ILO, Gates Foundation assist rural banks

MANILA, Philippines - The Rural Bankers Research and Development Foundation Inc. (RBRDFI) will receive a $100,000 (roughly P4.6 million) grant from the International Labor Organization (ILO) under the Microinsurance Innovation Facility. The facility was launched in 2008 with the support of a grant from the Bill & Melinda Gates Foundation.

On the other hand, the RBRDFI is the research and training arm of the Rural Bankers Association of the Philippines (RBAP), which has gained international attention in its efforts in microfinance, mobile banking and poverty alleviation.

The grant will support RBAP members in partnering with insurance companies to offer microinsurance to its six million bank clients nationwide.

“With the help the facility, rural banks can introduce quality insurance for the low-income families, thus helping them guard against risks and overcome poverty,” the ILO said in a statement released by the Microenterprise Access to Banking Services (MABS) Program. The program is a joint effort of the United States Agency for international Development (USAID) and the RBAP.

The facility was launched in 2008 with the support of a grant from the Bill & Melinda Gates Foundation.

The grant will likewise support training and technical assistance for rural banks to become licensed microinsurance agents. It will help provide microinsurance access to over one million rural bank clients, classified as low-income, and at least three million of their dependents.

The RBRDFI meanwhile will offer a turnkey approach to ensure rural banks’ cost-efficient compliance with licensing and capability-building requirements as institutional microinsurance agents. Rural banks will facilitate marketing, selling and servicing of microinsurance, with the commercial insurance companies issuing the policies.

“With over 2,700 rural bank branches and other banking offices (OBOs) nationwide serving more than one million micro- and low income borrowers, along with almost six million deposit account holders, rural banks are best-positioned to facilitate access to formal microinsurance services in the countryside,” the statement said.

Meanwhile, the Bangko Sentral ng Pilipinas (BSP) issued BSP Circular 683, allowing rural banks in partnering with insurance companies in offering microinsurance.

Since then, the RBAP and MABS developed strategic alliances with six insurance companies and three specialized microinsurance brokers. These alliances are geared to help rural banks forge partnerships to be able to offer microinsurance services to their microenterprise and low-income client base.

“The RBAP-MABS has already arranged seminars with all the interested insurance companies and has held workshops in July for member rural banks interested in initiating the licensing process to become microinsurance agents,” the USAID-supported microfinance program said.

Meanwhile, the Basel Committee on Banking Supervision is collating feedback from its proposed guidance for the application of the Basel Core Principles for Effective Banking Supervision (BCP) to microfinance activities, and the range of practices on regulating and supervising microfinance activities.

The committee is part of the Bank for International Settlements (BIS), the international body of the world’s central banks.

The report applies the BCP to the supervision of microfinance activities consistently highlight the following four key considerations. These are:

i) to allocate supervisory resources efficiently, especially where depository microfinance does not represent a large portion of the financial system but comprises a large number of small institutions;

ii) to develop specialized knowledge within the supervisory team to effectively evaluate the risks of microfinance activities, particularly micro-lending;

iii) to recognize proven control and managerial practices that may differ from traditional banking but may suit the microfinance business both in small and large institutions; and,

iv) to achieve clarity in the regulations with regard to permitted microfinance activities to different institutional types, while retaining flexibility to deal with individual cases.