MICROCAPITAL BRIEF: Philippines Allows Foreign Investors to Hold Stakes of up to 60% in Rural Banks

Philippine President Benigno Aquino reportedly has signed a law, entitled “An Act Allowing the Infusion of Foreign Equity in the Capital of Rural Banks,” that will allow foreign investors to own as much as 60 percent of the voting stock in Philippine “rural banks,” which are sponsored by the government of the Philippines for the purpose of promoting economic development in rural areas. The new law amends the Rural Bank Act of 1992, which mandated that foreign investors could hold a maximum of 50-percent equity of any rural bank, with the remaining shares held by Bangko Sentral ng Pilipinas, the central bank of the Philippines.

According to a quote attributed to the president of the Rural Bankers Association of the Philippines (RBAP), Edward Laendro Garcia, “The passage of the Foreign Equity Bill into law is a major win not only for rural banks, but also for the clients in the countryside. Rural banks are now in a better financial position to reach out and serve both the unbanked and under-banked through improved banking services.” RBAP, which has approximately 700 members, reportedly takes the position that the law will improve economic growth in rural areas of the Philippines by placing rural banks on an equal playing field with thrift and commercial banks.

By Makai McClintock, Research Associate

About Bangko Sentral ng Pilipinas
Bangko Sentral ng Pilipinas (BSP) is the central bank of the Republic of the Philippines. Established 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 Rural Bankers Association of the Philippines (RBAP)
Established in 1955, RBAP is a nonprofit, 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, comply with regulatory requirements and promote the welfare of the communities in which they operate. RBAP has approximately 700 member banks. As of 2013, the president of RBAP is Edward Laendro Garcia.

Sources and Additional Resources

Philippine Information Agency Article, “Rural Bank Act Amended to Allow Foreign Capital Infusion in Rural Banks,” http://www.pia.gov.ph/news/index.php?article=1751369816431

Boston University Archived Document “Rural Banking Act of 1992,” http://www.bu.edu/bucflp/files/2012/01/Rural-Act-No.-7353.pdf

MicroCapital, April 24, 2013, “MICROCAPITAL BRIEF: Bangko Sentral ng Pilipinas (BSP) Raises Maximum Microbanking Office Savings Balance to $968,” https://www.microcapital.org/microcapital-brief-bangko-sentral-ng-pilipinas-bsp-raises-maximum-microbanking-office-savings-balance-to-968/

MicroCapital, February 9, 2013, “MICROCAPITAL BRIEF: Microfinance Credit Bureau, MiDas Launched by Microfinance Institutions in Philippines,” https://www.microcapital.org/microcapital-brief-microfinance-credit-bureau-midas-launched-by-microfinance-institutions-in-philippines/

MicroCapital, May 7, 2012, “MICROCAPITAL BRIEF: Bangko Sentral ng Pilipinas (BSP) May Broaden ‘Special’ Program for Distressed Rural Banks as 3rd Straight Quarterly Rise Brings Bad Loan Ration to 10%,” https://www.microcapital.org/microcapital-brief-bangko-sentral-ng-pilipinas-bsp-may-broaden-special-program-for-distressed-rural-banks-as-3rd-straight-quarterly-rise-brings-bad-loan-ration-to-10/

MicroCapital, February 21, 2012, “MICROCAPITAL BRIEF: Bangko Sentral ng Pilipinas (BSP) Tightens CAMELS, Other Requirements for Banks Offering Agricultural Microfinance Loans in the Philippines,” https://www.microcapital.org/microcapital-brief-bangko-sentral-ng-pilipinas-bsp-tightens-camels-other-requirements-for-banks-offering-agricultural-microfinance-loans-in-the-philippines/

MicroCapital, October 19, 2010, “MICROCAPITAL BRIEF: Bangko Sentral ng Pilipinas (BSP) Approves Establishment of Microfinance Institutions in Underserved Areas of the Philippines,” https://www.microcapital.org/microcapital-brief-bangko-sentral-ng-pilipinas-bsp-approves-establishment-of-microfinance-institutions-in-underserved-areas-of-the-philippines/

MicroCapital, November 5, 2008, “MICROCAPITAL STORY: Assets in Philippines’’ Rural Banking Industry Grow by 15.72%,” https://www.microcapital.org/microcapital-story-assets-in-philippines-rural-banking-industry-grow-by-1572/

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

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

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