New mass-market banking model pushed

Former Finance Secretary Jose Isidro “Lito” Camacho is embarking on a new personal project to introduce a business model for banks developed in Indonesia, which has given millions of poor people access to financial services.

Camacho, vice chair of Credit Suisse in the Asia Pacific, said he would seek regulatory approval to introduce a new banking model that attracts deposits from the rich with slightly above-market interest rates, and lends these funds to those at the bottom of the pyramid.

“We’re adapting aspects of what I saw in Indonesia, which I thought were applicable for the Philippines,” Camacho said on the sidelines of last week’s World Economic Forum (WEF) on East Asia.

This business model he was referring to was that of Bank Tubungan Pensiunan Nasional (BTPN), Indonesia’s leading mass-market based bank.

BTPN’s business model involves setting up traditional branches in major cities such as Jakarta that take deposits from rich residents, who are attracted to higher interest rates for their money.  Branches, which look more like community centers than traditional banks, are set up in rural towns to facilitate lending to the poor.

“In the Philippines, these branches would look like barangay centers. If you’re a market vendor and you go to a normal bank branch, it’s intimidating,” Camacho said. Stripping down branches, he said, would make these more welcoming.

He said the branches outside major cities would staffed with people from local communities. This would ensure that bank officers know their clients on a more personal basis since. Camacho clarified that his “project,” which he is doing with several “friends,” would not be a part of Credit Suisse.

To get his project of the ground, Camacho said the Bangko Sentral ng Pilipinas (BSP) would have to make special exemptions in its regulations, particularly in the area of know-your-customer or KYC procedures.

Camacho said his new bank should be allowed to grant loans to tricycle drivers or street market vendors without asking them for regular requirements such as several government IDs or income tax returns, which they would most likely not have.

He said BTPN’s model has proven successful in Indonesia partly due to its ability to scale up in size. Unlike most microfinance cooperatives in the Philippines today, which don’t take deposits, their ability to lend was constrained by the size of donor funds they receive.