LANDBANK, SMI introduce banking system innovation in Cebu

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by SMART Public Affairs Aug 20, 2014

[20 August 2014] Having served in the public sector for many years and all too familiar with the workings of government institutions, Ma. Venus B. Casas of the Mactan Cebu International Airport Authority (MCIAA) finds it hard to imagine how a paperless and electronic salary loan system works.

Having served in the public sector for many years and all too familiar with the workings of government institutions, Ma. Venus B. Casas of the Mactan Cebu International Airport Authority (MCIAA) finds it hard to imagine how a paperless and electronic salary loan system works.

"Won't we need to fill up an application form and go to the bank to submit it together with other necessary documents? Don't we need to sign for it?" she wondered during the launch of the LANDBANK Mobile Loan Saver (LMLS) in Cebu early this month.  Casas, division manager for the MCIAA Accounting Department, said she had taken out a salary loan in the past and it required paperwork, bank appearances, and processing time of a week at best.

The new mobile loan service, made possible through a partnership between state-owned Land Bank of the Philippines, and Smart e-Money, Inc. (SMI), seeks to eliminate all these and make loan application and approval a matter of few text messages.

The Bangko Sentral ng Pilipinas (BSP) has described LMLS as the "country's first-ever fully electronic and paperless salary loan service with auto savings and insurance features " while the GSMA, an association comprised of 875 telecom companies spread out in over 220 countries, has affirmed that it is the first of its kind in the world.

"We all know that applying for loans can be a tedious process. This is what we seek to address through LMLS," LANDBANK president and CEO Gilda Pico cited in her remarks during the Cebu leg of the LMLS nationwide caravan, adding that the new facility allows more Filipinos access to the formal financial system at lower interest costs, and through a convenient and familiar platform that is the mobile phone.

Paperless, fully electronic loan and savings facility

LANDBANK officials explained that qualified employees who want to take out a salary loan through LMLS only have to text a keyword to a designated 4-digit number using their Smart, Talk N' Text and Sun Cellular phones to start the process.

They are then sent a link, via SMS, to an online application where they get to choose the loan amount and payment term, as well as how much savings they want auto-debited from their payroll account every month.

Ticking the electronic signature shows the borrower's agreement with the loan terms and conditions, deed of assignment, authority to deduct from the payroll account, auto-savings clause, promissory note, and loan disclosure statement—the equivalent of signing the documents by hand.

Government agencies and private companies interested in making the LMLS available to their employees must sign an agreement and keep their payroll accounts with LANDBANK as well as submit a "white list" of those they've pre-approved for the loan product. Borrowers are also informed by text that their loan has been approved, and the proceeds already deposited in their ATM accounts.

According to Pico, the LMLS effectively reduces the borrowing process to three banking days from about two weeks or so previously.

She also announced that the maximum loanable amount for salary loans has been raised to P500,000 for rank-and-file employees, and P1 million for officers.

Financially inclusive mobile money innovation

"This socially innovative financial service combines the pervasiveness of the mobile phone with the extensive banking reach of LANDBANK, especially in the countryside, in pushing a program for financial inclusion," said Lito Villanueva, head of Payments Innovation, Digital Ecosystems and Global Engagements for SMI.

Villanueva also said they commit to making LANDBANK’s newest loan product available to private sector employees without a payroll account with LANDBANK within a couple of weeks.

The LMLS has an auto-savings feature that allows employees to save a minimum of P100 monthly from their pay, he cited, adding it is a step towards fostering a culture of responsible credit and savings.

While borrowing can provide much-needed help to families in their education, health-care, and housing obligations or even for entrepreneurship and investment endeavors, it can also push households into a situation of persistent poverty if done irresponsibly, Villanueva stressed, referring to a recent BSP study stating only one out of four Filipino households has savings, a situation that makes many Filipinos vulnerable during emergencies.

Convenient and hassle-free

Although not as gravely affected as other areas of Leyte, BayBay City also had its share of damaged and destroyed houses in the aftermath of super typhoon Yolanda, according to Evangeline Manalo of the Fifth Leyte Engineering District (FLED).

She added that a significant number out of the 60 employees of FLED borrowed from LANDBANK to fund the repair of their homes.  However, it took some time for them to get the loan proceeds because there was no LMLS then.

The LMLS will certainly be useful during emergency situations since it's easy to avail of and takes a shorter time to process, Manalo stressed.

Casas described it as "high-tech, hassle-free, and convenient." She said they are indeed lucky that SMI and LANDBANK have come up with this innovative service, pointing out that some might not like being off the pre-approved employee list but that the LMLS will encourage them to work towards being included.

If one is in a company's "white list" of good standing employees qualified to take out a loan, then all he or she needs to do is just send a text message, said Department of Social Welfare and Development (DSWD) Central Office Director III Restituto B. Macuto.

Macuto, who is currently assigned in Tacloban City, said the LMLS is a "very good idea" but hoped that LANDBANK can make the payment terms longer than 36 months or three years.

LANDBANK evolution

Pico said the LMLS is a product of their continuing thrust to innovate banking products and services. The breakthrough system, made possible through the bank's partnership with SMI, is solid proof that goals can be easily achieved through collaboration.

"Growth doesn't happen by mere chance. It is the result of forces working together, of partnerships, collaborations and synergy. There is no better testament to this than LANDBANK’s evolution from an unassuming government bank tasked to finance the acquisitions and distribution of agricultural estates to a full-service universal bank that is now among the country's biggest financial institutions," she added.

No less than 243 companies nationwide have already signed up for LMLS, said LANDBANK Corporate Services Sector senior vice president Jocelyn Cabreza. She revealed that salary loans taken out under LMLS have a fixed interest rate of 0.83 percent per month or 10 percent per annum, possibly the lowest offered by a banking institution in the country.

Pico hoped it would dissuade many Filipinos from tapping organized moneylenders and loan sharks, which charge exorbitant interest rates.

"As we step into a new decade, all our efforts are geared towards achieving more and going farther in our commitment to helping growth," Pico stressed.

Smart e-Money, Inc. (SMI) and Land Bank of the Philippines have collaborated anew in making available the LANDBANK Mobile Loan Saver (LMLS), an innovative mobile money solution that aim to provide responsive and responsible financing to more Filipinos. In photo during the launch of LMLS in Cebu City are, from left, Victor Gerardo Bulatao, director, LANDBANK; Jocelyn Cabreza, SVP, Corporate Services Sector, LANDBANK; Cebu Vice-Governor Agnes Magpale; LANDBANK president and CEO Gilda Pico; Lito Villanueva, head of Payments Innovation, Digital Ecosystems and Global Engagements at SMI; and Rabboni Francis Arjonillo, EVP for Treasury and Investment Banking, LANDBANK.

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