Rural banks: Having selected the appropriate road to success

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Rural banking still remains a vocation, a noble calling.

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Regardless of size, to be present in a third to sixth class municipality is to continue serving. The odds may seem to go against it, but similar to a boutique hotel amid the big international chains, or a familiar sari-sari store amid the proliferation of 7-11s, a single unit rural bank may survive—especially if capitalization is filled in, operations are scaled, and risks are mitigated. Service is delivered, albeit with limited spreads or profits.

These were among the notable observations of Rural Bankers Association of the Philippines (RBAP) incoming president Jose Misael B. Moraleda, stated in his speech before 535 member banks present at the recently concluded 61st Annual National Convention of the RBAP.

Amid the discussions of challenges and opportunities for the industry, Mr. Moraleda said most rural bankers have already realized that “the only way to survive” is to “insulate rural banks from various threats and challenges.”

He said this is possible “by ensuring adequacy of capital, ensuring the quality of our assets, professionalizing their respective organizations, and redefining pricing methods and product delivery to support profitability.”

Most important of all, Mr. Moraleda emphasized the importance of valuing the clients’ trust. He said rural banks must ensure that they remain committed to the duty of safeguarding the funds entrusted by the depositing public.

However, he also said that some might see the need for rural banks to be leveled up.

As such, he suggested that succession issues would have to be settled, re-capitalization would have to be addressed creatively and acquisitions, mergers, and consolidation would have to be the modes for expansion.

For some, he said, the option to sell is still there but timing would be key in doing so. He cautioned that the market and/or the regulators might be too harsh if the inevitable decision is delayed for too long.

As the new board sits in July, he said RBAP will continue to strategize what is best for the industry in terms of legislation, advocacy, and collaboration.

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