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Despite the negative effect the “Legacy” scam has had on the credibility of country’s rural banking industry, the chairman of the Rural Bankers Research and Development Foundation, Inc. still says they foresee significant growth for the industry.
“In terms of asset base, rural banks assets continue to become stable with more depositors; and, in terms of the number of rural banking offices opening after what happened [to Legacy], banking offices continued to increase in 2009,” Tomas “Mitch” Gomez IV, RBRD chairman, said at a conference held in Cebu recently for their “Be a wise saver” campaign.
Gomez added that the growth happened because rural banks address unserved and underserved areas like the countryside where most commercial and universal banking companies do not operate.
“Rural banks are banks managed and operated by the people in the community. You know the managers and the tellers which also makes it comfortable for individuals to entrust their savings in that bank. What happened with Legacy is that it was owned and operated by people not from that community so they did not feel any developmental obligation towards the community and its people,” said Babes Alvarez, Rural Bankers Association of the Philippines vice president for Visayas.
Gomez added that share of rural banks in terms of assets within Metro Manila is only at 3 percent as commercial banks dominate the area. However, outside Metro Manila the share of rural banks share can go as high as 25 to 30 percent.
“That can only be explained by the fact that commercial banks are only in highly urbanized areas while rural banks are catering to the less urbanized communities like the countryside,” Gomez said.
According to the Bangko Sentral ng Pilipinas, there are 797 bank head offices in the country sharing a total of 6,973 branches nationwide; and of this figure, 86 percent are rural and cooperative banks, 9 percent are thrift banks and 5 percent are commercial and universal banks.
Due to the predominance of rural banks, the Philippine Deposit Insurance Corporation has launched a strengthening program for them, according to Jose Nograles, PDIC president.
“We have launched the program with a funding of five billion pesos, which includes a series of seminars and forums in 10 key cities and provinces in the country to educate, especially the students, on how to be a wise saver and educate them about the products available and which products will suit them,” Nograles said.
Nograles added that they believe that rural banks have a role in the economic growth of the communities they serve as the money deposited with them will also be loaned out to micro-, small- and medium-sized enterprises in the area. “That is why we have decided to strengthen them.”
Part of the strengthening program is a help desk dedicated to small banks that would like to merge with other banks and strengthen their ability to lend and gain more income. “We have a database to match them electronically and confidentially in terms of preferred shares. We encouraged them to merge and become stronger together.”
Nograles' team recently gave a forum on January 27, 2010 to the students of the University of San Jose-Recoletos on the banking industry and how they can start saving with reliable banks and the right financial products.
