First Metro Investment, RBAP forge alliance

First Metro Investments Corp. and the Rural Bankers Association of the Philippines (RBAP) has initiated talks that could lead to the consolidation, modernization and globalization of the rural banking industry.

First Metro Investments is a member of the Metrobank Group, and one of the country’s leading investment houses.

The rationale for the talks is to come out with a program to expand investment options, capital build-up, bank products and services, consolidation of the industry, closer cooperation with governments and other private companies, and backroom modernization.

RBAP president William K. Hotchkiss III said that the potentials of the 700-strong rural banking system remain largely untapped.

"They can do a lot of things, there are a lot of possibilities due to their size, reach and location," Hotchkiss added.

RBs in general have reportedly been experiencing high liquidity as deposits have been pouring in. However, borrowings remain cautious.

"We need to address the excess liquidity in the system, and rural banks are looking for investment vehicles or options other than just government securities. It is a happy problem," the RBAP president said.

He said that the rural banks have intensified their coordination with the Bangko Sentral ng Pilipinas (BSP) and the Philippine Deposit Insurance Corp. (PDIC).

They have also initiated talks with private groups that are efficient and experts in certain fields.

A good example is the ongoing discussions with First Metro Investment. The extent of experience and expertise of the Metrobank subsidiary could open various options including consolidation.

"We are looking for those kind of partnerships which could be beneficial for the rural banking system, for the private firm partner, and for the RBs banking clientele. We are looking for new investment options for the banks, and the bank clients."

Another kind of partnership is in the area of microfinance. Rural banks are in the best position to indugle in micro-lending. But there are limited funds in an banking endeavor that demands high levels of funding, management and accounting.

Hotchkiss revealed that there is a growing number of commercial banks interested in microfinance. And rural banks have been approached collectively or individually on how they could participate.

"We have been approached and we told them to open a wholesale window to rural banks specifically for microfinance," the RBAP president said.

The rural banking industry is forecast to grow by an average 15 percent in terms of resources, deposits and loans this year.

In the past two years, resources are estimated to have expanded by 13 percent while deposits and loans by an estimated 12 percent. Quantitatively, the industry is forecast to slightly shrink due to a few closures and mergers. But quantitatively, it will expand.

The system grew by 14 percent last year from P54.8 billion in 2002 to P62.2 billion in 2003. The banking industry average growth in deposits was a mere 6.5 percent in that period.

Stronger deposit base, less reliance on borrowings, and reduced cost of funds to finance lending operations enabled rural banks to grow and service client base. Deposits generated income from small savers, with 90 percent of the depositors have balances of P15,000 and below.

In likewise resulted in a collective net income of P1.5 billion in 2003, or a 33-percent growth from earnings the year before. – Ted Torres