Stronger rural banks seen

Stronger rural banks seen

THE RURAL banking sector will see fewer banks as mergers and consolidations continue, but will be armed with more resources as they reach out to the millions of Filipinos still without access to the country’s financial system.
“Mergers and consolidations that are happening will result in fewer rural banks that are stronger in terms of resources,” said Tomas S. Gomez IV, Rural Bankers Association of the Philippines (RBAP) spokesman, at the sidelines of the group’s national conference last Wednesday.

“In the future, we will see a stronger rural banking sector, with more resources, continuing to reach out to the unbanked and underbanked.”

Central bank data showed that the number of rural banks had shrunk to 607 in December from 613 in September and from 631 in December 2009. The Bangko Sentral ng Pilipinas (BSP) said this was a result of weak banks closing as well as mergers and consolidations.

Mr. Gomez, also the president and chief executive of the GM Bank of Luzon, Inc. added that “mergers and consolidations are happening as economics dictate,” even as the central bank and the state deposit insurer have put up a P5-billion fund to spur such changes.

“There are applications under Strengthening Program for Rural Banks (SPRB),” he noted, referring to the P5-billion program. “The results of this will definitely be seen in the future.”

The SPRB grants merger, consolidation and acquisition incentives to participating rural banks.

The program, which was launched on August 4 of last year, will run until 2012.

Sought for comment, BSP Deputy Governor Nestor A. Espenilla, Jr. said the impact of SPRB is yet to be seen. It’s “too soon to tell,” he said, as “we are still waiting for deals to complete,” he told BusinessWorld through a text message.

Mr. Espenilla, however, agreed with Mr. Gomez, that mergers and consolidations are happening as rural bankers themselves strive to be more competitive by pooling their resources together.

Mr. Gomez’s GM Bank of Luzon, for one, used to be called GM Bank, Inc. before it consolidated with Bangko Luzon, Inc. late last year. GM Bank, in turn, was a consolidation of three Nueva Ecija-based banks, namely, Community Rural Bank Inc., the Muñoz Rural Bank Inc., and the SME Bank.

Poised for growth

Mr. Gomez also pointed out that rural banks’ return on equity -- net income earned as percent of stockholders’ equity and a key measure of management’s performance -- is “larger” than that of universal and commercial banks.

Rural banks are expected to grow further on the back of agricultural loan, microfinance and microinsurance products. “There is a growing trend for more products, and rural bankers are ready to take the challenge,” Mr. Gomez.

He added that rural bankers will make use of new technologies, such as mobile banking, and new regulations that support their sector, as they penetrate the country’s unbanked and underbanked municipalities.

“We are firm in our commitment to work for better financial inclusion,” he said.

Mr. Gomez, however, acknowledges the hurdles that rural bankers face, foremost being financial illiteracy.

“We will work hand in hand with the government and other non-government institutions in order to move forward,” he said. -- ASOA

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