The need to transform


The effects of the evolving global landscape are slowly seeping into the Philippine financial and economic systems.

Recently, the Bangko Sentral ng Pilipinas (BSP) announced it was considering liberalizing foreign ownership regulations to open up the country further to foreign investors ahead of the forthcoming integration of the Southeast Asian nations.

Among the amendments proposed were an increase in the allowed foreign ownership to 100 percent from the current 60 percent, and the lifting of the limit on the number of foreign banks that could enter the country.

The Association of Southeast Asian Nations (ASEAN) targets to establish by 2015 an integrated community, which is basically a single market facilitating the free flow of goods, services, capital and people among the region’s 10 member-countries.

It is a giant step, perhaps even ambitious, and such event would definitely spur drastic changes in the member-countries’ fiscal landscapes.

As for the Philippines, some economists and analysts say the financial system remains unprepared for the integration and the stiffer competition it is bound to bring. Debt watcher Standard & Poor’s, for one, had pointed out that local banks are still lacking in terms of scale.

Indeed, the bigger banks—universal and commercial banks in particular—will be the ones competing with the foreign banks for the market in highly urbanized areas. But the effect will definitely trickle down to rural banks as these bigger banks try to explore and capture other markets, such as those in the countryside.

To this end, the central bank had suggested rural banks to assess their performance and review their strategies to maintain their hold on their niche market.

In the 2014 Visayas Management Conference held recently at the Amigo Hotel in Iloilo City, no less than BSP Deputy Governor Nestor A. Espenilla, Jr. said that the business of rural banking is a “serious business” as it plays a critical role in national development.

As such, DG Espenilla reminded rural bankers to scale up their operations and consider programs that will empower them, such as mergers and consolidations.

He said rural bankers must be open to the idea of having new stockholders into family-owned businesses but still bearing in mind that at the core of the selection process is still due diligence.

Since the law allowing the infusion of foreign equity in rural banks is now in place as embodied in Republic Act (RA) 10574, it is, likewise, expected that foreign investors will start fostering partnerships with local industry players, not only to fuel new investments to boost economic growth in the countryside, but also to specifically pave the way for that much-needed push for rural banks and for the industry, as a whole.

DG Espenilla also said rural banks should review the viability of their current business model and find ways to make their operations more suited to the needs and demands of the times.

It is about time rural banks realized technology is a serious game-changer. As the central bank suggests, rural banks should optimize the use of technology and invest in a reliable technological infrastructure.

Cloud computing, for instance, could be a possible option for rural banks, especially now that the BSP already allows its use for non-core banking functions under Circular 808.

Given the rapid advancements and challenges in the business landscape, it becomes imperative for rural banks to be attuned with the times. Not only do they need to “ride on the waves” of technology, they should, likewise, be open to any possibilities and opportunities to remain relevant and sustain growth.


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