Making it count

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What does earning an investment grade of “Baa3 with positive outlook” mean for ordinary Filipinos? For all the hoopla generated by the recent rating uptick given by Moody’s Investors Service, it could still mean little for our kababayans (countrymen), especially for those in the poor sector, if the investment grade does not translate to food on the table or additional employment opportunities over the short to medium term.

That is why even amid the recent positive economic gains the country has achieved, the next step figures to be even more important: turning economic growth and bullish investment outlook into inclusive growth. This responsibility rests not only on the shoulders of the government, but also on the rural banking industry.

For the Aquino administration, turning high growth into inclusive growth can be achieved by implementing reforms that will create more and better jobs for the poor. It views inclusive growth as sustained growth that creates jobs, draws the majority into the economic and social mainstream, and continuously reduces mass poverty. In pursuing a development strategy that revolves around this goal, the government is currently implementing a development plan that involves massive infrastructure investments, higher governance standards, human development and direct poverty relief, and employment generation.

On the other hand, rural banks help promote inclusive growth by providing the underprivileged with access to financial services the poor would otherwise find hard to get from bigger banks, mainly due to geographic restrictions. Utilizing tools such as mobile banking and microfinance to reach out to the traditionally unbanked and underbanked, rural banks play a very important role in helping the country achieve inclusive growth. The fight, so to speak, is right at the domain of rural banks. About 40 percent of Filipinos live in rural areas where the incidence of poverty is higher. Incidentally, as their very name implies, rural banks usually ply their trade in rural areas.


Inclusive growth is possible only if countryside development is given the solid push it direly needs. As part of the communities where they operate, rural banks are in the best position to provide the muscle for this push. The industry is the usual entry point of people residing in second to fifth-class municipalities who want access to banking services.

As rural banks continue to service their clients—ranging from farmers, fisherfolks, and small and micro entrepreneurs—the industry also develops a stronger customer base. In turn, the industry’s ability to support countryside development is further enhanced. The rural bank-client relationship becomes symbiotic in nature as they support each other’s achieve respective growth.

Right now, the rural banking industry, as does the whole country, still has ways to go in totally influencing inclusive growth.

As of end-2012, there are around 2,500 rural bank branches across the country, representing about 26 percent of total banking operations in the Philippines. Still, around 37 percent of all municipalities in the country are still without banking offices.

Admittedly, there is still a need to extend the industry’s reach even further to the unbanked and the underbanked. It would take a continuous, collective effort from the government and the rural banking industry, and other members of the financial sector to achieve economic growth, across the board. That would mean spreading the benefits of a robust economy from the trading floor and corporate board rooms all the way to the humble rickety dining tables of the poor.

By then, maybe the underprivileged can fully appreciate what an investment grade of “Baa3” with positive outlook means for them.

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