Different financial institutions including commercial and thrift banks have been seducing bank clients especially the small and ledium enterprises (SMEs) with new products and attractive lending rates.
Likewise, new international accounting standards are being required by the monetary authorities which among others demands an increase in the capital base of the banking community.
"Rural banks in Cebu are still surviving," Enrique P. Abellana, president of the Cebu Federation of Rural Banks Inc., said. He is also the board chairman and president of the Rural Bank of Barili.
But Abellana admitted that multi-level competition for their market, poor cooperation by the public sector, lack of training, and need to increase their capital base, is pushing the RBs against the wall.
"These conditions are forcing RBs to either close shop, look for new investors or consolidate. RBs are now taking mergers and acquisitions (M&As) seriously," he added.
Adding to their woes is the continued absence of guidelines from the motenary authorities regarding the implementation of the new accounting standards.
"We were told that they have been studying its application on the rural banking sector, and they have been constantly changing templates," the federation president said.
Meanwhile, Cebu-based RBs continue to emphasize lending to the microfinance and small and medium enterprises (MSME) sectors as well as to the agriculture sector. That is without prejudice to its regular lending base including commercial and property accounts.
And what is not helping the RBs is the inability of government to support the SME sector in terms of skills improvement.
Abellana said that the RBs were more than prepared to lend to the sector but the government remains wanting in helping the sector, particularly the manufacturing, furniture, and other exporters.
"There should be greater government focus on helping the SME sector, like skills development before the rural banks can effectively support the sector mainly financially," he said, adding that government partnership with RBs is crucial for countryside development.
They likewise expressed concern over their ROPOAs (real and other properties owned or acquired) that are agriculture lands.
These ROPOAs were reportedly "confiscated" by the National Government under the land reform program.
Rural bankers are asking the national leadership to review, and seek a compromise situation for foreclosed agricultural lands.
It is disadvantageous to the countryside financial sector, and it could prove disastruous to the agriculture sector as financial institutions would be forced to stay away from lending to that sector.
"It could limit the lending penerations of the RBs to the agri-based sector," the federation chief added.