RBAP seeks foreign funds
RURAL BANKS want to be allowed to accept foreign capital as a stronger financial base will allow them to extend more services to the public.
“When Congress resumes [on May 9,] the Rural Bankers Association of the Philippines will submit a proposal to amend the Rural Bank Act of 1992 to allow foreign equity of up to 60% of rural banks,” RBAP President Ma. Corazon Liamzon-Miller told BusinessWorld in a telephone interview last Friday.
The infusion of foreign capital in rural banks, Ms. Miller said, will allow the banks to “strengthen their financial base, professionalize management, and take advantage of modern technology.”
Section 4 of Republic Act (R.A.) No. 7353, otherwise known as the Rural Bank Act of 1992, states that “...the capital stock of any rural bank shall be fully owned and held directly or indirectly by citizens of the Philippines or corporations, associations or cooperatives qualified under Philippine laws to own and hold such capital stock...”
The provision, Ms. Miller said, isolates rural banks as “the only category of local banks that are not allowed to have foreign equity.”
“The restriction has limited the capability of rural banks to improve and expand the services they can offer to their depositors and borrowers, who are mostly in the countryside,” she added.
GM Bank of Luzon, Inc. President and Chief Executive Officer Tomas S. Gomez IV, in a text message last week said allowing foreigners to invest in rural banks will be advantageous for the sector.
“All the foreign investors we talked to wanted to add value in the general area of governance of the rural banks, but they still want their local partners to have control and run the show, so there is nothing to worry about once foreign capital is allowed in rural banks,” he said.
Foreign capital, he said, will boost rural banks’ microfinance business, allow some banks to renovate and improve their facilities and allow others to acquire automated teller machines, among others.
Mr. Gomez said he had spoken to a few foreign investors who were interested in investing in Philippine rural banks.
“I have talked with BlueOrchard (Finance S.A.), Treetops Capital, Unitus Capital, and Intellecap which is an investment bank based in India,” he said.
Sought for comment, BSP Deputy Gov. Nestor A. Espenilla Jr., in a text message last week week said, “[The BSP] is okay with it (infusion of foreign capital into rural banks).”
“It would provide opportunity for the banks since it would result in the entry of more capital, better management and innovative banking technologies,” he added.
BSP data showed that there were 598 rural banks as of March 11.
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