MICROCAPITAL BRIEF: Rural Bankers Association of the Philippines (RBAP) Expects Consolidation to Result in Fewer, Stronger Rural Banks

According to the Rural Bankers Association of the Philippines (RBAP), an association of approximately 700 banks that aims to promote rural development, the rural banking sector in the Philippines is expected to consist of fewer but stronger banks as mergers and consolidations continue. “Mergers and consolidations that are happening will result in fewer rural banks that are stronger in terms of resources,” said Tomas S Gomez IV, spokesman of RBAP, according to Business World.The consolidation trend may be at least partially attributed to the Strengthening Program for Rural Banks (SPRB), which is a joint program by Bangko Sentral ng Pilipinas (BSP), central bank of the Republic of the Philippines, and Philippines Deposit Insurance Corporation (PDIC), the state deposit insurer, to encourage mergers and consolidations among rural banks in an effort to further strengthen the rural banking system. This program, which is funded with PHP 5 billion – equivalent to over USD 115 million – was approved in July 2010.

Central bank data indicates that the number of rural banks shrunk to 607 in December 2010 from 613 in September 2010 and 631 in December 2009. Business World reported that BSP officials believe that this was a result of weak banks closing as well as mergers and consolidations. [1]

Mr Gomez reportedly added that rural banks’ return on equity – net income earned as percent of stockholders’ equity – is larger than that of universal and commercial banks. He also argues that rural banks are expected to grow further through agricultural loans and microinsurance products.

By Carol Kim, Research Associate

About 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.

About 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 1987 Philippine Constitution and the New Central Bank Act of 1993, BSP took over from the Central Bank of Philippines as the country’s central monetary authority. Headquartered in Manila, BSP has three regional offices performing cash operations and eighteen branch offices. BSP participates in advocacy programs concerning microfinance, financial education and consumer protection.

About Philippines Deposit Insurance Corporation (PDIC): Established in 1963, PDIC is the nation’s principal deposit insurer. PDIC also serves to regulate the banking sector and, specifically, acts as the liquidator and receiver of insolvent banks.

Sources and Additional Resources:

[1] Business World: “Stronger Rural Banks Seen”, May 2011, http://www.bworldonline.com/content.php?section=Finance&title=Stronger-rural-banks-seen&id=32059

MicroCapital.org: “Bangko Sentral ng Pilipinas (BSP) And Philippine Deposit Insurance Corp (PDIC) Create Fund to Strengthen Rural Banks That Offer Microfinance Loans”, December 18, 2009, https://www.microcapital.org/microcapital-brief-bangko-sentral-ng-pilipinas-bsp-and-philippine-deposit-insurance-corp-pdic-create-fund-to-strengthen-rural-banks-that-offer-microfinance-loans/

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

MicroCapital’s Universe Profile: Bangko Sentral ng Pilipinas (BSP), https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Bangko+Sentral+ng+Pilipinas+%28BSP%29%2C

MicroCapital’s Universe Profile: Philippines Deposit Insurance Corporation (PDIC), https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Philippine+Deposit+Insurance+Corporation+%28PDIC%29

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

Similar Posts: