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Challenges and Opportunities

For the past 53 years, countryside development and rural banks have been indispensable partners. Financial services that far-fllung areas of the country sorely lack then and now are mostly provided not by big banks but small local banks which mostly have limited capital but a groundswell of venturing spirit to back their aim of providing the financial needs of their townfolks.

On the occasion of the Rural Bankers Association of the Philippines’ (RBAP) 53rd charter anniversary last Oct. 15, many bankers who are pioneers in several ways on rural banking in their particular communities reminisced about the challenges they faced in pursuing the goal of providing ample financial services to the countryside. Such challenges had become more bearable with the forming of the RBAP.

RBAP has grown today to a membership of 600 banks throughout the country with over 2,100 branches, all of which serves the needs of clients as diverse as the communities that they are situated. Different industries and differing cultures in every region resulted in the need for rural bankers to adjust to the demands of different businesses with a personal touch as a result of their association with the communities they operate in.

Unlike commercial banks that gives their service in a professional but impersonal manner, rural banks are expected to create a more intimate relationship with their clients. Such a character of rural banks needed, however, balancing as recent global events dramatized the need to boost the fundamental strength of the rural banking industry.

The RBAP and its research arm Rural Bankers Research and Development Foundation Inc. (RBRDFI) led by its Chairman Joseph Omar Andaya, thus, worked with regulators such as the Bangko Sentral ng Pilipinas and the Philippine Deposit Insurance Corp. (PDIC) in the crafting of regulations, policies and programs that would further enhance the stability of rural banks.

Such collaboration resulted in measures such as the Strengthening Program for Rural Banks (SPRB), the holding of enhanced training seminars in management and corporate governance by the RBRDFI to keep rural banks abreast with global regulations and standards such as the Basel accords that laid down stricter capital requirements on banks.

Seminars on fraud prevention were also conducted among its members with the help of the National Bureau of Investigation (NBI) and the Anti-Money Laundering council (AMLAC) to toughen the industry against financial fraud or crime.

RBAP also has an agreement with the United States Agency for International Development (USAID) that extended the fourth phase of the funding agency’s Microenterprise Access to Banking Services (MABS) program until 2013. The program has been instrumental in educating rural bankers in designing microinsurance, microhousing loan and mobile phone banking products and services and the strengthening of their microloans and microsavings businesses.

The USAID funded project was launched in 1998 to provide financial services to the microenterprise sector in Mindanao, which was subsequently expanded to cover rural banks, allowing them to serve more than 470,000 small and medium enterprises by providing them with P17 billion worth of loans since then.

The industry is also continuously developing new products such as the microinsurance for farmers and small businesses and economical loans for the rural poor through the Agricultural Guarantee Fund Pool of the Department of Agriculture.

RBAP President, Ma. Corazon L. Miller, noted in her speech during the RBAP event that evolving technologies have resulted in the introduction of other sources of financing for farmers, fisherfolk, small entrepreneur and the others who belong to the bottom of the financial pyramid.

The RBAP president, nevertheless, recognized the use of new technologies such as mobile phones to spur financing in the countryside as having been developed in response to the demands of necessity.
As an industry, rural banks should also evolve and strengthen to be able to compete and such technological advances should be considered as opportunities to prepare rural banks for evolving challenges that will eventually strengthen the rural banking sector and improve services to bank clients.
Opportunities for growth of the industry, thus, lies in the big challenges on the horizon.