Section 3Sec./Art. 3

Definition of Terms. As used in this Act, the following terms shall mean:

(a) Accreditation the process of giving official recognition to duly registered microfinance NGOs, after meeting the minimum standards set by the relevant regulator;

(b) Compensating balance the proportion of the total loan of a microfinance client, which is retained with the microfinance institution as capital build-up (CBU) or microsavings. This amount can be used by the microfinance institution to offset the clients outstanding balance in case of default;

(c) Gross receipts from microfinance operations interest income, penalties, surcharges, commissions and discounts, service and general fees, and other charges related to microfinance operations;

(d) Low-income income of individuals or families that fall below the low-income threshold to be defined by the National Economic and Development Authority (NEDA);

(e) Microenterprise development strategy a social reform program to empower the poor, manage risks and vulnerabilities and thereby improve their asset base and expand access to microfinance services, such as microcredit, microinsurance, microsavings, health care and microhousing through a broad package of financial, business and human development services and other nonfinancial services, including education to enable them to lead productive lives;

(f) Microfinance the viable and sustainable provision of a broad range of financial services to poor and low-income individuals engaged in livelihood and microenterprise activities. It uses nontraditional and innovative methodologies and approaches, namely: the extension of small loans, simplified loan application procedures, group character loans, collateral-free arrangements, cash flow-based lending, alternative loan repayments, minimum requirements for CBU/minimum balance retention, and small denominated savers instruments aimed to improve their asset base and expand their access to capital and savings;

(g) Microfinance loans small loans granted to the basic sectors, as defined in Republic Act No. 8425, otherwise known as the Social Reform and Poverty Alleviation Act, and other loans; as defined by the government as to their amount, scope, and coverage that are granted to the poor and low-income individuals for their microenterprises and small businesses so as to enable them to raise their income levels and improve their living standards. Microfinance loans are granted on the basis of the borrowers cash flow and are typically unsecured;

(h) Microfinance NGO a nonstock, nonprofit organization duly registered with the Securities and Exchange Commission (SEC), with the primary purpose of implementing a microenterprise development strategy and providing microfinance programs, products, and services, such as microcredit and microsavings, for the poor and low-income clients;

(i) Microsavings the program of a Microfinance NGO to collect relatively small amounts of money from their clients for purposes of maintaining a compensating balance;

(j) Nongovernment organization (NGO) a nonstock, nonprofit organization duly registered with the SEC, focusing on the upliftment of the basic or disadvantaged sectors of society by providing advocacy, training, community organizing, research, access to resources, and other similar activities, as defined in Republic Act No. 8425, otherwise known as the Social Reform and Poverty Alleviation Act;

(k) Poor individuals and families whose income fall below the poverty threshold as defined by the NEDA. Generally, the poor are regarded as those who cannot afford, in a sustained manner, to provide their minimum basic needs of food, health care, education, housing and other essential amenities of life as defined by Republic Act No. 8425, otherwise known as the Social Reform and Poverty Alleviation Act;

(l) Social performance the effective translation of a Microfinance NGOs mission into practice; and

(m) Social welfare promotion/purposes the thrusts, objectives, plans, programs, services and activities designed to aid and/or ameliorate the living conditions of the poor, disadvantaged, marginalized, vulnerable and underprivileged individuals and their families in order to attain improved quality of life and well-being.