I. Why “minimum capital” matters in Philippine microfinance

In the Philippines, “microfinance” describes a set of financial services—most commonly small-value credit—targeted at low-income households and microenterprises. While microfinance is a purpose, Philippine regulation treats it primarily through the legal vehicle doing the activity (bank, cooperative, lending/financing company, NGO, etc.).

Minimum capital rules exist for three core reasons:

Prudential buffer – to absorb operating losses and credit risk, especially because microfinance portfolios are unsecured or lightly secured and are vulnerable to shocks.
Consumer protection and market discipline – to reduce fly-by-night lenders and support fair, stable lending operations.
Regulatory gatekeeping – secondary licenses (e.g., to operate as a lending company) are typically conditioned on capital adequacy and documentary proof of paid-up funds.

Because microfinance can be offered by different entity types, there is no single, universal “minimum capital for microfinance” figure across the entire Philippine financial system. The minimum capital requirement is determined by (a) the entity’s regulator, (b) the secondary license needed (if any), and (c) the entity’s geographic scope and product set.

II. What counts as a “microfinance corporation” in Philippine practice

“Microfinance corporation” is not always a standalone statutory class. In practice, it usually refers to any SEC-registered corporation whose primary business is microfinance lending and related services. That can include:

For-profit stock corporations that lend as a business (often under the Lending Company Regulation Act of 2007 or the Financing Company Act framework); and
Non-stock, non-profit corporations that provide microfinance as an NGO (often under the Microfinance NGOs Act accreditation framework if they seek tax privileges).

Microfinance may also be conducted by:

Banks (microfinance-oriented banks or banks with microfinance products) regulated by the Bangko Sentral ng Pilipinas (BSP);
Cooperatives regulated by the Cooperative Development Authority (CDA); and
Pawnshops and certain other non-bank financial actors (often BSP/other rules depending on structure and activities).

This article focuses on SEC-corporation pathways and explains where bank/cooperative rules fit for comparison.

III. The baseline corporate law rule (and why it is rarely the real answer)

Under the Revised Corporation Code of the Philippines (RCC), the default rule for stock corporations is that the corporation must have:

At least 25% of the authorized capital stock subscribed, and
At least 25% of the total subscription paid, with the paid-up portion not less than ₱5,000, unless a special law requires a higher amount.

For microfinance corporations, that ₱5,000 baseline is almost never sufficient because the moment the corporation is “engaged in lending” or in regulated financing activities, special statutes and SEC licensing rules impose higher minimum paid-up capital or net worth thresholds as a condition to operate legally.

IV. The key question: do you need a secondary license to lend?

A. “Engaged in lending” as a business

A corporation that is in the business of lending (i.e., making loans to the public for profit as a regular business) typically needs a secondary license/authority from the SEC to operate as a lending company (or financing company, depending on activities).

A corporation that extends credit incidentally (e.g., trade credit to customers, employee salary loans, installment sales incidental to a main business) may fall outside the “lending company” licensing regime depending on facts—but this is a high-risk area. Regulators look at frequency, public offering/solicitation, profit model, and primary purpose in the articles and in actual operations.

B. The common SEC pathways for for-profit microfinance lending

Most for-profit “microfinance corporations” that are not banks or cooperatives fit into one of these:

Lending Company
- Primary business is making loans (microfinance loans included).
- Governed by the Lending Company Regulation Act of 2007 (Republic Act No. 9474) and SEC implementing rules/circulars.
Financing Company
- Broader financing activities may include leasing, receivables financing, factoring, installment financing, etc., depending on structure.
- Governed by the Financing Company Act (as amended) and SEC implementing rules/circulars.

Both typically require:

SEC registration as a corporation and
SEC authority/certificate to operate as a lending/financing company, plus continuing compliance and reporting.

V. Minimum capital requirements for SEC-licensed lending and financing companies (microfinance corporations)

A. The rule structure: capital depends on the license and scope

For SEC-licensed lending and financing companies, minimum capital requirements are typically expressed as minimum paid-up capital (and/or “unimpaired capital”) and are often tiered based on the geographic scope of operations (e.g., single city/municipality vs. province/region/nationwide) and sometimes based on number of branches or other operational indicators.

Important concept: “paid-up” vs. “unimpaired” capital

Paid-up capital is what has actually been paid in by subscribers (cash and, in some cases, property contributions subject to valuation rules).
Unimpaired capital generally means capital that has not been reduced by accumulated losses or other impairments. Regulators care not only that you start with the minimum paid-up capital, but also that you maintain it (i.e., do not operate below the required minimum after losses).

B. Lending companies: typical minimum paid-up capital approach

For lending companies, the SEC has historically required minimum paid-up capital as a condition for authority to operate, often lower than financing companies, and often tiered by geographic scope.

In practical compliance work, corporations commonly structure their authorized and subscribed capital so that paid-up capital meets or exceeds the SEC minimum for the intended scope (e.g., single locality vs. multi-area operations), and they maintain this through operations to avoid license issues.

Operational takeaway: If the corporation will expand branches or coverage area, it should anticipate that capital requirements may increase, and failure to keep capital aligned with operational scope can trigger SEC findings.

C. Financing companies: typically higher minimum paid-up capital

Financing companies generally face higher minimum paid-up capital thresholds than lending companies because the permitted financing activities and risk profile can be broader, and the SEC treats the category as requiring more substantial capitalization.

D. A practical, compliance-safe way to state the “minimum capital” without relying on a single number

Because SEC minimum paid-up capital thresholds are commonly implemented and updated through SEC circulars and licensing issuances, and because the threshold can vary by scope and license type, the most legally accurate way to frame the minimum capital requirement for a “microfinance corporation” (for-profit, SEC-regulated) is:

If operating as a lending company: meet the SEC’s minimum paid-up capital for lending companies for the intended scope as a condition to obtain and retain the certificate of authority to operate.
If operating as a financing company: meet the SEC’s higher minimum paid-up capital applicable to financing companies for the intended scope, likewise as a licensing condition.
Ensure the capital is unimpaired and remains compliant after losses, expansions, or reorganizations.

(When drafting articles of incorporation and capital structure, counsel typically reverse-engineers the authorized/subscribed/paid-up amounts from the SEC licensing category and intended footprint.)

VI. Minimum capital and “microfinance NGOs” (non-stock, non-profit corporations)

A. Microfinance NGOs are corporations too—but the capital metric is usually “net assets/net worth”

A microfinance NGO is typically a non-stock, non-profit corporation that provides microfinance and allied services. Unlike stock corporations where “paid-up capital” is central, NGOs are often evaluated through net assets/net worth, governance, track record, portfolio performance, and compliance controls.

B. Why capital matters more if an NGO seeks accreditation and tax privileges

Under the Microfinance NGOs Act (Republic Act No. 10693), microfinance NGOs may seek accreditation (through the designated regulatory framework) to qualify for certain incentives and to formalize oversight standards. Accreditation regimes commonly impose:

Minimum net worth/net assets thresholds,
Track record/operational history requirements,
Governance and fit-and-proper expectations, and
Reporting and transparency obligations.

Practical point: A non-stock microfinance corporation that wants the benefits of the Microfinance NGOs Act must be ready to document financial capacity (net assets) and institutional maturity—not just corporate registration.

VII. Banks and cooperatives: capital rules are different (and usually much higher)

Even if the topic is “microfinance,” once the provider is a bank, BSP capital rules apply. Banks’ minimum capitalization is typically substantially higher than non-bank microfinance corporations because banks take deposits and are part of the supervised financial system. BSP rules often classify bank capitalization requirements by:

Bank type (e.g., rural bank, thrift bank),
Head office location and market category, and
Branching and expansion plans.

For cooperatives, capitalization concepts are tied to:

Share capital structure for cooperatives, statutory funds, and
CDA rules, plus cooperative-by-laws and member equity contributions.

Bottom line: If your “microfinance corporation” is actually a bank or a cooperative, the minimum capital question is answered primarily by BSP or CDA rules, not the SEC lending/financing framework.

VIII. Designing capital structure for a microfinance corporation (practical legal mechanics)

A. Align the Articles of Incorporation with the intended regulatory category

Regulators look at both:

Primary purpose clause (e.g., lending/financing/microfinance),
Actual operations and marketing to the public.

A mismatch (e.g., “consulting services” on paper, lending in reality) can create licensing and enforcement risk.

B. Build authorized/subscribed/paid-up capital around the licensing minimums

Common structuring practice:

Set authorized capital stock high enough to support growth and compliance.
Ensure subscribed capital is credible and aligned with investor commitments.
Ensure paid-up capital meets the SEC threshold in acceptable form (often cash is the cleanest).

C. Contributions in property vs. cash

Philippine corporate law allows property contributions, but regulated financial licensing may scrutinize:

Valuation support,
Transfer documentation,
Whether the contribution is truly usable as a capital buffer.

For microfinance lenders, cash paid-up is commonly favored because it is immediately available for operations and regulatory comfort.

D. Maintain “unimpaired capital” through governance and accounting controls

Because microfinance portfolios can generate volatility (defaults, write-offs), management must:

Track capital impairment,
Ensure timely provisioning and write-offs are properly reflected, and
Avoid distributing amounts that would push capital below required minimums.

IX. Capital requirements interact with other compliance regimes

Even if the question is “minimum capital,” regulators often evaluate capitalization together with broader compliance. A microfinance corporation should expect capital to be assessed alongside:

Consumer protection / fair lending
- Disclosure, pricing transparency, collections conduct, and complaint handling.
Anti-Money Laundering (AML) and counter-terrorism financing controls
- Depending on classification and coverage under AML rules, institutions may be required to implement customer due diligence, reporting, and internal controls.
Data Privacy Act compliance
- Microfinance entails sensitive borrower data; privacy compliance can be decisive in examinations.
Truth in Lending principles and disclosure practices
- Even outside BSP’s direct banking perimeter, regulators and courts expect fairness and transparency in credit transactions.
SEC reporting
- General corporate reportorial requirements plus additional lending/financing company reports and audited financial statements.

Capital shortfalls often surface through these compliance touchpoints: losses reveal capital impairment; poor controls increase risk; expansion plans trigger higher tier requirements.

X. Consequences of failing to meet minimum capital

For SEC-licensed lending/financing microfinance corporations, capital non-compliance can result in:

Denial of authority to operate,
Suspension or revocation of the certificate of authority,
Administrative fines and penalties,
Orders to cease operations, restructure, or infuse capital,
Potential exposure for responsible officers depending on the violation and applicable statute.

Separately, operating a lending business without the required authority can expose the corporation to enforcement action and additional liabilities.

XI. Common fact patterns and how minimum capital is determined

Scenario 1: A stock corporation wants to do microfinance loans nationwide

Likely needs to operate as a lending company (or financing company if broader activities).
Capital must match the SEC’s minimum for the intended nationwide footprint, which is typically higher than a single-city operator.

Scenario 2: A corporation begins microfinance lending “quietly” without a lending license

Risk: SEC may treat the activity as “engaged in lending.”
Capital becomes relevant because licensing cannot be regularized without meeting the minimum paid-up requirement and other conditions.

Scenario 3: A non-stock NGO provides microfinance and seeks accreditation/tax privileges

The “capital” question becomes a net worth/net assets and institutional qualification question under the accreditation framework, not a paid-up capital stock question.

Scenario 4: A microfinance lender wants to accept deposits from the public

This triggers banking/quasi-banking concerns and moves the question into BSP territory, where capital requirements and licensing are fundamentally different and far more stringent.

XII. Drafting and compliance checklist (Philippine legal practice perspective)

Identify the correct regulatory bucket
- Bank (BSP), cooperative (CDA), NGO (accreditation framework), or SEC-licensed lending/financing company.
Confirm whether a secondary license is required
- If lending to the public is the business, assume licensing is required unless clearly incidental.
Design capitalization accordingly
- Authorized/subscribed/paid-up capital (stock corp) or net assets/net worth planning (non-stock NGO).
Document capital properly
- Bank certificates, proof of remittance, subscription agreements, property transfer documents (if applicable), audited FS readiness.
Plan for growth
- Expansion may trigger higher capital tiers; bake this into capital planning.
Maintain unimpaired capital
- Monitor portfolio performance, provisioning, write-offs, and retained earnings.
Align governance and internal controls
- Board oversight, risk management, collections policy, borrower protection standards, privacy compliance, and (where covered) AML controls.

XIII. Key takeaways

There is no single “minimum capital for microfinance” across the Philippines; the answer depends on the entity type and regulator.
For SEC-registered for-profit microfinance corporations, minimum capital is usually governed by the SEC framework for lending companies or financing companies, expressed as minimum paid-up capital (often tiered by operational scope) and maintained as unimpaired capital.
For microfinance NGOs, “capital” is often evaluated as net assets/net worth, especially where accreditation and incentives are sought.
Banks and deposit-taking activities move the question into BSP licensing and capital regimes, which are materially different and higher.