Mutual Benefit Associations (MBAs) need to be distinguished from Savings and Loan Associations (SLAs). Under Republic Act (RA) 10607, otherwise known as the amended Insurance Code, a mutual benefit association is a “society, association or corporation, without capital stock, formed or organized not for profit but mainly for the purpose of paying sick benefits to members, or of furnishing financial support to members while out of employment, or of paying to relatives of deceased members of fixed or any sum of money, irrespective of whether such aim or purpose is carried out by means of fixed dues or assessments collected regularly from the members, or of providing, by the issuance of certificates of insurance, payment of its members of accident or life insurance benefits out of such fixed and regular dues or assessments x x x.”
On the other hand, under RA 8367, otherwise known as the “Revised Non-Stock Savings and Loan Association Act of 1997,” a savings and loan association is a “nonstock, nonprofit corporation engaged in the business of accumulating the savings of its members and using such accumulations for loans to members to service the needs of households by providing long- term financing for home building and development and for personal
finance.” SLAs are classified as a branch of the thrift banking system. Some have referred to it as “specialized banks.” As a financial institution, it is similar to banks in providing members with residential mortgages.
Both are membership based, and both only cater to its members. In its formation, Non-stock Savings and Loans Associations (NSSLAs) must have “at least five but not more than 15 members of a well-defined group as provided herein may form an Association under this Act.” MBAs have no minimum membership, but to be classified as a micro-MBA it must have 5,000 members. SLAs are directly regulated by the Bangko Sentral ng Pilipinas and are classified as nonbank financial intermediaries under the BSP Manual of Regulations, while MBAs are regulated by the Insurance Commission.
Difference
A difference between an MBA and an SLA are the primary and incidental purposes. The primary purpose of MBAs is to provide financial support to its members and provide services akin to insurance. The primary purpose of SLAs is the accumulation of savings, making it akin to banks, and providing loans to its members. While there may be similar services, such as the granting of loans by MBAs to its members, they are merely incidental.
Nature of Savings and Loan Associations
SLAs were originally referred to as “building and loan associations.” In its original concept, money was lent so that a member could build or purchase his own home. In other words, it was a home-financing institution. The first SLA was established in the 1830s and the first was the Oxford Provident Building Society in Frankfort, Pennsylvania. Soon, the SLA industry flourished. In 1932 the Federal Home Loan Bank Board was created in the US to regulate the SLA industry. The Garn-St. Germain Depository Institutions Act of 1982 allowed SLAs to invest in other types of loans besides home loans. With the collapse of the SLA industry in the 1980s due to unsound real-estate lending, known as the Savings and Loan Crisis, the US Congress passed the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 which, among others, created the Office of Thrift Supervision to replace the FHLBB.
Today, the NSSLA industry is “a constructive component of the Philippine financial system” and “has contributed and is contributing to the workings of the economy.”Its total assets have reached P80.4 billion at the end of December 2008. In the 2017 Financial Inclusion Survey, it was found that in 2017, only 0.3 percent of Filipinos save their money in Non-stock savings and loan associations, down from 0.4 percent in 2015. More Filipinos, 4.0 percent, save in informal groups such as the paluwagan.
Dennis B. Funa is the current insurance commissioner. Funa was appointed by President Duterte as the new insurance commissioner in December 2016. E-mail: dennisfuna@yahoo.com.