Rural banks post steady growth amid crisis - BSP

MANILA, Philippines – Rural banks have shown steady growth even in the midst of the global financial crisis and the closure of some rural banks, it was confirmed by the Bangko Sentral ng Pilipinas (BSP).

Speaking during the annual national convention of the Rural Bankers Association of the Philippines (RBAP), BSP Governor Amando M. Tetangco, Jr. said that key indicators pointed to a steady growth of the sector over the past year.

For one, rural banks have become more profitable, with net income after tax at more than P3 billion in 2008, slightly higher than the 2007 level.

BSP data also showed the rise in deposits, with around six million depositors depositing more than P107 billion as of December 2008.

“This good performance shall allow the rural banking sector to provide more loans to various sectors, such as agriculture and micro, small and medium enterprises (MSMEs),” said Tetangco, further citing that nearly half of the rural banks’ total loan portfolio of P106.6 billion in December 2008 went to agri-agra loans.

Tetangco also praised the rural banking industry for invigorating the countryside’s development, as rural communities grew and developed alongside rural banks.

Moreover, Tetangco noted that the rural banks’ capital adequacy ratio (CAR) of 13.8 percent as of September 2008 remains above the BSP’s mandatory standard of 10 percent. According to Tetangco, the CAR of rural banks is “comparable to the overall CAR of the banking sectors of Malaysia (12.6 percent) and Korea (11.2 percent)”.

“Rural banks have also embraced advances in technology, with the installation of more automated teller machines (ATMs): from only 83 in 2007 to 113 as of end December 2008. Electronic banking services such as cash cards and mobile banking have jumped up in number, from only five in 2005 to 47 in 2008, beefing “up delivery of financial services”, Tetangco said.

The sector’s operating networks also continued to rise. The network of rural and cooperative rural banks’ head offices and branches was at 2,148 as of end-December 2008, higher than the 2,133 in 2007. Its net effect is “a larger network capable of delivering banking services directly to a wider market,” Tetangco said.

Tetangco said he sees a bright future for rural banks: “Rural banks are certain to take a competitive and strategic place as effective channels for a truly inclusive financial system and catalysts for sustaining balanced growth and development in the countryside,” said Tetangco.

RBAP president Tomas Gomez IV, meanwhile, expressed confidence that the association would continue to be at the forefront of the rural banking industry. “We will continue to be a prime catalyst in the development of the countryside, faithfully serving our niche markets,” he added.