Likewise, rural banks have started the long and ardous route of consolidation seeing the importance of size and a secure capital base.
"There are a lot of interest, and we are a getting a lot of offers," William K. Hotchkiss, RBAP president revealed. "There are local groups asking around, and there is strong indication that there could be foreign groups behind them."
Hotchkiss admitted that the Rural Banks Association of the Philippines (RBAP) and some individual banks have received formal letters of intent or inquiry. "The interest is there, and these are not commercial banks."
Commercial banks have already initiated tactical alliances with rural banks regarding microfinance. Some, including foreign banks, have expressed interest in opening a lending window for rural banks to tap into for microcredit.
In fact, the Bangko Sentral ng Pilipinas (BSP) suggests that rural banks remain open to having investments from foreign or local groups, especially those that are inadequately capiltalized.
The BSP however made it clear that there should be "certain controls or ceilings, conservative controls coupled with constant dialogue with the banking authorities."
Meanwhile, the rural banks continue the road to consolidating not only to increase their capital base. Bigger and better capitalized rural banks can also be involved in foreign currency transfers and trading to service the remittance business.
Rumored to be exploring possible acquisitions or consolidations are the First Valley Bank (formerly Kapatagan Valley Rural Bank), the Rang-ay Rural Bank (La Union), the Green Bank (Surigao), the Kabayan Bank (Batangas), and the Card Bank (Laguna), to name a few.
To facilitate these efforts, the RBAP entered into an agreement with First Metro Investment Corp. for professional assistance in matters pertaining to capital build-up, modernization, globalization as well as mergers and acquisitions (M&As), and consolidation.
First Metro Investment is majority controlled by the Metrobank Group. It is considered the leader in global lending and capital-raising for domestic corporates as well as other financial services, including M&As and consolidation.
In the past two years, several M&As were undertaken by the rural banking industry allowing for expansion and modernization of the industry.
A classic case was when Network Rural Bank (Davao del Sur) Inc., the Rural Bank of Panabo (Davao del Norte) Inc., and the Provident Rural Bank of Cotabato (North Cotabato) Inc. consolidated, resulting in a single rural bank known as the One Network Rural Bank Inc.
One Network Bank emerged with a combined asset base of P2.65 billion and a depositor base of over 250,000. Thus, One Network Bank became the biggest rural bank in the country, larger than some thrift and commercial banks in terms of capital and deposit base.