Group backs move to allow foreign equity in rural banks

THE Rural Bankers Association of the Philippines (RBAP) expressed support for allowing foreign equity in rural banks, saying this will boost the industry.

In an email interview, RBAP president Edward Leandro Garcia said the move is “very positive news” for rural banks.

The Senate recently amended a law that for more than two decades limited rural bank ownership to Filipinos. The bicameral committee decided to adopt Senate Bill 3282’s main provision to allow foreign individuals and entities to acquire equity of up to 60 percent in rural banks.

Garcia said this will have direct positive impact on countryside development by creating an environment conducive to economic growth among rural banks and farmers and micro-entrepreneurs.

“Reinforced with foreign equity, rural banks will be in a better financial position to reach out and serve the unbanked and the underbanked by offering different products like microfinance and micro-finance. In addition, rural banks can expand more, knowing they have the financial wherewithal to do so,” Garcia told Sun.Star Cebu.

He said that with rural banks serving as a stable source of funding, farmers, fisher folks and micro-entrepreneurs can utilize loans to increase their livestock, improve their harvest through the procurement of better fishing tools or boats, or simply expand their business.

The amended bill also seeks to strengthen rural banks, which are prone to mismanagement. A total of 24 banks were placed under the Philippine Deposit Insurance Corp. receivership last year, mostly rural banks.

Senator Sergio Osmeña III, chairman of the banks, financial institutions and currencies committee and a staunch supporter of the bill, believes there is a need for rural banks to look beyond their limited resources and take advantage of funds
available elsewhere.

He said the opportunity to forge international equity partnerships will put rural banks on a level playing field with its thrift and commercial bank counterparts. This would mean more resources to reach to out the unbanked, underbanked and less privileged sector of the society.

“Once this bill is signed into law, the whole RBAP will be keenly anticipating for talks to intensify for potential foreign investor participation in the industry,” said RBAP vice president for Visayas Enrique Abellana of Rural Bank of Barili.

Abellana said rural banks in Cebu are very sophisticated already and have embraced technology.

“With the additional capital infusion given a foreign partner, services can even be at par with the bigger commercial banks,” he said.

As of Sept. 2011, rural banks provided a total of P5.4 billion worth of microfinance loans to 808, 021 micro borrowers.