• Revitalized rural banking


    As expected, the first quarter of the year showed the emerging financial independence of the rural banking industry, as indicated by the sharp fall in the availment by rural banks of loans through the peso rediscount facility offered by the Bangko Sentral ng Pilipinas (BSP).

    Data from the BSP showed that total loan availments by rural and thrift banks fell by 96.3 percent during the first three months of the year to P412 million from P10.987 billion in the same period in 2013. Market experts said there was enough money supply to go around the market in the first quarter, serving as the main reason for the practically non-availment of the rediscount window.

    Of the borrowings through this facility during the period, 74.2 percent went to commercial credits, 3.8 percent to agricultural and industrial credits, and 22 percent to other credits consisting of permanent working capital, other services, capital expenditures, and housing.

    The rediscounting window allows banks to borrow from the BSP to meet short-term liquidity requirements. Banks can obtain loans or advances by making use of the eligible papers of their borrowers as collaterals.

    A lower amount of availment simply means fewer banks made use of the facility as they faced no liquidity constraints.

    At the moment, the financial markets are teeming with cash.

    Domestic liquidity as of end-February this year expanded to P6.9 trillion from P5.1 trillion year-on-year on sustained demand for credit in the domestic economy.

    The increase was faster than the 32.7-percent expansion recorded in December 2013.

    Money supply continued to expand on higher demand for credit in the domestic economy.

    This also points to the overall good health of rural banks, a sign that bodes well for an industry hoping to attract local and foreign investors into its fold.

    Since the banks are generally healthy and there is so much liquidity in the financial market currently, rural banks find no need to tap the rediscount window at this time.


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