There are two very important lessons that rural banks need to learn to survive the tough times—quit being complacent and think out of the box.
This is what Bangko Sentral ng Pilipinas (BSP) Deputy Governor Nestor Espenilla Jr. emphasized in his speech at the 2015 Visayas Management Conference Held in Cebu City recently.
“The two worst strategic mistakes to make are being complacent and letting an opportunity slip away. To avoid this, you must treat each challenge as if it were brand-new and unique, and avoid falling back on formulae, guesswork or tradition,” he said.
On complacency, Espenilla urged rural banks to assess their operations and innovate, if need be. To drive home his point, he pointed out rural banks’ worrisome credit management as emphasized by their non-performing loans ratio, which stood at 11.8 percent as of end-September last year.
To address such problem, the central bank has already released Circular 855, which contains new regulations to guide rural banks on their credit practices.
The Rural Bankers Research and Development Foundation has updated its courses to incorporate recent regulatory reforms. The foundation continuously rolls out capacity-building seminars and workshops to hone the abilities of rural bankers and to keep them abreast with the latest trends and best practices in the industry.
Meanwhile, to encourage bankers to think beyond the custom, Espenilla underlined the potential of the remittance business to generate fee-based income.
“One area that you can look into is fee-based revenues by growing the remittance business. There is huge opportunity in cross-border inflows from the large OFW community,” he said, citing that remittance inflows in the past year have exceeded projections at $26.9 billion.
Just recently, the BSP has moved to liberalize the remittance market, granting thrift, cooperative and rural banks the authority to offer foreign exchange as part of their services.
For his part, Rural Bankers Association of the Philippines president Jose Misael B. Moraleda, in his speech, said that micro finance remains a viable option for rural banks.
“There’s microfinance, which has been showing great potential as an effective growth driver among the poor and a viable business venture for banks,” he said, also noting that the incidence of non-performing loans is also lower by an average 0.33 percentage points in the microfinance-engaged rural banks.
This year’s Visayas Management Conference was hosted by the Cebu Federation of Rural Banks. It was held last March 2-3, 2015 at the Marco Polo Plaza, Cebu and was attended by several distinguished speakers including BSP managing director Restituto Cruz and Land Bank executive vice president Cecilia Borromeo.