Banks seek changes in rural bank law

MANILA, Philippines - The country’s rural banking system is hungry for growth, but is limited, among others, to access to funding. One source is foreign funds through equity exposure.

But Republic Act (RA) 7353, otherwise known as the Rural Banks Act of 1992, rules that only Filipino nationals can own a rural bank.

Rural Bankers Association of the Philippines (RBAP) spokesperson and immediate past president Tomas Gomez III said that allowing limited foreign ownership in rural banks can open the system to more opportunities, global standards in technology, governance, expertise, and funds.

“It would create a level playing field for rural banks especially in the case of equity participation,” Gomez said.

For the meantime, rural banks have started tapping foreign and local funds through debt financing and Tier 2 capital-raising exercises.

Rural banks are also tapping the expertise of credit rating agencies that specialize in micro-, small and medium lending. These include MICRA, Planet Rating and Microfinanza Rating.

“Credit rating from international agencies suited to rural banking operations essentially compares our institution to better performing financial institutions abroad. These ratings focus on the levels of risks that an organization faces in different areas like microfinance and agri lending,” the RBAP spokesperson said.

International credit rating opens opportunities to tap the debt market offered by international agencies focused on microlending and poverty alleviation, such as Oiko Credit, Grameen Foundation, Blue Orchard, Unitus Capital and Intellicap.