MB okays microfinance rural bank

The Monetary Board has approved the creation of the country’s first microfinance-oriented rural bank as the Bangko Sentral ng Pilipinas (BSP) pushed for the establishment of more lending institutions catering exclusively to micro-borrowers.

During its meeting this week, the BSP’s policy-making body approved the operations of VisionBank Inc., a rural bank based in Bato, Catanduanes. The MB had earlier approved the creation of two microfinance-oriented thrift banks, but this is the first rural bank to be created for the purpose of retailing credit to small borrowers.

According to the BSP, there were a total of four banks in the whole province of Catanduanes, but all of these are located in the provincial capital of Virac, making it difficult for small borrowers to avail themselves of banking services since they have to travel to the capital to do so.

The new bank, the BSP said, would bring banking services closer to micro-borrowers who would now have access to a bank that specializes on microfinancing.

BSP documents indicated that the newly-approved bank had an authorized capital stock of P80 million while its initial paid-up capital was P9.03 million.

The bulk of VisionBank’s capital, the BSP said, would come from the Agricultural and Rural Development for Catanduanes Inc. (ARDCI), a non-government microfinance organization.

The BSP said ARDCI was a long-standing member of the Microfinance Council of the Philippines and had earlier been given a rating of "very satisfactory."

VisionBank, the BSP said, would give small clients an alternative to usurious money lenders who have thus far monopolized microfinancing in the rural areas, often forcing rural households to accumulate debts at exorbitant rates.

Despite criticisms from lending cooperatives, the BSP has been pushing for the creation of similar institutions and even opened a rediscounting window for any bank that would engage exclusively in microfinancing.

As defined by the BSP, microfinancing consists of small loans of from P25,000 to P150,000 granted to small businesses to enable poor and low-income households raise their incomes and improve their living standards.

The BSP rediscounting window is open to rural and cooperative banks to maximize their ability to serve the many small enterprises that do not otherwise qualify for credit from big commercial banks.

Earlier, lending cooperatives said the rediscounting facility would have a deleterious effect and wipe out gains in the microfinance sector.

According to the People’s Credit and Finance Corp. (PCFC), there was also some doubt on the institutional capacity of these newly-created entities to lend to small borrowers.