Rural Banks at the Forefront of Financial Inclusion

During his keynote speech at the Inaugural Dinner of the Rural Bankers Association of the Philippines (RBAP) last August 4, Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr recalled the journey of the two institutions in pursuance of advancing the rural banking sector and expanding financial services through innovative channels to more Filipinos.

Governor Tetangco noted that only five years ago, products and services offered by rural banks were limited. The recent BSP’s Circular 678, 680 and 683 are now allowing rural banks to expand products and services to serve even more clients than ever before. These circulars recognize micro-housing loans, micro-agri loans and microinsurance as products that are suitable for low-income market. In addition, Circular 694 now allows rural banks to expand their outreach through cost-efficient channels such as the establishment of other banking offices (OBO) and micro-banking offices (MBO). Also, Circulars 649 and 704 will also open the doors for rural banks to act as e-money issuers.

He also noted that the Philippine Rural Banking industry has so far been posting solid results – rural banks are currently at par with commercial banks in terms of return on assets (ROA), return in equity (ROE) and profitability indicators. As of end 2010, the industry-wide capital adequacy ratio was at 19 percent whereas ROA was at 1.9 percent and ROE was at 11.7 percent. Gross loan portfolio in 2010 totaled PhP100.2 billion or an increase of 1.1 percent over 2009, while deposits amounted to PhP108.9 billion or an increase of 3.4 percent from previous year. Governor Tetangco concluded his speech by discussing the recently issued Circular 730 that would push for greater loan transparency and encourage more healthy competition in the banking industry. He added that the BSP will continue to adhere to its commitment in implementing policies that will further strengthen the rural banking sector and allow rural banks to extend their reach to more clients.

Below is the video of the Governor’s speech during the RBAP Inaugural Dinner.