Rural Banks and 52 years of consumer relevance.

PRLog (Press Release) - Nov 05, 2009 -
After 52 years, rural banks remain at the front lines of countryside development.  This is even more relevant now as the country reels from the effects of the recent typhoons and disasters.  Rural banks have stayed committed to their clients in the areas they operate in because they know that their survival and growth largely depend on the survival of the client and the communities they serve.

The interdependence and synergy between the client and a Rural Bank has always made the difference in achieving success.  While clients largely rely on the Rural banks to finance their small businesses or their expansion, Rural banks also rely on the success of their clients in order to ensure that the loans are paid.  This is done with constant advice and guidance by bank and account managers who provide the technical and financial know how to their town-mate clients.  There exists a tight bond between the customer and his chosen Rural bank which usually lasts a lifetime.

“Everlasting bonds” - key to consumer protection

Relationship marketing has always been the key to a Rural banks’ existence and health.  Customer retention is largely based on trust and the perception and image its owners project to the communities they serve.  Rural consumers largely depend on the image of the owner and his relationship to them when they entrust their hard earned money.  In the same manner Rural banks provide loans and other services based on the relationship that has been established by a consumer.  This is over and above the strict guidelines that need to be adhered to by Rural banks as set by regulators like the Bangko Sentral ng Pilipinas (BSP) and the Philippine Depositors and Insurance Corporation (PDIC) when operating in an area and providing client protection.

Services provided by Rural bankers and their employees have always been on a personal level.  This is dictated by the environment and culture we Filipinos have where a premium is placed on a referral and testimonial.  Expansion has always been on the back of personal referrals and testimonials made by long time clients and their families who have already experienced the services provided by their Rural Bank.  There have been many instances that the banking relationship has gone beyond generations where grandsons of Rural bankers still provide services to grandsons of the original client in their hometown.

This relationship and bond is a prime reason why commercial banks choose not to operate in small towns.  Apart from the overhead and the risk of entering an unknown area, they have to contend with the trust factor that an existing rural bank has established in the town.  “They grew up seeing their parents banking with us, and to them, our clients, we are the Bank in the area”.  Of course, Rural banks also charge lower fees and provide higher interest rates to keep their depositors loyal.   Clients also know Rural bankers are there for the long haul because they are town mates or the managers and other officials and employees are town mates or even relatives who have a stake in the progress of their communities. They know that a Rural Bank is there to stay as compared to the commercial bank that might just suddenly decide to leave because of lack of business.

So how are depositors money protected from deceit?  Apart from the assurances and safety nets that exists like bank capitalization requirements and depositors insurance levels which are very strict, there is the “commitment factor” that the Rural Bank owner provides which can be aptly described as “Palabra de Honor” (Word of Honor), and cultural factors like “kahihiyan” (Shame) and protecting the family name to his fellow town mates. Rural Banks also take extra steps in being transparent to their consumers on issues like interest rates and fully explaining contents and provisions of loan agreements.  These are done in the vernacular and explained until the customer really understands their responsibilities.  While largely lost in the cities, these cultural traits still exist and are the basis of strong un-measurable foundations of relationships among Rural banks and their clients.  

During the height of the Legacy issue, one Rural Banker did something that not even advertising could achieve.  The 90 year old owner, dressed in his best barong sat in his Rural Bank together with his whole family, welcomed clients and gave them his personal assurance of the safety of their funds.  This he did everyday and his presence alone saved his bank from a bank run.  Many such stories exist among the pool of dedicated rural bank owners who truly care for their clients and the communities they serve.

Adjusting to the times and adopting technology

Filipinos are already becoming technology savvy.  56% of Filipinos now have access to the internet, whether it be at home or using the internet cafes.  Celphone acquisition and use has been constantly on the rise with at least 81% using SMS as the prime form of communication based on the latest Synovate Media Atlas Survey.  The 3 major celphone network providers cover and link the whole of the Philippines.  And based on recent World Bank studies, Farmers alone that have been surveyed increased their yields and consumption by at least 11% to 17% upon acquisition and subsequent use of the celphone.

Rural banks did not stay idle while all these technological innovations were happening.  In fact, Rural Banks together with Globe Telecom and Smart have been very active in the continued development and expansion of Mobile Phone banking.  Almost 6 years ago, Rural banks spearheaded by RBAP in cooperation with the United States Agency for International  Development (USAID) developed the Microenterprise Access to Banking Services or MABS which helps rural banks develop the capacity to profitably provide microfinance services to microentrepreneurs and low-income households using mobile banking as one of its conduit platforms.  There are currently 1.6 million active mobile banking users. This move, together with dedication among rural bankers, has propelled the Philippines to being ranked 3rd in the whole world in the realm of microfinance and microenterprise and 1st in Asia.

Acknowledging the rising sophistication of the Filipino rural banking client and adopting to the trend where towns have become cities in need of modern banking services, the largest rural banks have embraced technology by not only providing mobile banking services but by also investing in the traditional banking offer of ATM services.  Currently there are 253 ATMs deployed across the nation in as many bank branches and this is growing by the week. This bodes well for the other customer of the rural banks - the OFWs who are basically looking for ways to send money to their families in their respective provinces

The notion of a one counter, hole-in-the-wall operation of rural banks is long gone.  With the advent of technology, Rural banks are as capable as the biggest commercial banks in providing adequate services for their consumers in the rural areas.  In fact, rural banks tend to be competitors of big commercial banks when it comes to banking services in the provinces, but these are limited basically to the provincial centers where big business gradually gravitate to commercial banks.  But when it comes to the towns and even provinces, the Rural Bank remains King, and this will remain so for some years to come as Rural banks become powerful regional banks.

The future is really based on consolidation, innovation and continued capitalization to keep the rural banking industry relevant to its consumer base.  Providing technology and allied services will keep the consumers satisfied. This coupled with the long-standing trust and transparency that has been engendered and developed throughout the years with its loyal client base, will ensure the survival of the industry and strengthen its continued thrust of countryside development and countrywide progress.