RBs junking parochial mentality

The Rural Bankers Association of the Philippines (RBAP) is determined to strengthen the sector by professionalizing its member banks, expanding the services overseas, forge partnerships with regulators and private sector players, expand further its participation in lending to the microfinance sector, and strengthen its capital base.

"It is time that we rid our sector of the parochial mentality," William K. Hotchkiss III, president of the RBAP, said. RBAP member banks numbers 764 rural and rural cooperative banks natoinwide.

Among the key strategic moves of the sector is consolidation.

The banking environment is vastly changing. Rural banks must introduce more innovative products to remain competitive as commercial and thrift banks are slowly encroaching in its traditional strong areas in the countryside.

A good example is the remittance business. The Philippines is the third largest in terms of remittances next to Mexico and India.

Last year, the Bangko Sentral ng Pilipinas (BSP) reported remittances amounting to over $8.6 billion. It forecasts the business to increase by another 20 percent.

Ironically, a large chunk of the overseas Filipino workers (OFWs) are domiciled in the countryside.

Some rural banks are already directly or indirectly involved in the business which is still dominated by money transfer companies and commercial banks.

Consolidating the rural banks through increases in capital base as well as mergers could make them more competitive. It would also allow the consolidated players to introduce more services that usually requires larger outlays.

The banking industry is anticipating the lifting of the branch moratorium by the end of the year or early next year.

But the BSP had made it clear that it would only be applicable to strong and well-capitalized banks.

Thus the smaller or weaker players in any of the banking sectors would be marginalized further by those that can increase its capital, those that are better managed, and those that have moved towards merging to attain economies of scale through size and/or capital.

"We still have too many rural banks, at a time when we have seen successful mergers leading to stronger banking services," Hotchkiss said.

Meanwhile, the RBAP continuous to train not only rural bank owners but also its workforce.

Training does not only involve new developments in the banking sector but also risk management, new international accounting and banking standards, and corporate governance.

RBAP has already achieved an 80-percent compliance for training for good corporate governance in the board directors level. It is moving into the level of the bank’s workforce including the branch heads.

"We have also brought in our traditional accounting partners like SGV and PICPA to study and later help deciminate the new international accounting and banking standards," the RBAP chief executive added.

The RBAP strategy also foresees the industry as the gateway of all financial services for its banking public from remittances from overseas to microcredit to the smallest entrepreneur.

"We would like to be known as the community bank, meaning our community financial services reaching the OFW whose families are our banking clients to offering salary and personal loans, trading and servicing foreign currencies, accessibility through automated teller machines (ATMs) or credit cards, to payment or receiving services to members of government financial institutions like the Government Service Insurance System (GSIS), the Social Security System (SSS), the PhilHealth, and the soon payments to such entities as telecommunications and utility companies ," the former Air Force general explained.