Rural bankers chart roadmap for growth and development
According to the Bangko Sentral ng Pilipinas’ (BSP) 2015 National Baseline Survey on Financial Inclusion, when it comes to borrowing money, whether it’s for personal or business use, most Filipinos still rely on informal channels instead of banks.
The survey showed that 74.4 percent of Filipinos who borrow money still rely heavily on trusted sources like family members, relatives or friends. 10.2 percent borrowed from informal lenders or loans sharks. Others borrowed from a collection of formal lenders such as financing/lending companies (7.9 percent), cooperatives (7.6 percent), and microfinance NGOs ( 5.1 percent). Only a tiny percentage — two percent — sourced their funds from banks.
Now, imagine this scenario happening in the countryside where formal lending institutions like banks are harder to find. Most of the people who will be looking to make a loan are small farmers, fisher folk and those who work or own cottage industries. With virtually little or no access to formal lending institutions, these sectors of the economy are forced to borrow from informal lenders that are not within the scope of BSP regulations. It’s no wonder these are the very sectors that often fall prey to predatory lending practices.
A trusted source of rural funding
Rural banks provide a safe and secure source of loans for marginalized and financially excluded sectors of the economy as opposed to informal lenders. In the Philippines, these banks provide services to 85 percent of municipalities and cities in rural areas. However, with the recent dynamics in the banking industry, rural banks have begun decreasing in number.
According to a study by the Oxford Business Group in 2015, the number of rural bank locations in the Philippines peaked at 2,619 in 2010 but went down to 2,441 in Sept. 2014. Cooperative banks peaked at 167 in 2012 before decreasing to 159. The study saw tougher competition between commercial and rural banks as the reason for the decrease, as the entry of bigger, wellfunded commercial banks is forcing smaller rural banks to sell at attractive prices.
With rural banks decreasing in number, small farmers, fisher folk and other marginalized sectors of the economy have no alternative but to seek loans from informal lenders, as these sectors cannot afford loans that commercial banks offer because of steep interest rates and because these banks are generally seen as catering to bigger entrepreneurs.
To alleviate this decrease and maintain the robust health of the rural banking industry, the 59- year- old Rural Bankers Association of the Philippines ( RBAP), together with its foundation, the Rural Bankers Research and Development Foundation, Inc. (RBRDFI) and with the Institute for Corporate Directors (ICD) as its consultant, has charted a road map for the industry’s continuous growth.
A roadmap to growth and development
“Basically, the roadmap charts what we want to do for the next five years from 2016 to 2021, considering the many challenges that are present now in the banking industry — entry of foreign banks, the ASEAN Economic Integration, competition with commercial banks in the countryside, and compliance with BSP regulations. With this roadmap, we want to make a clear track of how we can withstand the next five years and chart the course that we want our members to take,” new RBAP president Antonio Pasia told The Philippine STAR.
Pasia, who is also president of Lipa Citybased Malarayat Rural Bank, said there are currently different directions that rural banks want to take, particularly single-unit banks. Some RBAP members have expressed interest in merging with other rural banks or with commercial banks in order to strengthen their presence in their locality. Others have shown a desire to sell their banks because of attractive rates. He added that a total of 28 rural banks are currently involved in consolidation talks: 12 located in Batangas, six in Leyte, five in Laguna and five in Cavite.
“The roadmap that we crafted serves as a directional guide for our members whichever course they want to take. We help our members look for suitable partners if they’re thinking of merging, and instead of selling out, we encourage them to look for new management that could turn their business performance around,” Pasia added.
Another provision in the roadmap is the planned procurement of centralized software that single-unit banks can tap into, an innovation similar to the one adopted by the National Association of Training Centers for Cooperatives (NATCCO).
“Most of our members are mortar and brick enterprises that have very little access or investment in technology. Some might not even have a computerized accounting or auditing system. Once RBAP is able to host this software, we will make it available to our members so they can use it in their operations,” Pasia stated.
Single-unit banks stand to benefit the most from the new industry roadmap that RBAP has drafted. It strengthens the banks by providing them with crucial access to sound financial plans and banking technology that are otherwise inaccessible to them.
“When you look at the big and mediumsized rural banks, they are very capable. They have very good business plans, support in terms of technology, they have branch connectivity. Single- unit banks might still be outdated. With this roadmap, we are pulling up the bigger bulk of our members, which are single-unit banks. This is a manifestation of our bayanihan spirit, which is necessary for the industry these days because if we don’t help each other, our very survival is at stake,” Pasia emphasized.
But more than rural banks, it’s the grassroots of our economy that reaps the rewards of a stronger, more resilient rural banking industry. Farmers, fisher folk and cottage industries can continue to have a dependable and stable lifeline of funding for their agricultural ventures. Manufacturers can have a steady supply of raw materials for their products. Merchants will be able to fill their stocks and inventories of goods to sell. Consumers can put food on their table and other everyday needs.
It is a cycle of economic growth that stands on the palms of rural bankers, carefully nurtured and kept revolving by organizations such as RBAP. With this new roadmap, Pasia hopes for the continued existence of the organization and the industry for decades to come.
“Hopefully, by the time we reach a century of existence, we are stronger, more capable in terms of technological advancement, and more accessible to rural entrepreneurs that need us most,” Pasia exclaimed.
RBAP will unveil the new Rural Bankers’ Roadmap for Growth and Development during the 59th Charter Anniversary Symposium, which will be held today and tomorrow at the Marriott Grand Ballroom in Pasay City.