As another year begins, rural banks are optimistic that the industry will remain resilient amid stiffer competition and despite being underdogs in terms of scale.
The rural banking industry looks forward to turning some challenges in the banking landscape into opportunities that may be tapped.
In his message during the Rural Bankers Association of the Philippines (RBAP) symposium held in November, Bangko Sentral ng Pilipinas (BSP) Deputy Governor Nestor Espenilla Jr. noted there are still many areas in the country that remain unbanked and are served by only one rural bank.
Espenilla then encouraged the community lenders to seize and maximize this opportunity, saying, “if customers are not well served, competition will come in or customers will look elsewhere for solutions.”
Heeding this, some rural banks now seriously consider the new program of the central bank that seeks to encourage consolidations and mergers among rural lenders.
The Consolidation Program for Rural Banks (CPRB) aims to bring about a less fragmented banking system through consolidations and mergers by enabling rural banks to improve their governance and financial strength, enhance their viability, strengthen management, generate synergies as well as expand market reach.
To date, there are already eight groups of rural banks in talks over possible mergers as part of the program.
“Hopefully if the banks are strengthened, there will be less closures for the system and we will have more banks that will cater to the needs of the unbanked and unserved,” said Philippine Deposit Insurance Corporation President Cristina Orbeta, expressing optimism at this move.
Furthermore, rural banks are also seen expanding by opening microbanking offices (MBOs) designed for the low-income portion of the population that typically lives in far-flung areas and several miles away from the nearest bank branch.
Five MBOs under rural and cooperative banks were opened during the third quarter of last year.
Rural banks reaffirm their commitment to work around present challenges by creating a dynamic operating environment, a system that is able to maximize opportunities within regulatory frameworks and alongside innovations.