Bayani Ng Bayanihan

Rural banks have been crucial in helping finance small businesses in the province. This is attested to by the World Bank and the Bangko Sentral ng Pilipinas. Here is an article that appeared in the Manila Times which provides more information on how Rural Banks help OFWs and SME’s in the provinces.

RBAP
By Atty. Francis Ganzon

Local rural banking sector takes pride in its role in the countryside.

In a recent article published in The Economist, World Bank Chief Economist Justin Lin underscored the importance of small banks in developing countries where a large number of lower income sectors, which need to be taken care of, reside.

According to Lin, “Smaller domestic banks are much better suited to providing finance to the small businesses that dominate the manufacturing, farming and services sectors in developing countries. There is evidence to suggest that growth is faster in countries where these kinds of banks have larger market shares, in part because of improved financing for just these kinds of enterprises.”

Lin cited how Japan, South Korea and China’s “adherence to simple banking systems” kept them away from financial crises on their road to
becoming high-income countries. In the United States, local banks were dominant during the industrial phase of its development.

I could not agree more with the World Bank observation. The WB article written by no less than the institution’s chief economist only validates the rural bank industry’s vital role in developing countries like the Philippines.

Thus, to be able to achieve an ideal financial “ecosystem” where all client sectors—from small to big—are served well, small banks—the rural banks, most especially, have to co-exist with the large banks to provide the needed balancing factor. This is to ensure that the country’s financial system does not leave out especially the marginalized sectors of the society.

This has been the thrust of the rural bank industry since its inception more than 50 years ago—to serve the unserved and underserved
segments of the population. This thrust is supported by the fact that in more than 40 percent of the areas where rural banks are located,
there are no other forms of financial institutions to be found aside from rural banks. This shows how rural banks are able to serve the
needs of underprivileged and previously unserved communities in the country.

The rural bank sector releases approximately P2.7 billion loans every month as working capital for micro-entrepreneurs, thereby serving as a catalyst for development.

Based on data from Bangko Sentral ng Pilipinas (BSP), more than 800,000 micro-entrepreneurs were able to avail of financing totaling
to P8 billion as of end-2008. This accounts for more than 30 percent of the total number of micro-entrepreneurs served nationwide, and 50
percent of the value of total loans to this sector.

Rural banks’ exposure to small enterprises is even greater at P32.4 Billion, or 51.9 percent of its total loan portfolio as of latest
complete data from the BSP dated end-December 2007. Loans extended to medium enterprises amounted to P8.4 billion in the same period. In toto, RBs have a 75.4 percent compliance rate for lending to the SME sector vs. the minimum requirement of 8 percent. Moreover, 2008 data, once available, are expected to show an even more robust lending to the SME sector.

Any business activity or enterprise may be categorized as micro if it has a capitalization of not more than P3 million, small if above P3 million but not more than P15 million, and medium-sized if above P15 million up to P100 million.

Imagine how many rice farmers and millers, poultry and hog growers, mini-grocery owners, and handicraft manufacturers that rural banks have helped fund. Imagine how many of these small town entrepreneurs have succeeded in establishing formidable businesses with the help of their local banks.

Indeed, we at the rural bank industry have helped realize thousands of dreams of people in the countryside and have supported the overall growth and development of the communities where their businesses are located. Needless to say, our service to the previously unserved and underserved segments is one of the best, if not the best service fulfilled by the industry.

Atty. Francis Ganzon is the president of Bangko Kabayan (A Rural Bank) Inc., a 52-year-old rural banking institution serving its “kabayans”all over the Province of Batangas. He served as president of the Rural Bankers Association of the Philippines (RBAP) for FY 2006 to 2007 and was the chairman of the Rural Bankers Research and Development Foundation for FY 2008 to 2009. He finished his degree in Law at the Ateneo de Manila University.

Please see the Bank list guide of Bayaning Bayanihan.  These Rural Banks are in the top 3% of the Rural banking industry in the Philippines and may be present in your hometown.  Click on the active links to visit their websites for more information. Halina, Bayaning Bayanihan Na!