The government's move to focus on provinces is expected to help rural banks boost productivity of farmers. (AFP)

The government’s move to focus on provinces is expected to help rural banks boost productivity of farmers. (AFP)

by Imee Charlee C. Delavin, Reporter

The Duterte administration’s push to develop agriculture and areas outside Metro Manila has cast a ray of hope on smaller lenders wanting to regain their footing, if not expand.
Even while campaigning for the Presidency, then Davao City Mayor Rodrigo R. Duterte has capitalized on the disparity in economic development between what he called “Imperial Manila” and the rest of the country, especially the rural areas.
Rural banks have mirrored the countryside’s neglect, with a growing number of the industry’s members driven to bankruptcy. This forced the Bangko Sentral ng Pilipinas (BSP) and the Philippine Deposit Insurance Corp. (PDIC) to launch a rescue package that includes tax and other incentives for third-party investors willing to avert closures, if not revive forlorn rural lenders.
Despite two extensions of the program, rural banks continue to fall by the wayside, erasing the little amount depositors had earned on their accounts, if not their trust in banks altogether.
Rural Bankers Association of the Philippines (RBAP) President Antonio O. Pasia said rural banks are hoping to participate in the financial inclusion thrust of the new government.
“We’re hopeful, we definitely would like to participate in the programs of the new administration, we would be offering the rural banks to take part in the countryside development,” said Mr. Pasia, who is also president of Batangas-based Malarayat Rural Bank Inc.
“We think the new administration is more receptive towards the needs of the farmers and fisherfolks that’s why we’re offering the services of the rural banks in those areas,” he said.
Rural banks are front liners in countryside development and in financing the needs of farmers, fisher folks and micro, small and medium enterprises (MSMEs).
These lenders serve as the platform for bigger banks to fulfill their required 25% credit quota to the farming sector, as mandated by the Agri-Agra Reform Credit Act of 2009.
The small lenders could also serve as the platform for small and medium-scale enterprises to secure funding for their business expansions through microfinance.
With stiffer competition in the banking space, rural banks would like to strengthen [their] position in [their] own areas and “hopefully compete in the delivery of credit to the countryside” by merging to build stronger lenders, upgrading technology and forging partnerships, Mr. Pasia said.
“Eventually, there will be lesser number of rural banks because of consolidations and mergers but stronger players. I think for those that will stay on, there future will be better,” he said.

Tunas are cleaned for export in General Santos City in this file photo. Rural and thrift banks are optimistic that the Duterte's focus on the countryside will help spur regional industries which will also further increase lending. (AFP)

Tunas are cleaned for export in General Santos City in this file photo. Rural and thrift banks are optimistic that the Duterte government’s focus on the countryside will help spur regional industries, which, in turn, will also further increase lending. (AFP)

<style=”text-align: left;”>Development of regional industries sought

Economists have welcomed the Duterte administration’s plan to hasten growth in the agriculture and fisheries sectors, which account for roughly 10% of gross domestic product (GDP) but employs almost a third of the country’s workforce.
The World Bank and the Asian Development Bank have said in previous reports that poverty can be addressed by improving the agriculture sector. Business leaders have also included in their recommendations to the administration the delivery of support services like financing, technology, and logistics to farmers and the adoption of value-chain development for rural-based enterprises.
In line with the new government’s thrust to develop the countryside, business leaders also recommended the development of regional industries.
“The Philippines’ growing middle class and the Duterte administration’s focus on promoting rural development could broaden the reach of the banking system, potentially resulting in more revenue streams,” said Land Bank of the Philippines market economist Guian Angelo S. Dumalagan.
Chamber of Thrift Banks President Rommel S. Latinazo said the sector remains “very optimistic” given the new administration’s thrust.
“I think we continue to push for inclusive growth that means when there is development in the countryside, it means more opportunities for lending activities and there’s a need for financing, credit facilities as well as consumer financing — these are the two main businesses of thrift banks,” Mr. Latinazo, who is also RCBC Savings Bank President and CEO, said.
“Of course there’s also that pronouncement from the administration that they’d like to push for the agricultural side and that’s where many thrift banks are positioned… [A]griculture means it’s not going to happen in Metro Manila, it will happen outside Metro Manila, in the provinces and that’s where most of us are positioned like the stand-alone thrift banks, so that’s also an opportunity that makes us positive,” he added.
Mr. Latinazo said consolidations among smaller banks will become more sensible amid stiffer competition in the near term.
“Consolidation remains to be the thrust of government. The BSP has been putting up incentives to encourage more integration, consolidation. That is happening [to] all sectors — rural banks, thrift banks and we see that continuing. Indications are there. A lot of foreign banks are looking at us, either by way of putting up their own or via investment in an existing bank,” Mr. Latinazo said.
Maybank ATR Kim Eng banking sector analyst Katherine Tan said mergers and acquisition “has been quite attractive because there’s a lot of growth potential, as we’re very underserved and the banking space remains underpenetrated.”
“We’ve already seen a lot of big banks acquiring rural banks for the past years and there’s been a lot and it’s still going to continue. We have over 600 banks in the Philippines and the consolidation would continue,” she said.

Imee Charlee C. Delavin (@charleedelavin on Twitter) covers private banks for BusinessWorld. She loves to travel.