Tag Archives: banking

On the Banking System and Financial Literacy in Mindanao

mindanaobanking

MAKATI CITY (8 May) – As a financial literacy advocate and blogger, I was quite privileged to be invited last Friday (May 6) in the first forum on “The Flow of Deposits in the Mindanao Banking System: Exploring Alternatives” hosted by the Joint Ateneo Institute of Mindanao Economics (JAIME) held in Ateneo de Davao University, Davao City.

Covered by the British Broadcasting Corporation (BBC), the forum was attended by representatives from the Tokyo University, Department of Trade and Industry (DTI) – Region 11 Office, Mindanao Development Agency (MinDA), Mindanao Business Council, Landbank of the Philippines, Union Bank, Banco de Oro (BDO), Development Bank of the Philippines (DBP), Philippine National Bank (PNB), MMC, Davao City Chamber of Commerce and Industry, Ateneo de Manila University, Xavier University, various offices of Ateneo de Davao University (Academic Vice President Office, University Research Council, Finance Office, Al Qalam Institute for Islamic Identities and Dialogue in Southeast Asia, School of Business and Governance, and the Economics Department), rural banks, and microfinance institutions, among others.

Focused mainly on the constituents of Mindanao’s dualistic banking system, viz. (1) branches of the universal and commercial banks (UCBs) with head offices in the National Capital Region (NCR) and (2) branches and head offices of the locally-oriented thrift banks and rural and cooperative banks (TB-RCBs), the research presentation by JAIME Director, Dr. Germelino M. Bautista, attempted to answer the following questions:

(1) What is the overall performance of the dualistic banking system in Mindanao, and what are its trajectories?

(2) How different are the deposit mobilization capacities and loan provisioning roles of these banks and what do these differences imply for the banking system and economic development of Mindanao?

(3) What options are available to address the limitations in capacities and roles of the UCBs and TB-RCBs?

As Prof. Bautista argued, a vision or alternative future for the TB-RCBs of Mindanao might entail the following conditions:

(3.1) Improve the capacities of existing TB-RCBs, strengthen their local community orientations, and determine what can further promote the growth of rural and cooperative banks;

(3.2) Tap the currently underserved and unbanked population, and further expand the community-based microfinance operations of TB-RCBs to promote the livelihood of the self-employed and small businesses and eventually generate and mobilize savings from new client depositors;

(3.3) Establish more Islamic finance intermediaries and apply shari‘ah financial instruments that aim to generate higher incomes and mobilize savings in poor Muslim communities; and

(3.4) Mobilize deposits from both Muslim and non-Muslim cooperatives for their own rural cooperative and Islamic banks.

In the Q & A session, the following points came to the fore:

* There has been available money for loan in the banks and microfinance institutions, but the usual problem has been the failure of most borrowers to repay their respective loans.

* The local government units (LGUs) could do a lot in improving the flow of deposits in the banking system.

* Any success in encouraging the potential depositors to deposit their money to a commercial bank or a rural bank, as the case may be, is also reflective of our success in encouraging them to develop the habit of saving and later on, investing, as well as to cultivate their entrepreneurial mindset. In other words, financial literacy of the individual – the potential depositor and loan applicant – is a preliminary step in banking.

* There is considerable interest in knowing more about shari‘ah-compliant instruments for generating higher incomes and mobilizing savings.

As such, these points could be viable candidates as the next research agenda of the nascent Joint Ateneo Institute of Mindanao Economics or JAIME.