A HOUSE of Representatives committee approved on Tuesday the measure seeking to regulate the paluwagan or microfinancing system to include tax exemptions on its income and loan transactions.
Under the bill, paluwagan activities may enjoy tax exemptions on any income received, including interest on its deposits with any financial institution, and loan transactions with its members.
“While our nation has made strides in promoting financial inclusion, many individuals especially those in low-income sectors still face barriers when accessing formal financial services,” said Nueva Ecija Rep. Mikaela Angela B. Suansing, House Ways and Means Committee senior vice chairperson, as she quoted the bill’s sponsor, Party-list Rep. Rodante D. Marcoleta.
It is a substitute bill to HBs 7356 and 7757, which provides for the regulation of the organization and operation of community groups also known as paluwagan.
The central bank defines paluwagan as a microfinancing system that pools members’ money through daily, weekly, and monthly collections to be collected by a leader or manager.
“Participants contribute pre-determined amounts to a communal fund which is then disbursed to a designated member at an agreed upon date,” Ms. Suansing told the committee.
She noted that the informality of the paluwagan system makes it prone to fraudulent activities.
“By regulating the system, we aim to safeguard the interests of its participants and provide a safety net in times of uncertainty,” Ms. Suansing said, quoting Mr. Marcoleta.
About 35.4% Filipino households have considered placing their savings in paluwagan and credit or loan associations, according to the Bangko Sentral ng Pilipinas’ (BSP) Consumer Expectations Survey for the third quarter of 2023.
The measure will be reverted back to its mother committee, the House micro, small and medium enterprises panel, for its committee approval before undergoing plenary debates.