Local cash lending companies may face significantly tighter entry requirements as industry leaders push the Securities and Exchange Commission (SEC) to raise proposed capitalization floors to ensure market stability.

Lito Villanueva, FinTech Alliance PH founding chairman, told reporters that the proposed ₱10 million minimum is likely insufficient to sustain serious players in the country’s rapidly evolving digital credit landscap.

“We are actually pushing for this. Even the FinTech Alliance supports it because we need serious players. How can you expand your lending if your capital is too low?” Villanueva said, adding that the capital requirement could be tiered, based on the size of the firm. “To be more competitive in the Philippine market, you definitely need more capital.”
This measure, Villanueva said, will depend on how the SEC intends to implement it.

Villanueva noted that while the Bangko Sentral ng Pilipinas (BSP) requires banks to maintain a certain level of capital, cash lending companies are still free to operate in the country without being subject to similar regulations.

“For lending companies, there is currently no required capitalization. That’s why this is actually one of our major recommendations—to establish a clear capitalization requirement,” said Villanueva. He is also the executive vice president and chief innovation and inclusion officer at Rizal Commercial Banking Corp. (RCBC).

Villanueva explained that it is questionable to maintain only ₱1 million in capital if a financing company is underwriting a loan far larger than its capital.

“Even if it’s just ₱1 million, your underwriting goes far beyond that. How can you manage that properly? Something is clearly wrong,” he said. He added that the proposed ₱10 million threshold should also be subject to assessment, particularly regarding the clients it covers.

Villanueva said that imposing a higher capital requirement will not stifle online lending expansion, arguing that lending companies should be stable and not risk collapsing.

“They need that capital to start with. If they are truly serious, and if we want more credible players in the industry, we don’t want these online lending companies to fold up,” said Villanueva.

Under the draft rule, the SEC is seeking to impose higher paid-up capital requirements on cash lending companies, especially those that operate online.

Financing companies without online platforms must have at least ₱20 million in paid-up capital, while lending companies must maintain ₱10 million.

For companies operating online lending platforms (OLPs), capital requirements increase with the number of platforms. Financing firms would need ₱30 million for one OLP, ₱60 million for two to five, and ₱100 million for up to 10. Lending companies would face lower thresholds of ₱20 million, ₱30 million, and ₱50 million, respectively.

Villanueva, meanwhile, said the fintech industry supports the SEC’s planned lifting of the ban on OLPs, saying it will “entice more players” to participate and compete within the industry.

He noted that there has been an influx of investments into the Philippines, particularly in OLPs. Most of these investors come from China, as the Chinese government's “restrictive” interest-rate cap limits their expansion. “That’s why they’re now expanding to other markets like the Philippines,” he said.

Meanwhile, the SEC also moved to tighten its regulation of cash lenders, mandating a reduction of the lending rate cap to 12 percent starting next month.