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RBs: Last mile in remittance business |
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By Ted P. Torres
The Philippine STAR 04/18/2006 The Rang-ay Bank Inc. is close to transforming itself from the traditional and antiquated rural bank to a full banking institution offering various financial services previously offered exclusively by commercial banks. "From mere deposit taking and lending, Rang-Ay Bank offers a basket of financial services that will not only benefit the banking public but also the rural bank itself," Ives Q. Nisce, president and chief executive officer of Rang-ay Bank, said. Rang-ay Bank is a rural bank (RB) considered among the biggest and most profitable financial institution in Northern Luzon. Its head office is located in San Fernando, La Union. The bank expanded its remittance business through alliances with banking and non-banking institutions resulting in fee-based earnings. It is allied with Western Union and Uniteller, two of the country’s major players in the money transfer (remittance) business. It has alliances among others with the Rizal Commercial and Banking Corp. (RCBC) and Banco de Oro Universal Bank (BdO). Citibank in fact has started talks with the Northern Luzon-based rural bank as well as 20 of the biggest RBs in the country for the same purpose. It has forged alliances with Globe Telecommunications and Smart Telecommunications for the remittance business under the SMS-based programs known as "G-Cash" and "Smart Padala," respectively. Approximately 40 percent of remittances collections are made in the rural areas, and Northern Luzon contributes significantly. "Remember that residents of Northern Luzon have long sent their sons to the United States, the West Coast and Hawaii long before the Middle East and Hongkong was a fad." Data from the Bangko Sentral ng Pilipinas (BSP) show the biggest chunk of money transfers from migrant Filipinos come from the US. RBs reportedly get a commission of a little over a dollar or a roughly P100 per transaction. "True to its calling, rural banks are the last mile in the remittance business, fulfilling the desire of the BSP to make remittances faster and safer," Nisce added. Another source of fee-based earnings for Rang-ay Bank is the designation of the bank as collecting agent for La Union, Ilocos Sur and parts of Ilocos Norte for the Agricultural Credit Policy Council (ACPC), an attached agency of the Department of Agriculture (DA). Loan receivables amount to P84 million. At the start of 2006, the rural bank launched its first automated teller machine (ATM) at its head office. Phase two of the ATM program will be one unit for every branch, and phase three entails all machines to be enrolled in the Megalink network system in a "unique system." It is also poised to apply for a foreign currency deposit unit (FCDU) license as another source of business. It is already an authorized foreign exchange dealer as well as an authorized collecting agent for the Social Security System (SSS) and the Benguet Electric Cooperative. "Fee-based earnings is slowly but surely becoming a component part of the RB’s balance sheets," Nisce added. Rang-ay Bank operates 11 branches while four more will be opened within the year (due to BSP incentives offered for bank consolidations from mergers and acquisitions), and five more in the pipeline. In November 2004, Rang-ay Bank acquired the Rural Bank of Burgos (Ilocos Sur) Inc. and it was fully integrated by December 2005. Existing branches are located in San Fernando (head office), Agoo, Tubao, downtown in San Fernando, all in La Union; Candon, Sta. Cruz, Vigan, and Burgos, in Ilocos Sur; Laoag in Ilocos Norte; Dagupan in Pangasinan; and Baguio in Benguet. To be opened within the year are branches located in Bacnotan, Nagujilian, and Balaoan, in La Union, and La Trinidad in Benguet. In end-2005, Rang-ay Bank reported total resources of at P679 million and deposits reaching P500 million. Total loans accumulated since 1956 already breached the P7 billion level extended to over 100,000 borrowers. In 2005 alone, P1 billion in loans had been released to 10,000 borrowers. It ranked first in terms of total deposits, gross loans, gross assets, and total capital in both Region 1 and the Cordillera Autonomous Region (CAR) end- September 2005. It ranked second in the same four categories in Northern Luzon. The regional district of the Bureau of Internal Revenue (BIR) recognized Rang-ay Bank as the second largest taxpayer last year. Under its loan program, majority or 88 percent were released to the farming sector and merely 12 percent to commercial borrowers. In the ’90s, agricultural loan releases accounted for 60 percent of the total creidt program. Industrial and small and medium enterprises (SMEs) accounted for 36 percent of the total loan portfolio. Capital accounts reached P117 million end-2005, the first-ever instance that it breached the P110 million ceiling. |
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