Non-Banking Financial

Institutions
Non-Banking Financial Institutions
• Financial institutions that provide banking services without meeting the legal definition
of a bank.
• Investment House
• Investment Company
• Credit Cooperatives
• Microfinance
• Savings and Loans Association
• Pawnshops
• Securities Dealers and Brokers
• Insurance Companies
• Venture Capital
• Financing Companies
Investment House
• Any enterprise which engages in the underwriting of securities of
other corporations
• Types of underwriting
• Firm commitment
• Standby underwriting
• Best effort basis underwriting
Investment company
• Any issuer which is or holds itself out as being engaged primarily, or
proposes to engage primarily, in the business of investing, reinvesting,
or trading in securities
• Classifications of investment company
• Open-end
• Closed-end
Credit cooperatives
• a form of credit union to promote savings and thrift among members
and to accumulate funds to be lent to members in the form of loans
• Other cooperatives
• Producers cooperative
• Consumer cooperative
• Service cooperative
• Marketing cooperative
Micro-finance
• broad range of financial services such as– deposits, loans, payment
services, money transfers and insurance products to the poor and
low-income households, for their microenterprises and small
businesses, to enable them to raise their income levels and improve
their living standards
• Microfinance loans
• small loans granted to the basic sectors, on the basis of the borrower’s cash
flow and other loans granted to the poor and low-income households for
their microenterprises and small businesses to enable them to raise their
income levels and improve their living standards.
Characteristics of Microfinance
Core principle of Microfinance
• The poor needs access to appropriate financial services
• The poor has the capability to repay loans, pay the real cost of loans
and generate savings
• Microfinance is an effective tool for poverty alleviation
• Microfinance institutions must aim to provide financial services to an
increasing number of disadvantages people
• Microfinance can and should be undertaken on a sustainable basis
• Microfinance NGOs and programs must develop performance
standards that will help define and govern the microfinance industry
toward greater reach and sustainability
Segments of Demand for Micro-credits
• The landless who are engaged in agricultural work on a seasonal basis
and manual laborers in forestry, mining, household industries,
construction and transport.
• Small and marginal farmers, rural artisans, weavers and those self-
employed in the urban informal sector as hawkers, vendors and
workers in household micro-enterprises.
• Medium farmers/small entrepreneurs who have gone in for
commercial crops and others engaged in dairy, poultry and other farm
and non-farm activities.
Savings and Loans Associations
• a non-stock, non-profit corporation engaged in the business of
accumulating the savings of its members and using such
accumulations for loans to members to service the needs of
households by providing long term financing for home building and
development and for personal finance
Powers of an association
• The Association shall accept deposits from and grant loans only to its
members
• charge reasonable interest and collect such necessary fees and charges
incidental to the grant of loans
• invest its funds in any sound non-speculative enterprises as well as in
bonds, security, and other obligations issued by the Government of the
Philippines, or any of its political subdivisions, instrumentalities, or
corporations including government-owned or -controlled corporations,
subject to the rules and regulations of the Monetary Board
• allow members to participate in the profits of the Association
• require the employer-entity or corporation to provide it with adequate
office space within which it can conduct its business
Well defined groups
• employees, officers, and directors of one company, including
member-retirees
• government employees belonging to the same
department/branch/office, including member-retirees
• immediate members of the families (up to second degree of
consanguinity or affinity)
Pawnshops
• refer to a person or entity engaged in the business of lending money on
personal property delivered as security for loans and shall be synonymous,
and may be used interchangeably, with pawnbroker or pawnbrokerage.
• Key terms
• Pawner -borrower from a pawnshop.
• Pawnee - refer to the pawnshop or pawnbroker.
• Pawn -personal property delivered by the pawner to the pawnee as security for a
loan.
• Pawn Ticket -the pawnbrokers' receipt for a pawn. It is neither a security nor a
printed evidence of indebtedness
• Property -shall include only such personal property as may actually be delivered to
the control and possession of the pawnshop
Securities dealers and brokers
• A dealer in the securities market is an individual or firm that stands
ready and willing to buy a security for its own account (at its bid
price) or sell from its own account (at its ask price)
• Brokerage acts as a broker (or agent) when it executes orders on
behalf of clients.
Insurance companies
• A business that provides coverage, in the form of compensation
resulting from loss, damages, injury, treatment
or hardship in exchange for premium payments.
The company calculates the risk of occurrence then determines
the cost to replace (pay for) the loss to determine the
premium amount.
Forms of Insurance
• Life insurance
• a contract between the policy owner and the insurer, where the insurer
agrees to pay a designated beneficiary a sum of money upon the occurrence
of the insured individual's or individuals' death or other event, such as
terminal illness or critical illness.
• Non-life or general insurance
• a type of coverage that is very common and covers businesses and
individuals. It protects them, monetarily, from disaster by providing money in
the event of a financial loss.
Venture capital
• also known as "seed capital." It is mostly used to help businesses that
have high potential for growth.
• Venture capital funds are used primarily for companies who may not
have sufficient operating history to qualify for traditional loans
through a bank. Most start-up high technology companies have used
venture capital funds in order to get started. In most cases, these
companies are required to provide the venture capital company with
a form of "profit sharing" by providing the venture capital firm with
equity in the company.
Venture capital
• Advantages
• Business Consultations - Many
venture capital firms have consultants
on their staffs that are well versed in
specific markets
• Management Consultations
• Human Resources
• Additional Resources
• Disadvantages
• Management Position - In many
cases, a venture capital firm will want
to add a member of their team to the
start up company's management
team.
• Equity Position - Most venture capital
firms require that the company give
up an equity position to them in
return for their funding.
• Decision Making - One of the biggest
problems that many entrepreneurs
face when they agree to accept
venture capital is that they often are
giving up many key decisions in how
their company will operate.
Financing companies
• Financing companies are corporations primarily organized for the
purpose of extending credit facilities to consumers and to industrial,
commercial, or agricultural enterprises, by direct lending or by
discounting or factoring commercial papers or accounts receivable, or
by buying and selling contracts, leases, chattel mortgages, or other
evidences of indebtedness, or by financial leasing of movable as well
as immovable property.