64th RBAP National Convention and General Membership Meeting
Cordillera Convention Hall, Baguio Country Club
May 30, 2017
by Sen. Juan Edgardo “Sonny” M. Angara
Magandang umaga po sa ating lahat. Thank you for inviting me here all the way from Baguio. I wish I could stay as long as you but I just arrived and I have to be in my flight after this speech because, well, we all know there are many important things happening around in our country.
But give me some time to share my thoughts on what is happening in banking sectors.
So, by many indicators the Philippine financial sector appears to be still performing well and enjoying (_) global confidence. Last year, consolidated bank loans were up, as were the assets of the banking industry. Deposits were at an all-time high of P10.1 trillion. Credit rating agencies maintained their positive outlook for Philippine banking, as several foreign banks expressed interest in setting up shop in the country. As outgoing BSP governor Amando Tetangco Jr. pointed out, not only did Philippine banking survive a volatile 2016, we thrived throughout of it.
Such high performance has been true for a number of years. Two years ago, we pointed out that ours was the only banking sector out of 69 others rated positively by the end of 2014. We were performing well then. We seem to be still performing well now.
But while things are looking up, millions are still hungry, sick, jobless and hopeless. While the gap between the rich and the poor seemingly continues to widen.
Our economy for sure remains among the fastest growing in the region. We’ve maintained more than 70 quarters of economic growth since 1998 which is an impressive thing, but I think just as probably, this is not the first time that you’re hearing this but it appears that many are still excluded from this growth – still excluded. And we have a few at the top, we have millions at the bottom and we still seem to lack that strong middle class which many countries have succeeded in building up.
History has shown that this middle class is the most important foundation, not just for promoting economic activity, but also for building a robust and a stable democracy. Getting more people into the class that philosopher Aristotle once described as a moderating force should be one of our goals as a society.
The American poet Walt Whitman once wrote that the greatest country is not that which has the most capitalists, the most monopolists, the most immense grabbings or fortunes with its sad, sad soil of extreme degrading damning poverty, but it is a land where wealth does not show such contrasts high and low, [and] where all men have enough for themselves.
We heard this during the recent Asean business summit. We heard it during the Asean summit when we had all the leaders of the various countries: Indonesia, Malaysia, Singapore, etc.
I’m encouraged by your association’s effort alongside the BSP to build a more inclusive society. We’ve also worked as a public servant, to build a strong middle class, where all Filipinos ultimately had enough for themselves and their families.
For the past decade or so, we’ve been trying to promote reforms in human capital development as well as reforms in taxation more recently. We’ve always been focused on health and education ensuring that every Filipino is healthy and skilled enough to earn a decent living and to lift themselves up from poverty.
From making kindergarten and early-years education universal, we’re now working on making tertiary education available to all. The Senate very recently passed the Free College Education Law or bill and that’s a law in few weeks. Surely, the president will sign it into law. So, from mandating universal healthcare to expanding Philhealth coverage, we’re now trying to get basic medicines and even dialysis treatment to the communities who need them the most.
Building a middle class is also why we’re working to address some of the deficiencies in our tax code that have gone unanswered for almost two decades. Our current tax code was enacted in 1997, , the CTRP or Comprehensive Tax Reform Program during the Ramos administration. In the intervening years since then, we have failed to keep our tax rates updated with the times or indexed to inflation.
This has pushed people like entry-level professionals, nurses, teachers, call center agents into higher brackets, paying high taxes which they shouldn’t be paying. And while these at the very top are more likely to have a means to reduce or those at the very top are more likely to have the means to reduce their tax due, this was how our antiquated tax code helped widen the gap between the rich and the poor.
So, with the changes we seek to hopefully enact no longer will those trying to move up be overburdened by heavy taxes while those at the top, enjoying a free pass.
We’re fortunate to work on several banking sector reforms focusing on getting people access to the financial services that do boost their chances of moving up economically.
During the 14th and 15th congresses, we enacted the pre-need code to save what at the time was a scandal-ridden Pre-Need industry. We passed a stronger insurance code, and we modernized our insolvency laws. We wanted to make the banking sector more accessible to have lower transaction cost and to allow for more people to acquire credit with less collateral. Hence, we passed the Credit Information Systems Act which mandates that all financial institutions be connected to a single database where credit information of clients is shared. This was 2003. So we’re happy that finally, in 2017, the Credit information Corporation expects this database to finally come online although this is more than a decade after the original law was enacted.
We also laid down a framework for banks and other financial institutions to become administrators of the PERA or the Personal Equity and Retirement Account, a Philippine version of 401k retirement plans offered in the United States as well as in other developed countries.
Thanks to the efforts of the BSP, SEC and other regulators. Finally, the PERA system is in place and for now, we have some universal banks who are already accredited as PERA administrators.
PERA hopes to give our Philippine consumers, consuming public our better selection because any financial product can be included as PERA account and OFW fund. Before we’ve been saying that there is a need to channel these funds rather than just be used to spend in malls or buying appliances. PERA is one such way to attract such funds providing tax (_) in the process.
Hopefully, we can expect similar developments with the role of the real estate investment trust or the REIT. These laws were passed almost a decade ago but it shows how hard it is for our system to absorb some of these changes.
None of these changes will stick, however if our people are not financially literate. And that’s why we make sure to include in the Youth Entrepreneurship Act that financial literacy be incorporated in curriculums across our basic education system.
We even enacted the law that designates the second of November every year as Economic and Financial Literacy Week where government agencies and local government units can conduct information-drives and training modules on financial literacy. How many times have we seen our people lured by (_) and blinded by risky ventures in the past? Investment scams. Paulit-ulit ho. Every year has its own version and hopefully with greater financial literacy, could have less public scam by all of these unscrupulous schemes.
I’m happy to note that the forefront of providing financial services to those at the bottom working to move up. Among the different bank categories, rural banks are perhaps among the most compliant in terms of mandatory lending. For that I congratulate you.
Where the Magna Carta for Small Enterprises mandates banks to set aside 10 percent of their loan portfolios for MSMEs, RBAP members devoted roughly 33 percent—or one-third of your total available credit.
Where the Agri-Agra Law (RA 10000) requires that up to 25 percent of loans should be for agriculture, fisheries and agrarian reform beneficiaries, RBAP members gave nearly 50 percent (46.53%= 29.5% to agriculture; 17.03% to agrarian reform). Palakpakan naman po ninyo ang inyong mga sarili.
For various reasons, the banking sector in general finds it difficult to serve those at the bottom—the majority of Filipinos whom some consider unbankable, and thus too risky to serve.
That’s clearly not the case for all 473 members of the RBAP. You may account for nearly two percent (1.6%) of the entire banking industry’s assets. But clearly, by your credit performance alone, you have demonstrated your commitment to helping the millions at the bottom for the financial or economic period. You can truly be proud of the example you are setting for the rest of your industry. And I have breakfast with some of your officers and they are trying to convince me not only to penalize those who do not comply but to also reward those who comply with the Agri-Agra Law and other mandated or legislated commitments. So, we are looking at that. I am honored to be among you here who are working for financial opportunities to be made available for all Filipinos to move up in our society.
Having access to enough education, health, take-home pay, and financial opportunities, ultimately help ensure that people are included and given the chance to participate and engage in society.
As economic forces have brought prosperity to societies in the last decade to various countries particularly in Asia, have been lifted out of poverty. At the same time though, there are forces and dark clouds that appear in the horizon.
Terrorism and extremism have emerged as threats to our way of life. We are hopeful that our armed forces will be able to put a stop to the violence happening in Mindanao at the soonest time possible time , effectively neutralizing any need for Martial Law to continue. That is a more urgent concern for the moment. But really the surest way for Martial Law to never happen again is by organizing our communities to be as inclusive as possible and by working so that every person has enough, materially, and spiritually. That should be our long-term, abiding concern.
Indeed, much has already been achieved, but clearly, much more needs to be accomplished. All the more is it imperative that we remain vigilant and incessant in pushing the sector forward.
I understand that RBAP has constituted a technical working committee to study the Rural Banking Act of 1992 as well as other related laws. I’ve also been told that there are talks about setting up shared services to boost the IT capabilities of small rural bankers, and hopefully enable them to offer their clients e-banking services. Again, I commend you for taking pro-active measures to provide better services for our countrymen.
To be ever vigilant requires us to be a little unsatisfied, even if we’ve accomplished much. Thomas Edison once said, “Restlessness is discontent and discontent is the first necessity of progress. Show me a thoroughly satisfied man and I will show you a failure.” I don’t think any of us want to fail in what we are doing.
There is still much to be unsatisfied with, especially when it comes to financial inclusion. Millions of Filipinos are still unbanked. Only 14 percent of Filipino households maintain a deposit account (as compared to 86 percent without one). Two out of 10 Filipinos have never even saved one centavo in their whole life.
We still hear of cases where gaining access to credit is the exception rather than the rule for small and medium enterprises. This partially explains why this sector accounted for only 35 percent of GDP in 2014, despite representing more than 99 percent of all businesses in the Philippines and employing up to 65 percent of the labor force.
The same rings true for agriculture, the sector that as of January 2017 employed 1 out of every 5 able-bodied Filipinos. A recent study by the Agricultural Credit Policy Council (ACPC) estimated that in 2014, the unmet credit demand for priority agricultural products was as high as P364 billion in 2014.
Adam Smith, the father of capitalism, wrote in the book The Wealth of Nations, that a good financial system can increase the industry of the country, “…not by augmenting the capital of the country, but by rendering a greater part of that capital active and productive. He continues, by writing and saying, “The judicious operations of banking enable [a dealer, merchant or bank client] to convert this dead stock into active and productive stock; into materials to work upon, into tools to work with, and into provisions and subsistence to work for; into stock which produces something both to himself and to his country…”
In short, the financial system should not be where wealth is just hidden away, but where it is put to better use for the rest of the country. The financial system shouldn’t just be a collection of vaults or security boxes, but a clearinghouse of opportunities.
Nagtatagumpay po ang inyong sektor kapag nakakahain kayo ng ayudang pinansiyal sa bawat Pilipinong nangangailangan at karapat-dapat na makatanggap ng pondo. Sapat dapat ang kanilang “access to credit.” Sapat dapat ang pagkakataon para sa bawat Pilipino.
Our greatest source of discontent, but also our most powerful motivation, should be the fact that even though ours is among the fastest-growing countries in the world, we are still also among the world’s most unequal societies – with the very few hoarding so much, while the impoverished millions barely even surviving.
But then, there are stories like those of Lydia Malot, a nata de coco manufacturer. She’s a former teacher, and Lydia was able to secure some orders from Dole Philippines, borrowing P4,000 from a small microfinance organization in 2006 to expand her productions. Just recently, she started exporting nata de coco to Korea.
There’s also an inspiration story of Ester Sheila Vitto, who, with her husband, started a business making sandals and slippers out of old tires. Her initial capital was P10,000. In 2007, she took out a P6,000 loan from CARD Bank. By 2015, her average annual sales were P2.1 million, with average annual profit at around P1 million.
These individuals are among the winners during the recent Citi Microentrepreneurship Awards (CMA). They prove that people can overcome poverty, especially with an inclusive and nurturing financial system. Imagine if we are able to replicate more of these stories—in more of the poor Philippine towns, and poor Philippine communities, I’m sure rural banks will play a significant role in multiplying these efforts.
Noted economist Jeffrey Sachs once said: “At the most basic level, the key to ending extreme poverty is to enable the poorest of the poor to get their foot in the ladder of development. The ladder of development hovers overhead, and the poorest of the poor are stuck beneath it. They lack the minimum amount of capital necessary to get a foothold, and therefore need a boost up to the first rung. “Our financial system can definitely become that “boost-up to the first rung” for our people.
Umaasa po ang mga kababayan natin sa inyo, mga rural banker at tiwala naman po ako na you will rise up the challenges in the future.
Maraming salamat po sa pag-imbita sa akin at ako’y nakikiisa sa inyo ngayon sa inyong selebrasyon and I wish you a productive few hours days ahead.