BSP OKs banks’ branch-lite units

The Bangko Sentral ng Pilipinas (BSP) said it has approved the rules on “branchlite” units which banks could establish to offer financial products and services to low-risk clients.

The new guidelines, according to the central bank, rationalize the current classifications of banking units to expand financial inclusion coverage.

The BSP’s branch-lite framework includes banks’ extension offices, other banking offices (OBOs) and microbanking offices (MBOs). “This policy initiative is consistent with the BSP’s reform agenda to develop a more inclusive banking system,” it said.

The BSP describes branch-lite banks as units that could “provide a wide range of products and services suited for servicing the needs of the market.”

“These product and service offerings (by branch-lites) will depend on the business model and strategies of the banks as defined by the board of directors. The banking products offered shall exclude those suited for sophisticated clients with high risk tolerance,” added the BSP.

Branch-lite units can be established anywhere in the country. The BSP is hoping that with this reform, the 570 cities and municipalities with no banking presence will be resolved.

“With simplified and more flexible provisions, banks will be better able to expand in areas which are unbanked and underserved,” said the BSP.

Of the branch-lite units, the MBOs are more popular. The BSP is monitoring more than 600 MBOs and the number has expanded by almost 100 percent during the last five years.

The BSP has assessed that MBOs are growing faster than other types of banking offices or increasing about 18 percent average rate per year compared to other offices’ four percent growth rate.

Some 393 local government units have MBOs and there are 75 municipalities that are solely being served by MBOs.

The BSP reported earlier that when it comes to usage of basic savings accounts, they noted remarkable growth in micro-deposits which are specifically designed to the low-income sector.

A micro-deposit account has a maintaining balance not more than R100 with average daily balance not exceeding R40,000. This deposit account does not have dormancy charges. There are near three million microdeposit accounts with a value of more than R6 billion. The BSP said microdeposits are growing a yearly average rate of 34 percent, faster than the six percent growth of other deposit products.

MBOs are low-cost banking infrastructure that can be established in municipalities where it is not feasible to set up a regular branch, said the BSP. Majority of MBOs are located in areas outside Metro Manila particularly in the regions of CALABARZON, Bicol, Western Visayas, and MIMAROPA.

Regular branches or the full bank branches concentrated more in the National Capital Region.