Rural banks well capitalized, highly liquid

The country’s rural banking sector has never been stronger, retains solid financial foundations, and is a contributor to stability in the Philippine banking system, according to the Rural Bankers Association of the Philippines (RBAP).

“The rural banking sector remains well-capitalized and highly liquid,” RBAP president Tomas Gomez said.

Based on records from the Bangko Sentral ng Pilipinas (BSP) as June 2008, the rural banking sector leads the Philippine banking industry in terms of financial results. 

Year-on-year growth rates for loan portfolio, deposits, and assets are at 19.6 percent, 13.7 percent, and 15.8 percent, respectively sustaining the sector’s all-time high growth rates recorded in 2007. 

Gomez said rural banks continue to be resilient amid a challenging global economic environment. The sector achieved a little over 12-percent positive pre-tax net income growth in the first six months of 2008.

It recorded the highest return on equity at 13.8 percent, and an industry capital adequacy ratio (CAR) average of 13.67 percent.

“The rural banking sector, with its size appropriately tuned to the financial services requirements of the communities it serves, has a higher capital adequacy ratio than many of the biggest global financial institutions, failed or still operating,” the RBAP president added.

Meanwhile, the Cebu Federation of Rural Banks Inc. (CFRB) assured the banking public that all the rural banks in Cebu and nearby provinces that the sector was healthy.

“It is business as usual for the Cebu rural banks,” Daniel Arcenas, CFRB president told The STAR.

The bankers were reacting to recent reports indicating that several rural banks were placed under receivership by the BSP.

No less than Ayala Corp. chief executive Jaime Augusto Zobel de Ayala II called the rural banking system as the catalysts for development in the countryside. The Ayala chief executive’s pronouncements were followed by various working arrangements between Globe Telecommunications, Smart Communications, and state-run SB Corp.

It was likewise preceded by the continued support of the United States Agency for International Development (USAID) stamp of approval for its contributions to microfinance in the countryside.