Photo courtesy of Reach52
The pandemic impacted the economy heavily. Businesses suffered, affecting millions of Filipinos in the country. The loss of jobs and income resulted in the majority of Filipinos needing financial resources to get through the impacts of COVID-19. Fortunately, there are financial institutions, such as rural banks, that are in the position to help.
Rural banks remain strong even with an ongoing pandemic. BSP Governor Benjamin Diokno said that rural banks are sufficiently capitalized to weather the economic crisis triggered by the pandemic. They had an increase in credit applications and loan disbursements from the agricultural and healthcare sectors even with strict community quarantine in place.
This emphasizes the important role of rural banks in the Philippines. In spite of the limitations caused by the pandemic, they continue to support and help Filipinos in need. Yet the majority of rural banks have yet to transform digitally. Helping them cross that bridge will allow them to access the benefits of digital transformation and maximize their potential in serving their communities.
Before we delve deeper into that, let’s take a look at how rural banks are doing in the midst of COVID-19.
How Rural Banks Support Filipinos during the Pandemic
Photo courtesy of Philippine Information Agency
Access to financial services is crucial, particularly to the agricultural and MSME sectors. These sectors remain the backbone of the Philippine economy. Agriculture ensures food production and security while MSMEs contribute to employment in the country. The vital roles of these sectors emphasize the importance of providing them with capital and credit in order to sustain their livelihood – even more so during the pandemic.
This is where rural banks come in.
They play an essential role in the Philippine financial system. As the frontliners for financial inclusion, they cater to the financial needs of the unbanked and underserved communities: farmers, fisherfolks, MSMEs, and low-income households in far-flung areas. Despite the financial constraints by the pandemic, they continue to meet the financial needs of their communities.
Farmers borrowing from rural banks continue to pay their loans according to the deadline, not opting to defer even after the debt moratorium imposed by the government. Meanwhile, 40% to 50% of borrowers from the microenterprise sector were voluntarily paying their weekly or monthly amortizations shortly after the lockdown.
The rural banking industry can also adjust the loan terms and payment based on their customers’ needs. Along with the agricultural and MSME loan programs from the government and relief measures from the BSP, marginalized Filipinos can continue to apply for loans that will help them recover from the pandemic.
Benefits of Digital Transformation in the Financial Industry
Photo courtesy of Manila Bulletin
Based on the current situation, 63.86 million Filipinos still lack access to financial services. This makes it even more critical for rural banks to digitize so they can support initiatives for improving financial inclusion in the Philippines.
As BSP Governor Diokno shared in his keynote speech during the Building the Next Wave of Digital Banks: Accelerating Innovation and Financial Inclusion event: “Through this digital transformation, we hope to usher in a new economy where every Filipino is empowered with access to financial services.”
To support this, financial institutions are preparing to shift to digital cloud-based core banking technology.(1)
Using the right core banking solution will enable institutions to build a proper foundation for their digital transformation. This makes it easier for rural banks and other institutions to integrate other digital solutions such as:
- SMS Solution: institutions can easily remind their customers about due payments, inform them about new products and promos being offered, and also send one-time-pin (OTP) once they have shifted to a mobile approach.
- Agent Banking: banks can use an agent banking solution where they can onboard new customers and collect payments outside of their branch with the information automatically synched to their system.
- Mobile Banking: they can eventually transition to mobile and launch their own app that allows customers to access their banking information and financial services from their phones.
The use of digital solutions will also help banks and other financial institutions to speed up the digitalization of financial services in the Philippines, empowering marginalized communities more effectively. They can discover new opportunities using data generated from digital solutions. Through the use of data, institutions can tailor new products that better fit the needs of farmers, fisherfolks, and MSMEs and provide them with personalized services based on their customers’ financial needs.
Digitizing rural banks will better equip them to serve their customers more efficiently and reach unbanked Filipinos faster. But how will they be able to transform?
The Better Way to Transform Your Institution
One of the benefits of digital transformation is to open up plenty of opportunities to financial institutions. Yet rural banks and other community-based financial institutions find shifting from traditional banking to a digital one a difficult task. Finding the right partner and digital solutions can address this concern. Working together with the right partner can not just transform your institution but also empower the communities you serve more efficiently.
To ensure this, you must have the right foundation first for your institution’s system. With the proper foundation, you can streamline your operations, cut down waiting times through loan approval, and onboard more customers. Doing so will allow underserved and unbanked Filipinos to access financial services faster and easier.
As we are now living in the digital age, it’s easy for businesses, organizations, and Filipinos that lack access to digital means to get left behind. The digitalization of the rural banking industry can foster their growth and unlock their fullest potential. This, in turn, can also open possibilities for all Filipinos, especially the unserved and underserved.