More rural banks undergoing digital transformation

Rural banks across the Philippines are warming up to the idea of adopting digital processes as their business areas benefit from the reopening of the economy.

Meanwhile, the Monetary Board has raised the minimum capital for rural banks to P50 million from as little as P10 million, compliance to which the affected entities must do within the next five years.

According to Rural Bankers Association of the Philippines (RBAP), the industry is embracing the advantages of digitalization in order to remain relevant in a business environment that has been reshaped by the COVID-19 pandemic.

Digital transformation, as the buzzword goes, makes “deploying financial services as easy as tapping on a screen, while [the rural banking industry remains] grounded in its role as a vital provider of financial services that uplifts the lives of our countryside’s economic drivers—the farmers, the fisherfolk and the microentrepreneurs,” RBAP said in a statement.

As of Aug. 31, the Bangko Sentral ng Pilipinas (BSP) lists 380 licensed rural banks across the archipelago. The latest list of RBAP members counts 358 such banks.

In January, then RBAP president Albert Concha Jr. said the group was anticipating an upward push this year on countryside incomes, especially with the upcoming national elections in May that brings “immense multiplier benefits to the local economies.”

In Circular No. 1151 dated Aug. 24, the BSP said its policymaking body approved last Aug. 4 Resolution No. 1145 which approves the increase of minimum capital requirements for rural banks.

This is part of initiatives under the Rural Bank Strengthening Program, intended to enhance operations, capacity and competitiveness of these banks.

“A strong capital base enables rural banks to enhance their risk management systems, upgrade resources and manage operational costs, meet prudential standards and accelerate digital transformation,” Circular 1151 stated.

The requirements set the minimum capital for rural banks with a head office only as well as those with up to five branches at P50 million (from P10 million); those with six to 10 branches at P120 million (P15 million); and those with more than 10 branches at P200 million (P20 million).

“The revised minimum capital requirements shall result in stronger and well-capitalized rural banks underpinning a Philippine banking system that is stable, sound, resilient and inclusive for Filipinos,” BSP Governor Felipe Medalla said in a statement.