Fintech to improve rural lenders’ reach

TAPPING digital solutions will help rural banks to extend more loans to farmers, as it would eliminate logistical woes that limit access to formal credit, the country’s central bank chief said.
Bangko Sentral ng Pilipinas (BSP) Governor Nestor A. Espenilla, Jr. said the adoption of financial technology (fintech) will allow small lenders to broaden their reach and expand services in the countryside, particularly to the agriculture sector.
“We believe that with an increasing recognition of the necessity for innovation, coupled with proximity to and intimate knowledge of the market, rural banks can now, more than ever, reinvigorate and blaze new trails for agriculture financing in the country,” Mr. Espenilla said in a speech before the Rural Bankers Association of the Philippines general membership meeting in Davao City yesterday.
“Innovations enabled by digital technology and value chain approach can not only make agri-financing more viable but also unlock new opportunities for rural banks to deliver a whole range of financial services catering to the unique needs of farmers and their communities.”
Cloud-based banking systems as well as getting aboard the online Lendr platform are also seen to facilitate wider access to credit, leveraging on Internet connectivity at an era of wide smartphone usage.
The BSP chief cited rural banks as a “catalyst” for broader financial inclusion given their strong presence in far-flung towns which are not served by universal and commercial lenders. A third of municipalities in the country remained unbanked in 2017, leaving a sizeable gap in the number of Filipinos with access to the banking system.
In particular, lending to the farm sector remained tepid despite a 2010 law requiring all banks to set aside a portion of their loanable funds for agriculture.
Republic Act 10000 or the Agri-Agra Reform Credit Act mandates banks to allot at least 10% of its total loanable funds to agrarian reform beneficiaries, and 15% for farmers and fisherfolk.
Compliance remains poor as banks only extended a total of P573.7 billion of agri-agra loans in 2017, just half the P1.034 trillion which they should have lent to the sector, according to BSP data.
Relaxed rules on banking requirements are also expected to help lenders get more customers tap formal financial services. Mr. Espenilla said rural banks can set up branch-lite units and offer basic deposit accounts to make banking more accessible.
Finance Secretary Carlos G. Dominguez III said in a separate speech that the Financial Inclusion Bill being pushed by his agency has been identified as a priority measure, which will improve access to credit among small-scale firms.
“We are rushing the completion of the digital backbone for processing payments in real time. It will alter the work of all our financial institutions dramatically over the near term. I urge all of you to familiarize yourselves with recent advances in fintech,” Mr. Dominguez said.
Studies showed that gross domestic product could increase by more than 14% if the financial inclusion gap was closed in the Philippines. — Melissa Luz T. Lopez