The need for revitalization

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Bangko Sentral ng Pilipinas officials last week revealed that seven Asian banks have expressed plans to enter the Philippine financial system.

One of the banks, Sumitomo Mitsui Banking Corp., received the go-ahead to set up shop in Manila, the first foreign bank to enter the system since approval of the new foreign ownership rules.

The entry of foreign banks in the country is a sign of an improving economy. This allows the country to attract foreign investors, which, in turn, would open more job opportunities for our fellowmen.

However, for smaller domestic banks, this development could mean new hurdles and stiffer competition. With the entry of foreign players, big local banks would have to expand to other markets, including the countryside where rural banks operate.


It has been said that rural banks have an edge with their familiarity and long-standing relationship with their patrons. Realistically though, this advantage alone would not suffice to keep the business afloat, especially during rough times. In the end, banks would still have to closely re-examine themselves and the way they conduct their business.

In the recent Visayas Management Conference, Rural Bankers Association of the Philippines President Jose Misael Moraleda stressed this fact, saying that the “revitalization of rural banks is a continuous process whose need is highlighted even more by the new demands of time, regulatory reforms and the ever-changing business landscape.”

Considering the current environment, Moraleda urged rural bankers to implement necessary internal reforms that would allow them to beef up their operations, and ensure secured and responsive banking for their consumers.

The central bank has already laid out new guidelines to guide banks in establishing new set of standards, particularly for capitalization, consumer protection and credit risk management. It has likewise liberalized the rules governing the remittance market, thus giving rural banks a new source of lifeline in the remittance business.

Despite all the challenges, the rural banking industry’s statistics continue to reflect resilience and steady growth. As of the third quarter of 2014, rural banks’ total resources rose 9.27 percent year-on-year to P196.6 billion, while their total loan portfolio expanded 6.21 percent to P124.5 billion.

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