By Revin Mikhael D. Ochave, Reporter

THE PUBLIC and private sectors must intensify efforts on financial literacy and financial technology (fintech) innovation to offer safer, more inclusive lending alternatives, as the Securities and Exchange Commission (SEC) cracks down on erring lending companies, according to economists.

Following the SEC’s tighter monitoring of financial and lending firms, SM Investments Corp. Economist Robert Dan J. Roces said the government and the private sector should encourage fintech solutions to enhance financial inclusion.

“The real opportunity lies in using this regulatory cleanup to foster innovation — encouraging fintech solutions that combine accessibility with transparency, while banks develop more inclusive products,” he said in a Viber message.

Mr. Roces said the SEC’s recent directive also creates opportunities for legitimate players to serve the underbanked Filipino market.

“Rather than just removing bad actors, this moment allows both regulators and industry to build a healthier lending ecosystem that serves Filipinos’ credit needs without exploitation,” he said.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message that there should be stronger efforts from both the public and private sectors to raise public awareness and financial literacy.

“Greater public awareness and financial literacy may still be needed so that borrowers know the better options available for them. This will help them choose the best terms such as lower interest rates and better overall service quality by lenders,” he said.

Diosdado C. Salang, Jr., president and chief executive officer of Discovery Credit Solutions Corp., said the revocations will have a ripple effect across the lending and financing industry.

“It prompts other firms to reassess their compliance strategies and ensures that robust compliance frameworks are prioritized. For existing companies, this can lead to a renewed focus on governance, risk management, and transparency,” he said in a Viber message.

“Lending fraud poses a significant risk to consumers, often leading to financial distress and long-term repercussions,” he added.

Mr. Salang, also a financial literacy expert, said the SEC could implement a more rigorous vetting process for companies seeking lending and financing licenses.

“This could involve comprehensive background checks on the company’s management, financial health assessments, and an evaluation of business practices to ensure compliance with existing regulations,” he said.

“As consumers seek accessible financial products, the regulatory landscape must evolve to ensure protection against potential fraud and mismanagement in the sector,” he added.

In an order dated May 30, the SEC Financing and Lending Companies Department (FinLend) revoked the corporate registration and secondary licenses of 401 lending corporations due to noncompliance with reportorial requirements.

The companies, tagged as delinquent, failed to submit their audited financial statements, general information sheets, directors’ or trustees’ compensation reports, and performance evaluations, as well as the standards or criteria used for assessment.

In a separate order dated May 27, the SEC FinLend also revoked the corporate registration of 47 financing companies for failure to comply with reportorial requirements. These companies were likewise declared delinquent.

On May 19, the commission issued separate orders revoking the corporate registration of nine other companies for continuing noncompliance.

The SEC FinLend said in a statement to BusinessWorld that the intensified monitoring aims to remove noncompliant companies and prevent illegal activity.

“The SEC aims to clean up companies that violate the law to separate the compliant from the noncompliant,” it said.

“It is also appropriate to remove inoperative or inactive corporations because they are often used for illegal activities by scammers,” it added.

According to the SEC FinLend, financing and lending companies were given about one year — until Dec. 31 last year — to avail of the commission’s amnesty program and enhanced compliance incentive plan. The program allowed companies to settle fines and penalties for late or non-submission of reportorial requirements at reduced rates.

“Despite the show cause letters sent to them, they still did not submit the said reports, resulting in their registration and license being revoked,” the SEC FinLend said.

Under Republic Act No. 11232 or the Revised Corporation Code, companies are deemed delinquent if they fail to submit their reportorial requirements three times — either consecutively or intermittently — within a five-year period.

Delinquent corporations are given six months from receipt of the order of delinquency to comply, according to SEC Memorandum Circular No. 19, series of 2023. Failure to do so will lead to the revocation of their corporate registration.

Consumer group Samahan at Ugnayan ng mga Konsyumer para sa Ikauunlad ng Bayan (SUKI) Network said in a statement that the SEC’s action highlights the need to generate more sustainable and decent-paying jobs.

“Revoking the license of hundreds of lending companies has its pros and cons but in the end, the issue is how to ensure steadier and more sustainable incomes for consumers and their families,” it said.

“The pro is if it were scamming hubs that were declined. The con is narrowing options for consumers to seek refuge when their pockets run dry,” it added.

The SEC FinLend has also strengthened its monitoring of financing and lending companies operating through online platforms and applications.

In a June 20 order, the commission required that a company’s name and address must match those declared in its articles of incorporation. It also mandated that both principal offices and branches must have landline numbers.

Bangko Sentral ng Pilipinas data showed that bank lending rose by 11.12% year on year to P13.25 trillion in April from P11.91 trillion a year earlier. This marked the slowest growth in five months or since the 11.1% expansion in November 2024.