By Lee Chipongian
Rural banks, despite their smaller sizes individually, are known as the banking community’s champion for “customer outreach” because it enables the delivery of financial services to reach rural areas.
Rural banks have encouraged countryside development. They are in far-flung areas or locations that big banks, or even thrift/savings banks, will not go.
The Rural Bankers Association of the Philippines (RBAP) has a network of 2,745 banking offices across the country, and it is growing still. With this expanding reach, they are at the crux of the Bangko Sentral ng Pilipinas’ (BSP) financial inclusion efforts.
This is why the BSP has been pursuing digitization of financial services to further enhance and promote the financial inclusion (FI) program. BSP officials recognize that rural banks are important in FI since there are still plenty of areas that are unbanked and underserved.
“(The) BSP’s financial inclusion journey, which has been filled by highlights, milestones, and interesting developments. It is, however, by no means a smooth sailing one – we at the BSP are aware of the challenges to serving the financially excluded that persist until today,” according to BSP Governor Benjamin E. Diokno.
Based on the BSP’s 2018 Financial Inclusion Initiatives report, unbanked local government units (LGUs) declined to 554 or 33.9 percent of the total in 2017 from 582 or 35.6 percent in 2016, or about a 1.7 percentage points decrease in unbanked areas.
It is not just rural banks that are being dependent on for countryside development. Banks are now pursuing branch-lite units to explore areas they have not reached before.
Not just big banks, but rural banks can establish branch-lite units that have fewer regulatory requirement and easier to set up.
The BSP reported that 155 banks – out of 581 head offices – have tapped 1,751 branch-lite units to expand physical outreach in 738 LGUs, of which 151 LGUs were being served by branch-lite alone.
The Philippines is first in the region in terms of FI ranking, based on the 2018 Global Microscope by the Economist Intelligence Unit. Of 55 countries, the Philippines, which is consistently top-ranked since 2009, is fourth in the world.
The BSP said it will continue to do groundbreaking work in terms of setting guidelines for financial inclusion and pushing for the digital finance ecosystem.
Still, rural banks remain as key financial services provider for farmers, fishermen, and the micro, small and medium enterprises or MSMEs. As per the latest data, 87.3 percent of rural banks or its retail depositors have P10,000 in their accounts. Farmers and fisherfolks are still the key clients of rural banks.
The BSP has said that rural banks are in a good position to grow using technology and innovation, especially since bank branching rules have been liberalized.
In fact, rural banks now have operational flexibility because the BSP has allowed these banks to utilize cash agents to lessen the cost of its service delivery. Presently, there are 1,874 branch-lite units and over 40,000 cash agents.