Mobile Technology Answer to High Cost of Rural-Credit Deployment

by David Cagahastian – November 16, 2015

Finance Secretary Cesar V. Purisima said that to lower the costs of reaching out to micro-, small- and medium-sized enterprises (MSMEs), banks and other financial institutions should tap technological advances, like the increasing sophistication of mobile phones.
At the launching of the Financial Infrastructure Development Network (FIDN) under the framework of the Asia-Pacific Economic Development (Apec), Purisima said the high cost of operating in far-flung areas ranks high among the many problems banks face in the deployment of capital for MSMEs.

Other problems that hinder the giving of access to capital to MSMEs is the lack of a credit-information system that should lessen the lending risk for banks and the lack of a framework that will recognize as collateral the assets of MSMEs that are currently not acceptable, such as personal property.

“In lowering costs, the vision of mobile telephony should be realized such that it can become the wallet of the future. Mobile telephony could also be the access point of MSMEs,” Purisima said in his keynote speech.

The use of mobile telephony for banking services in the rural areas is already being done and expected to become more in use with the involvement of the Rural Bankers Association of the Philippines (RBAP) in the online marketplace platform for consumer loans established by Voyager Innovations, the digital innovations arm of PLDT and Smart.

Voyager Innovations introduced RBAP to its Lendr web site, the first online-marketplace platform for consumer loans, wherein loan applications may be sent by prospective clients through
applications on their mobile phone.

Through the involvement of RBAP, prospective clients of rural banks may be able to apply for consumer loans through their mobile phones, with options on which loan product to avail of from among the many loan products offered by the different banks at varying interest rates and repayment terms.

Lendr also provides clients with updated information on their loan-application status, loan repayments and
amortization schedule.

“PLDT and Smart strongly believe in enabling broader financial access to Filipinos. By bringing digital services to the countryside, we help our partners, like RBAP, extend their reach and enhance their efficiency,” PLDT and Smart Chairman Manuel V. Pangilinan said during his keynote speech at the launching.

According to a Bangko Sentral ng Pilipinas data for 2014, rural banks are growing in terms of size and reach, with industry
assets growing to P203.8 billion in 2014, while total loan portfolio to P128.3 billion. Total domestic deposits increased to P144.5 billion in 2014, from P135.6 billion in 2013.

But compared to the entire MSME industry in the Philippines, considered the backbone of the country, this modest growth of the rural banking system still appears wanting, and many MSMEs are still deprived of access to capital that can help them break through to big-time status.

Foreign Affairs Undersecretary Laura del Rosario said the lack of access to capital keeps these MSMEs where they are despite their ability to produce quality products that have a demand abroad.

This, because when faced with an opportunity to produce large volumes of their quality products, they cannot deliver because their operations are only big enough to deliver small quantities of such products.