Actualidad Peru

Strengthening Municipal Savings and Loan Unions

Act 30607

On 13th July 2017, the Peruvian Congress passed a law amending and strengthening the manner in which Municipal Savings & Loan Unions (hereinafter, “MSLUs”), adapting Supreme Decree 157-90-EF published in 1990 into line with the modernisation process that these institutions have been going through, by creating mechanisms and conditions similar to those applying to private microfinance institutions. This project was already analyzed in number 11 of Progreso.

The main regulatory changes are as follows:

Capital, reserves and profits

Article 4 of the Supreme Decree sets the minimum capital required for setting up and operating MSLUs at PEN 4,050.00 (100 tax units). The new law raises this sum to PEN 7,500,000.00, the same as the minimum capital required for a company under the General Financial and Insurance System and Organic Law governing the Banking & Insurance Authority  (hereinafter, “General Law”).

On the subject of profits, this law makes it obligatory to capitalise at least fifty per cent; the remainder may be (i) distributed in the form of dividends to the municipality in question, (ii) capitalised, (iii) set aside as discretionary reserves, or (iv) left to accumulate on the income statement. In the event of the MSLU opting to distribute profits in the form of dividends, the municipality will be obliged to spend this money on social programmes.

The modified rule also touches on corporate governance and risk management in MSLUs, indicating that, in the event of these not meeting the standards required by the Banking, Insurance & Private Pension Fund Managers Authority (hereinafter, the “Authority”), the minimum capitalisation ratio may be raised to seventy five per cent.


The law broadens the range of transactions MSLUs may conduct, in line with the remit given in the General Law, giving them greater operational flexibility.

Governing Bodies

As discussed by Superintendent Socorro Heysen Zegarra in the interview conducted in this issue of Progreso, the law seeks to strengthen corporate governance in MSLUs

The Supreme Decree considered the Steering Committee and Management Committee as the MSLUs’ governing bodies. However, the new regulations, while still considering the Management Committee as a governing body, changes the name of the Steering Committee to Board of Directors and includes the General Shareholders’ meeting, whose powers are described in each MSLU’s statutes, which must be approved by the Authority.

Similarly, the law has altered the composition of the Board of Directors. standardising the positions on the Board and mandating it to have representation from seven groups: the majority party on the Municipal Council (2), the minority party on the Municipal Council (1), COFIDE (1), the Chamber of Commerce (1), the Clergy (1) and the Small Tradespeople and Producers in the region where the MSLU operates (1). Whereas members of the Steering Committee used to be in office for one-year terms, members of the Board are elected for three-year terms, giving this body greater stability.

The Supreme Decree stipulated that board meetings should be held once a quarter; now, with the amendment, the Chair of the Board must convene meetings twice a month at the most and hold meetings at least once a month; Directors shall be paid a maximum of three allowances a month for their participation on the Board and/or on the committees required by legislation current at the time.

The Supreme Decree laid down that the Management Committee should be made up of two or three natural persons, meeting once a week over a four-year term of office. This disposition has been modified in the new law, which indicates expressly that the Management Committee should henceforth comprise three members appointed by the Board of Directors for an indefinite period who should meet once a month, and that the position of General Manager should be created, after authorisation from the Authority.

The law is also about of Peruvian Federation of Municipal Savings & Loan Unions - FEPCMAC that represents and coordinates the activities of the MSLU system in Peru and abroad.

The amendment to the law that affects the Federation and differs from the Supreme Decree, allows for a period in which the Authority can oversee FEPCMAC until 2019, and also extends its functions to include:

  • Articulating the development of initiatives and/or programmes within the MSLU system, to help to make it more competitive and financially sustainable.
  • Handling centralised hiring and procurement and supporting the optimisation of synergies between them.
  • Providing services to the MSLUs in accordance with existing legislation.
  • Making financial investments on its own account or at the request of the MSLUs.
  • Having representation on the MSLU Fund’s Board of Directors.

As to FEPCMAC’s General Meeting, the amendments have excluded the Provincial Mayor from being a participant, accepting only that each MSLU send a delegation, to include the Chair of their board and a member of the management committee.

The Board of Directors is FEPCMAC’s administrative body and comprises the Chair of the Federation of Municipal Savings & Loan Unions and a representative from each MSLU, who has to be the Chair of his/her respective Board or a Manager of the MSLU in question.

As to senior management, under the Supreme Decree, Boards made appointments for a four-year term, which has been modified by the new law, which extends appointments for an indefinite period.

The Supreme Decree required FEPCMAC to have an Audit department whose Director needed approval from the country’s Comptroller General to be appointed or dismissed. However, the amendment to the law has made this more flexible, granting the Board of Directors the power to appoint and dismiss the Head of the Internal Audit unit.

The law also refers to the Municipal Savings & Loan Unions Fund - FOCMAC who coordinates the flow of financial resources from domestic and foreign institutions to the MSLUs.

The law recognises FOCMAC as a non-state legal person under public law operating within   the legal framework of a limited company, whose employees are subject to private sector labour law and whose organisation, leadership and administration is the responsibility of shareholders, the Board of Directors and the management board.

The Supreme Decree took into account the contributions to FOCMAC’s capital made by the MSLUs and the sums disbursed by foreign institutions. However, the amendments classify nominative shares as capital, and permit both domestic and foreign investors to participate.

Those of FOCMAC’s transactions that were designed to obtain resources from third parties have been changed so as to provide profits and support to MSLUs. In addition,profits earned by FOCMAC transactions will have to be used in the first instance to set up a legal reserve, and the amended law sets out a protocol for the percentage of profits remaining whether third party investors have taken part or not.

The supplementary clauses prohibit MSLUs from financing political campaigns or paying expenses linked to their shareholders. It also requires MSLUs and FOCMAC to have their own Internal Audit units and to be responsible for choosing and hiring external audit companies.

Finally, the provisions exclude MSLUs, FEPCMAC and FOCMAC from the effects of any law or regulation pertaining to the National Budget System, or the State Hiring Law, its regulations and standards, so that MSLUs may have greater liberty when hiring third parties, and can design their own hiring regulations.