Philippine Star: RBs to boost consumer, SME lending portfolio

Philippine Star — The country’s rural banks will be aggressively lending to the consumer and small and medium enterprise (SME) markets this year, a bank official said.

According to Rural Bankers Association of the Philippines (RBAP) president Ian Eric Pama, the high level of liquidity, low interest rate environment, and strong competition within the country’s banking systemserve as a perfect condition for robust lending.

Pama added that rural banks would likewise increase their presence in the urban areas outside Metro Manila.

“Rural banks will also expand aggressively in urban areas to capture these markets. And these are the thrift banks’ traditional market base,” the RBAP head added.

One reason for the gradual shifting of attention is that competition in the microfinance sector is “getting stiffer.”

“A lot of non-government organizations (NGOs) and foundations are into microfinance and they are not regulated by BSP (Bangko Sentral ng Pilipinas). There is no level playing field for rural banks, so we expect increased lending to SMEs and consumer market,” he added.

And a lot of these groups, including the microfinance institutions (MFIs), are getting support fromcommercial banks.

Still another reason is the swift urbanization of a lot of towns and municipalities where rural banks have strong presence. As these towns prosper and grow, the same goes with their credit needs and credit appetite, he said.

Urbanization means more lending to the consumer and SME markets, a strong potential for deposits, and expansion of other bankingservices.

Latest data from the BSP reflect a 4.1 percent growth in deposits in the first three quarters of 2011. Demand and new deposits went up 14.6 percent.

In the same period, rural banks exceeded the 10-percent allocation for agrarian reform credit by over 14 percent.

For microfinance lending, latest data reflect an amount of P5.8 billion in early 2011.

Nonetheless, Pama said that there would still be a pressing need for the rural banking system to consolidate.

“I expect more consolidations in the sector in the near future because as they say, size is might. To be able to compete competitively, size does really matter,” the RBAP president explained.

He further explained that the entry of new and younger generations of rural bankers signals a shift of new ideas.

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