Incoming Bangko Sentral ng Pilipinas (BSP) Governor Nestor Espenilla Jr. said the central bank will further liberalize micro-banking offices (MBOs) to operate as light branch with more functions beyond microlending.
“It will move towards more liberalization. What will be liberalized? The functionality,” Espenilla said.
MBOs provide a specified range of activities and services such as micro-deposits, micro-loans, microinsurance, foreign currency, bills payments, government pay-outs and e-money conversion.
“In the past, MBOs are only for microlending activities. Now we are moving in the direction of a light branch – functionality that is appropriate to the location and not only limited to microfinance,” Espenilla said.
MBOs were allowed to perform customer identification process and facilitate account activation, but the approval and actual opening of deposit accounts were done only at the head office or branch.
Last year, MBOs have been allowed to approve and open deposit accounts for clients with as part of BSP efforts to facilitate financial inclusion.
“What they accept are microdeposits. So we have to connect that to the creation of basic bank accounts that will actually supplant micro deposit rules. So we will allow small savers to open an account,” Espenilla said.
A micro-deposit account has a required maintaining balance of not more than P100, with an average daily balance not exceeding P40,000. The deposit account does not have dormancy charges.
“So what we are looking at is expanding their functionality. And the other level is the concept of microdeposits,” Espenilla noted.
“So they meet but also can stand alone,” he said. For example, a commercial bank can put up an MBO in a market and get deposits from vendors and lend to vendors.
“They bring banking to where the business is, that is the concept,” Espenilla said.
In its latest report on the state of financial inclusion in the Philippines, the BSP said the growing number of MBOs has contributed significantly to better access and use of financial services in the Philippines.
“For access, worth highlighting is the growth in micro-banking offices, which are low-cost banking infrastructure that can be established in municipalities where it is not feasible to set up a regular branch,” the BSP earlier said.
Regular bank branches continue to rise in number but concentrated in Metro Manila. In that sense, MBOs contributed more to financial inclusion by extending the reach of financial services to underserved and unserved areas.
Most MBOs are located in Calabarzon (Cavite, Laguna, Batangas, Rizal and Quezon), Bicol, Western Visayas and Mimaropa (Mindoro, Marinduque, Romblon and Palawan).
“Most municipalities that were previously unbanked are now enjoying access to banking services because of MBOs,” according to the central bank.
As of June 2016—the latest available data—there were 617 MBOs, an increase of 93 percent from 320 as of June 2012.
The number of local governments units (LGUs) with MBOs grew by 105 percent to 393 in June 2016 from 192 LGUs in June 2012. To date, 75 municipalities are being served by MBOs alone.
MBOs increased 18 percent on average year-on-year rate, which is faster than the growth of other types of banking offices (4 percent) and automated teller machines (13 percent).