Rural banking grows via microenterprise access program

DAVAO CITY, Philippines — A program of the Rural Bankers Association of the Philippines with technical assistance from the United States Agency for International Development (USAID) that is training rural banks to cater to microenterprises is enabling these financial institutions to widen their market, a statement of the Mindanao Economic Development Council (MEDCo) said. The current fourth phase of the Microenterprise Access to Banking Services (MABS 4), which will run until 2013, is teaching rural bankers how to design their microinsurance, microhousing loan and mobile phone banking products and services, as well as strengthen their microloans and micro-savings businesses. The MABS program, which forms part of USAID’s Mindanao Peace and Development Fund, for which MEDCo serves as oversight implementing agency, aims to increase the number of micro-borrowers among participating rural banks by more than 375,000 from this year to 2013. Micro-borrowers currently under this program are distributed as follows: 70,800 in Luzon; 64,600 in the Visayas; and 67,300 in Mindanao. Mindanao has 30 banks participating in the program with about 200 branches and satellite offices, compared to 46 from Luzon and 14 from the Visayas. Total bank branches and satellite offices nationwide participating in this program now number 453. Started in 1998 to provide financial services to microenterprises in Mindanao, the program targets to assist 550 rural banking units and branches nationwide by 2013. The statement quoted MABS Chief of Party John Owens as noting that Mindanao experienced growth in rural banking, accounting for P10.1 billion worth of loans out of the total P20.7 billion nationwide since the start of the program. He also noted that deposits in these banks in Mindanao have reached P797 million, out of the P1.7 billion nationwide since the start of the program. "By providing microfinance services and focus on deposit mobilization, rural banks are in better position to weather changes in the financial market," he said. MABS will also continue to implement the mobile phone banking services that was developed in 2004 in partnership with G-Xchange, Inc. (GXI), wholly owned subsidiary of Globe Telecom Inc. A Web site — http://www.mobilephonebanking.rbap.org — launched by RBAP with support from GXI provides mobile phone banking applications and mobile commerce services for rural banks and their clients. Services include Text-A-Payment for loan payment, Text-A-Remittance to transfer money locally and abroad, Text-A-Deposit for remote deposit mobilization, and Text-A-Withdrawal whereby clients can withdraw electronic money directly from their savings account to their mobile wallet. About 67,000 rural bank clients and employees have registered to use these mobile phone banking services as of last September, the statement read. The program will also support rural bank plans to pilot-test next year mobile phone banking services using platforms of Smart Communications Inc. The MABS program began working with four banks in Mindanao in 1998. The First Valley Bank, founded in Lanao del Norte and one of the Mindanao participating banks during MABS’ first rollout in 1999, will open its 16th branch in Zamboanga City next year. It now has 68,000 client micro-depositors. The other pioneering Mindanao banks are the Green Bank, now with 32 branches in the Visayas and Mindanao; Cantilan Bank; and the Cooperative Bank of Misamis Oriental. Central bank data shows that the rural banking sector grew slightly, with a total loan portfolio rising just 2% to P98.451 million by the end of the first half from P96.53 billion in end-2007. The sector has remained profitable, with return on equity at 13.56% by last June, higher than commercial banks’ 7.22% and thrift banks’ -1.16% that same month. "We hope that with programs such as MABS, Mindanao will be able to get a large chunk of development support through the program’s assistance to rural banks and microfinance institutions in Mindanao which are the conduit of many of our micro, small and medium entrepreneurs," the same statement quoted MEDCo Chairman Virgilio L. Leyretana Sr. as saying. - BusinessWorld