Regulators have unveiled fresh incentives that aim to goad local banks into setting up shop in more than 1,600 cities and municipalities around the country that still lack access to formal financial services.
Local banks are absent in more than a third of the towns around the country as putting up branches in far-flung areas is still considered unprofitable and difficult to staff. As a result, it remains difficult for a big chunk of the population to save and invest, excluding them from the formal economy.
“Banking presence tends to be skewed to higher-income and more populated areas considering the cost of setting up banking offices,” the Bangko Sentral ng Pilipinas (BSP) said in a statement.
To address this challenge, the BSP issued a new regulation waiving the processing fees for banking offices that will be established in the said municipalities. This is expected to lower the cost of setting up offices in such areas. To facilitate the flow of information, the BSP will post on its website the list of unbanked municipalities which will be updated quarterly.
Together with the revised rule on branch processing fees, the new regulation widens the scope of allowable activities and services that micro banking offices (MBO) can provide.
MBOs are simple offices that may engage in limited transactional banking activities including the provision of micro-loans and micro-deposits.
In addition to the disbursement and release of proceeds of all types of microfinance loans, MBOs can now provide and service other types of loans to microfinance clients, including educational loan, health loan and emergency loan.
Interested banks may also apply for BSP approval to increase the limit of the monthly average daily balance of micro-deposit accounts from the current maximum of P40,000, subject to certain requirements.
The expanded services will primarily cater to the needs of microfinance clients and the prudential requirements and operational controls will be retained.
The amendments recognize the growing importance of MBOs in the delivery of financial services especially in underserved areas.
To date, there are 508 operating MBOs serving 325 municipalities, of which 62 municipalities are served by MBOs alone.
There are more than 10,000 banking offices nationwide yet 36.5 percent of the 1,634 cities and municipalities are unbanked.
These policy enhancements support the enabling regulatory framework for financial inclusion in the Philippines. The BSP efforts have received international recognition as shown from the consistent high ranking of the Philippines in the annual study conducted by the Economist Intelligence Unit (EIU).
For six consecutive years (2009 – 2014), the Philippines has been cited as one of the top countries in the world with the most conducive environment for microfinance and financial inclusion.