Rural banking sector sees positive growth this year

CEBU, Philippines - The rural banking industry is seeing a huge growth potential this year, as demand for rural banking is significantly increasing especially in the far-flung areas.

Rural Bank Association of the Philippines (RBAP) president Joseph Omar Andaya said that despite the industry’s nightmare brought about by the Legacy Bank controversy, the rural banking sector continued to grow in terms of asset and network expansion in the last few years.

This year, the industry is seeing a more profitable year, as rural banking services in the rural areas are in demand, encouraging the existing rural bank owners to expand their network base and serve to this “un-served” market.

“Growth is happening now. We take advantage in opening in areas where commercial banks are not comfortable to open, these are in the non-urban areas,” said Andaya, who is the president of Green Bank.

With this, the farmers, fisher-folks and small traders in the rural areas will be given opportunity to have professional financial partners, and that loans extended to these sectors is also seen to increase, Andaya said.

For his part, Babes Alvarez, RBAP vice president for the Visayas, said that rural bankers has personal commitment to the development of their own communities, by continuously providing financial assistance—without collaterals to the community residents, while in rural banking business, trust is very essential.

About 97 percent of the rural banking network is located outside of Metro Manila. As of December last year, rural banking network reached to its all-time-high of 2,170 nationwide.

There are a total of six million deposit accounts of rural banking sector, this is expected to increase as the demand for rural banking services has increased, Andaya said.

Despite the problems, which also affect the depositors impression on rural banking, Andaya said the sector is banking on its close relationship with the community they are operating.

The government on the other hand, has recognized the role of the rural banking sector in developing the micro-finance sector in the country. Without the rural banks which extend loans (with collateral) to rural communities, residents will still be susceptible to loan sharks, and some financial scams, said Philippine Deposit Insurance Corporation (PDIC) president Jose Nograles.

According to Alvarez, the industry has commitment to help development its own communities by continuously providing financial assistance to the residents. Now, the new emerging clients for rural banking are the increasing number of OFWs (Overseas Filipino Workers).

Families of these OFWs can easily run to their trusted rural bank in town, whenever there is an immediate need for financial help, Alvarez said.

Besides, in the rural banking business money deposited by the residents within the locally are invested by the rural banks to the local economy, through loans and business instruments.