Bridge invests $24M on rural banks

MANILA, Philippines - Bridge Financial Services (Bridge) is investing $24 million on Philippine rural banks, whether through mergers and acquisitions (M&A), capacity building, or capital raising.

Initial investments will reportedly be made in June this year and completed within a two-year period.

Bridge founder Paul Kocourek said the opportunity and need in provincial areas of the Philippines is enormous. Rural finance is the missing component of inclusive banking.

“Eighty two percent of provincial Filipinos do not have bank accounts; only six percent of business growth in small provincial businesses is funded by bank loans. This lack of access to finance means slower job creation, greater risk for the poor and increasing inequality,” Kocourek said.

Provincial banks are often owned by the same family groups for generations and are the only formal institution offering financial services to their local community.

Bridge will offer a combination of services and capital as well as providing support in product design, risk management, and growth planning.

These services will be provided by a team of Filipino and international experts working with the banks every day.

“Our vision is to build a long-term network of dynamic and dedicated provincial focused banks,” the Bridge chairman said.

The $24-million fund will be raised with the help of several social-oriented non-bank financial institutions such as Accion, Bamboo Finance, DEG, and FMO.

Accion is a global non-profit institution dedicated to financial inclusion while FMO of the Netherlands and DEG of Germany are two of Europe’s biggest development finance institutions.

Bamboo Finance is a global private equity firm with expertise in microfinance and impact investing.

“These investors share the goal of creating enduring social and environmental impact and strong returns. They will provide funding as well as management services and technical assistance to Bridge and its investee banks,” it added.

The entry of Bridge comes at a time when a bill, opening the Philippine banking system to foreign capital, is now awaiting the signature of Presisdent Aquino to be passed into a law.

The country’s rural banking system has been, since inception, off limits to foreign ownership.

“We congratulate the RBAP (Rural Banks Association of the Philippines) for its leadership in supporting the amendment to the Rural Banking Act.We believe socially motivated foreign investment will significantly improve stability and growth in the sector, ultimately creating more growth and social progress in rural areas,” it added.

RBAP president Edward Leandro Garcia said in a separate statement that Bridge would be providing rural banks with long-term capital to fund growth, with expertise to manage risk, and with central services to reduce cost.

“These services will be provided to a team of Filipinos and international experts working with the banks on a daily basis as part of the partnership framework,” Garcia said.

There are over 600 rural banks nationwide but an average of 20 rural banks have been closed yearly due to deficiencies in capital.