• Keeping the rural market niche


    OVER the past few years, Asean integration has become a buzzword in the country. The integration basically targets to create a single market with a free flow of capital, investments, goods and labor among the 10-member Association of Southeast Asian Nations by 2015.

    The trade sector is likely to take the biggest impact from this integration but it will also set off a domino effect in the banking sector, which has been recently liberalized by the government to accommodate the entry of more foreign banks. The Asean banking integration is targeted to take effect in 2020.

    Key sectors of the economy such as the banking industry are threatened by the increase in competition as more foreign players enter the arena. As for the financial sector, such a scenario would force big local banks to find other markets to rely on, which would include the countryside where rural banks operate.

    While this will definitely add up to the challenges that rural banks already face, Rural Bankers Association of the Philippines (RBAP) President Jose Misael Moraleda reminded his fellow rural bankers during the recently concluded Mindanao Credit Conference of the fundamentals and the very reason why rural banks were created as an industry in the first place.

    In his speech, Moraleda said that what separates rural banks from the rest of the industry is its mandate to serve the countryside, particularly the low-income and the agriculture sector. He said the rural banking industry should, therefore, focus on intensifying its niche so as to remain relevant in the societies it serves.

    Microfinance is a business rural banks have already stamped their mark on. To date, rural banks are already serving over 800,000 borrowers nationwide and extending loans amounting to over P6 billion as of the first quarter. Considering the 604 unbanked localities in the country, Moraleda remained optimistic that these figures will grow even more.

    As for the agriculture sector, Moraleda said the rural banking industry has been one of its most reliable partners for credit. As of the first quarter of this year, rural and cooperative banks have already extended P29.5 billion in loans to this sector, in compliance with the mandatory lending law for agriculture and agrarian reform.

    But the risk exposure on the part of the rural banks is quite high and the industry needs the government’s help. Government should, therefore, commit itself more to the initiative by providing crop insurance and guarantees through its agencies. This would lessen the risk exposure of banks and encourage more to offer agriculture credit.

    Globalization would also require rural banks to beef up internal capabilities to keep up with international standards. In this regard, the RBAP president underscored the need for credit risk measures to be put in place and religiously followed to prevent financial bumps.

    In addition, he said corporate governance would also play a crucial role in surviving the times, as banks would have to rely not only on their clients’ patronage but also on the ability and competence of their management.


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