which its customers can perform secure online, real-time deposit and withdrawal
transactions for his/her own bank account, fund transfers and bills payment (self-service
transactions)

Provided, Further, that the Board of Directors of the Contracting Bank shall adopt
clearly-defined written policies, procedures, and controls for its Cash Agent operations,
including but not limited to, Cash Agent selection and due diligence, and customer care
arrangements

SECTION 6. Evaluation Process. — BSP shall be tasked to create an online
evaluation process for Cash Agent application while ensuring that

a. Cash Agent demonstrates good reputation and credit history, including lack of
previous civil and criminal record, and has a deposit account with the Contracting
Bank against which all bank transactions will be conducted

b. The result of the application shall be released within seven (7) working days
upon the application from Contracting Bank

c. In case an application shall be rejected, the applicant shall be given a registered,
written notification that indicates and explains the ground/s for rejection.


d. In case an application shall be approved, BSP shall issue an Authority to Utilize
Cash Agent to Contracting Bank valid for two (2) years.

The Authority to Utilize Cash Agent shall be displayed conspicuously in the Cash
Agent's retail outlet.

SECTION 7. Revocation of Authorization. — BSP shall revoke the Authority to
Utilize Cash Agents if a Cash Agent no longer meets the standards set to qualify for the
requirements under this Act prior to its expiration,

SECTION 8. Bank Transactions and/or Services. — A duly-authorized Cash
Agent may perform any or all of the following bank transactions/services:

a. Accept and disburse cash on the bank's behalf in connection with the following
self-service transactions of customers:
i. Deposit and withdrawal transactions performed by the customer on
his/her bank account;
ii, Fund transfers performed by the customer;
iii, Bills payment; and
iv. Payments due to government institutions, i.e., members’
contributions to the Social Security System and premiums payable to
the Philippine Health Insurance Corporation

b. Collect and forward applications for opening a savings account.
Forward loan application documents.
|. Perform Initial Customer Identity Verification: (i) conduct Customer Due
Diligence (CDD) in opening low transactional and low risk accounts or accounts
Subject to deposit and transactional limits; (ii) prevent Anti-Money Laundering
and Countering Financing of Terrorism.
e. Others: Payment (including loan repayments) using credit and debit cards,
checks, and cash; (ii) transfers between bank accounts including of other
banks, (iii) balance inquiries, and (iv) check cashing

a0

SECTION 9. Investment Incentives. — Any Cash Agent that establishes business
in a Remote Area shall be entitled to the following incentives:

a. Free training of Cash Agent personnel on various bank processes conducted
by the BSP;

b. Expedited processing of permits and certificates that are requisites to business
registration and operation; and

c. Expedited processing of local government permits and other related
documents.

DTI shall require SEC and the local government unit (LGU) involved to create
mechanism for expedited processing resulting in a timeline from application to approval

SECTION 10. Tax Benefits. - A Cash Agent in a Remote Area shall be exempt
from income tax arising from the operation of the enterprise for a period of one (1) year.

SECTION 11. Role of LGUs. - The concerned LGU shall encourage and provide
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incentives to a Cash Agent in relation to the purpose of this Act pursuant to the Local
Government Code.

Further, the concerned LGU shall hold programs in the barrio/barangay on
financial literacy and capability to increase understanding of different financial service
and products.

SECTION 12. Subcontracting Agents. — Cash agents cannot subcontract to third
parties,

SECTION 13. Agent Exclusivity. — BSP may permit temporary agent exclusivity
for a period not exceeding two (2) years. Otherwise, the Cash Agent shall enter into an
agreement with another Contracting Bank

SECTION 14. Fees. — Cash agents may set customer fees and charge customers
directly, provided that the Contracting Bank and the Department of Trade and Industry
shall monitor such pricing for signs of exploitation or customer confusion

SECTION 15. Principal Liability for Agents. — The Contracting Bank is liable for
all actions and/or omissions of the Cash Agent. This responsibility extends to actions of
the Cash Agent even if not authorized in the contract so long as they relate to banking
services or matters connected therewith.

The Contracting Bank shall exercise due diligence to ensure its cash agents
comply with applicable rules, regulations, and policies on anti-money laundering,
consumer protection, bank secrecy and customer data confidentiality.

SECTION 16. /mplementing Rules and Regulations. — BSP in coordination with
the Anti-Money Laundering Council (AMLC), Insurance Commission, a representative
from the Union of Local Authorities of the Philippines (ULAP) and DTI shall promulgate
not later than thirty (30) days upon the effectivity of this Act the necessary rules and
regulations for its effective implementation.

SECTION 17. Separability Clause. — If any section or part of this Act is held
unconstitutional or invalid, the other sections or provisions not otherwise affected shall
remain in full force and effect.

SECTION 18. Repealing Clause. — All laws, decrees, executive orders, rules and
regulations, issuances or any part thereof inconsistent with the provisions of this Act,
are hereby repealed, amended or modified accordingly.

SECTION 19. Effectivity. - This Act shall take effect fifteen (15) days after its
publication either in the Official Gazette or in at least two (2) national newspapers of
general circulation

Approved,