Secrets behind a rural bank’s success
When the New Rural Bank of San Leonardo opened its first branch in 1994 in Nueva Ecija, it only required an authorized capital stock of P15 million. At that time, about 1,500 rural banks were operating in the country. After 20 years, the NRBSL has expanded with 12 branches in the provinces of Nueva Ecija, Bulacan, and Tarlac; and it is set to establish at least five more branches between now and 2015 after the Bangko Sentral ng Pilipinas (BSP) granted its approval for an increase in its authorized capital stock to P400 million. On the other hand, the total number of rural banks in the Philippines has gone down to about 500.
Many rural banks, unable to meet the increasing demand of competition and regulation, found it easier to sell out or to be merged with larger banks. A number had to be closed down due to unsound banking practices and weak governance.
So why has NRBSL survived and experienced growth better than other rural banks?
“With just 12 branches we are still a modest bank,” insists Abundio D. Quililan Jr. or Jun, NRBSL’s president and CEO. He adds, “We’re one of the few rural banks that are not family-owned and which are run by a board of directors who are elected by the shareholders based on the knowledge and experience they can add in the strategic management of the bank, as well as by managers who are professionals and who undergo regular evaluation by the board based on performance.”
I am sure these are valid and crucial factors in the success of rural banks that remain stable and competitive. However, I am also sure there are other and deeper reasons for a “modest” rural bank in being able to adapt to the complex changes in its market. Consider for example the impact to small banks of the aggressive expansion of universal and commercial banks into their traditional market. In 2011, the BSP lifted a moratorium and allowed the much bigger banks to open their branches to previously “restricted areas” outside of the National Capital Region. Plus, in 2013, P-Noy signed into law RA 10574 allowing foreign investors to own up to 60 percent of the voting stocks of a rural bank.
In our conversation over coffee in his office in Cabanatuan City, Quililan explained that loan interests are “at the center of this competition. Even ‘modest’ banks have difficulty matching the lower rates that universal and commercial banks can offer for their loans. The big banks have highly integrated and automated services that easily attract many deposits, and deposits are the cheapest source of borrowed capital. This is what makes it feasible for big banks to lower their credit interest rates.”
So how does a ‘modest’ bank like the NRBSL stay afloat in this very challenging environment?
Quililan emphasized that dependability and timeliness of service rendered is where rural banks can maximize their competitive edge. “Because we are relatively small, we are more agile compared to the universal and commercial banks. Our operational layers are quite flat so that decisions and feedback are exchanged and become known much faster. Even a branch manager can communicate directly via text to me, as president, if a quick decision about a client’s case is required.”
Quililan added that satisfied clients are an asset and a source of information and feedback to other potential clients.
Here are three of satisfied NRBSL clients:
Nestor Balajadia, 61, a successful farmer-entrepreneur, was working in his father’s farm in San Isidro, Nueva Ecija at age nine. “Everything was being done manually. There were no machineries then. All we had was a carabao. So I promised myself that if ever I shall remain a farmer, I would make farm work less back-breaking for the workers.” After high school he enrolled at the Central Luzon State University in Munoz, for a bachelor’s degree in agriculture, then headed back to his father’s farm.
In 1998, the Department of Agriculture released an order for 500 tons of palay seeds required for the first planting season in 1999 in the province of Iloilo. He was able to obtain a loan to be able to produce seeds for the second planting season. There were other orders too, to fill for the other provinces of Panay. The opportunity of growing his business through the DA order for certified seeds was what drove Nestor to scout for the “right business partner.” He obtained a loan in March 1999 under NRBSL’s ”Business-Labor Triple Benefit“ program.
Today, Ka Nestor is managing as well as launching several projects, all made possible from the succeeding loans he got from the bank. In addition to his seed growing enterprise, Ka Nestor is maintaining a citrus orchard (kalamansi-an) and a vegetable farm.
He also now maintains a small fleet of farm machineries, some of which are being rented out. He has started running two sets of mechanical dryers based on his own design with a total capacity of 13.75 tons of palay every 10 to 20 hours, and is now building a warehouse that can store 9,000 bags of palay or certified seeds at a time.
Another satisfied client is Tarcila Jonatas, 60, and married to her business partner. They are the proprietors of a motor parts and supply shop as well as rice and vegetable farms in Zaragosa, NE.
Tarcila became a client of the La Paz, Tarlac branch of NRBSL in 1999. ““My husband and I were convinced that we needed to increase the stocks in our shop to meet the growing demand but we did not have the money to do so,” she said. They were hesitant to borrow because they were still making payments on an existing loan with another bank.
They decided to accept NRBSL’s offer to buy-out their existing loan to consolidate with the new loan with NRBSL. With the additional money from the new loan, the couple was able to expand their motor parts and supply shop and finish the construction of their house. Succeeding loans helped them improve their rice and vegetable farms and send all their four children to college.
At the young age of 33, Charito S. Cagayan owns a tricycle parts and supply shop in Rizal. Her husband works as a quality control supervisor in a factory in a town in Laguna.
“I used to work on my father’s farm,” Charito said. “But being now married, I thought about starting my own business which will allow me time for my young daughter while earning my own keep.” Running a parts supply business, which she learned from a brother, was the answer. But she needed a loan to start it.
Fortunately, NRBSL just opened its Rizal branch in 2010, and Charito obtained a loan under its Negosyante ng Bayan credit program. With succeeding loans, she increased her supply stock and expanded her shop, and even co-invested with her brother in a buy-and-sell car business. Now, with a just-approved credit line, her next project will be as a franchisee of a food chain outlet.
How does NRBSL plan to sustain its success and continuous growth? Quililan said, “It’s important to continue to innovate with new products and services. That is where future growth lies.”
Under Quililan’s direction, a money transfer service has been added as part of the regular services of the branches. “This is part of our plan to expand our client base among the OFWs.” And, sounding very inspired, he added, “Soon, the bank will introduce an ATM service.”
* * *
- Latest
- Trending
