MICROCAPITAL BRIEF: Filipino Rural Banks Prepare for Capital Injection from Foreign Investors

Rural banks in the Philippines are preparing for the possible entry of foreign investors into the rural banking market following the passage of a bill that would allow such banks to sell stakes as large as 40 percent to foreign interests.

Ian Eric Pama, president of the Rural Bankers Association of the Philippines (RBAP), was quoted as stating that “foreign equity would help rural banks expand their operations to become a major stimulus for microfinance, micro-enterprise or small and medium sized enterprises (SMEs), and agriculture sectors thereby serving as catalysts in countryside development. We cannot continuously depend upon the National Government to invigorate local economic activity.” According to Mr Pama, approximately PHP 2.7 billion (USD 63.9 million) loans are disbursed every month as working capital for micro-entrepreneurs.

The Bangko Sentral ng Pilipinas (BSP), the central bank of the Philippines, reportedly is supportive of the anticipated foreign capital injection with the hope that it will enhance the competitiveness and financial strength of rural banks. The total number of banks operating in the Philippines decreased to 746 in the first quarter of this year from 779 in the same quarter last year after BSP stepped up its campaign against problematic banks and the industry continued to consolidate.

By Carol Kim, Research Associate

About the Bangko Sentral ng Pilipinas (BSP): BSP is the central bank of the Republic of the Philippines. Established in July 1993 under the provisions of the New Central Bank Act of 1993, BSP is headquartered in Manila and has three regional offices performing cash operations and eighteen branch offices. BSP participates in various advocacy programs concerning microfinance, financial education and consumer protection.

About the Rural Bankers Association of the Philippines (RBAP): Established in 1955, RBAP is an incorporated association of rural banks operating under the guidance of 15 directors whose goal is to promote rural development in the Philippines. RBAP’s mission is to support the ability of its members to offer quality banking services to all their constituencies, to comply with regulatory requirements and to promote the welfare of the communities in which they operate. RBAP has approximately 700 member banks.

Sources and Additional Resources:

Philstar.com: “Rural banks prepare for entry of foreign investors”, August 2011, http://www.philstar.com/Article.aspx?articleId=714342&publicationSubCategoryId=66

MicroCapital.org: “MICROCAPITAL BRIEF: MFTransparency Announces First Microfinance Data Submissions for Transparent Pricing Initiative in the Philippines”, August 22, 2011, https://www.microcapital.org/microcapital-brief-mftransparency-announces-first-microfinance-data-submissions-for-transparent-pricing-initiative-in-the-philippines/

MicroCapital.org: “MICROCAPITAL BRIEF: Bangko Sentral ng Pilipinas Reduces Fees, Loosens Branch Restrictions to Promote Financial Inclusion in the Philippines”, July 10,  2011, https://www.microcapital.org/microcapital-brief-bangko-sentral-ng-pilipinas-reduces-fees-loosens-branch-restrictions-to-promote-financial-inclusion-in-the-philippines/

MicroCapital’s Universe Profile: Bangko Sentral ng Pilipinas (BSP), https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Bangko+Sentral+ng+Pilipinas+%28BSP%29

MicroCapital’s Universe Profile: Rural Bankers Association of the Philippines (RBAP), https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=The+Rural+Bankers+Association+of+the+Philippines+%28RBAP%29

Browse the MicroCapital Universe and add your entry to the wiki at https://www.microcapital.org/microfinanceuniverse/

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