BanKO moves to attract underserved households

AYALA-LED Bank of the Philippine Islands (BPI) is reviewing the operations of BanKO—the country’s first mobile-powered, microfinance-oriented savings bank—to incorporate a new business model that will make it a more meaningful vehicle for “underserved” households.

BPI recently signed a deal to raise its stake in BanKO to 100 percent from 40 percent by buying out the stake held by sister company Globe Telecom and parent conglomerate Ayala Corp., which originally owned 40 percent and 20 percent of the bank, respectively.

In a recent interview with the Inquirer, BPI executive vice president and head of retail clients Natividad Alejo said the bank was looking for a new model for BanKO that will “allow us to be able to fulfill our mandate for financial inclusion and at the same time make sure that this is more sustainable.”

In the last five years since its establishment, Alejo said BanKO had accomplished a lot on the transactions side, attracting over a million customers but only on the deposit-taking side of the business.

BanKO’s loan portfolio, however, has remained small in relation to BPI’s total portfolio. This area is what the thrift bank would now like to explore.

“We’re bringing it [BanKo] closer to [our] banking fold and what we’re trying to do now is more akin to the BPI business model, except that it’s really addressing the [nuances] of the lower market,” she said.

On BPI’s part, Alejo said the banking group’s definition of financial inclusion was not necessarily getting everyone into the basket. “There are pockets inside the economy that should be part of the banked (segment), but they are underbanked because they have no access to other services, therefore forcing them to operate in the informal sectors. So what we’d like to do is actually bring them into the formal sector.”

Around a quarter of households in the Philippines to date are in this “underbanked” category, she said.

This underserved market refers to people who are able to maintain deposit accounts but are unable to borrow and are thus forced to operate in the informal channel. They sometimes borrow from informal lenders at prohibitive interest rates.

“We will build on what has been accomplished,” Alejo said. “I think what we’re hoping to be able to do is build a banking model that is tailored for this particular market, while adapting to some of the learnings that we had.”

“I think BanKO has been able to do a lot on the transactional side. Our focus is now on the credit side,” Alejo said.

Likewise part of the review is to look at the “brick and mortar” presence needed in relation to the new business model. BanKO’s old paradigm saw no need for extensive branching out as its operations were designed in such a way that the cost structure is much lower than traditional banks but nevertheless capable to handle small-sized transactions in high volumes and at reasonable prices.

In the last five years of its operations, BanKO has set up only four branches: the head office at Greenhills in San Juan, Naga City, Dumaguete and Davao.