A recent study by the Bangko Sentral ng Pilipinas (BSP) reveals that foreign capital injections have positively impacted the profitability and development of rural banks in the Philippines.
Foreign capital has proven beneficial for rural banks in the Philippines, contributing to sustained profitability and growth, according to a recent study conducted by the Bangko Sentral ng Pilipinas ( BSP ). The study, authored by researchers from the BSP Research Academy led by Principal Researcher Hazel C. Parcon-Santos, analyzed data from 13 rural banks that received foreign capital infusions.
Key findings revealed that five of these banks experienced significant profit increases despite a potential lag time since acquiring foreign capital. The researchers attribute these improvements to several factors, including enhanced technology, skilled manpower, upgraded business processes, and improved data management.The study recommends that rural banks actively explore opportunities to secure foreign capital investments from international sources. Furthermore, it suggests that the BSP continue to monitor the performance of rural banks with foreign equity, tracking their long-term benefits and ensuring continued positive outcomes. To achieve this, the researchers propose an annual survey similar to the one conducted for commercial banks, offering insights into the impact of foreign capital on the rural banking sector.The study was based on a BSP survey involving nine rural banks that had received foreign capital infusions by the end of 2022. A significant finding was that 33 percent of participating institutions received foreign equity primarily driven by investor aspirations to expand their businesses. Geographically, the foreign equity influx was distributed across 17 regions nationwide, with the highest concentration (four banks) located in the Calabarzon region. Singapore emerged as the leading source of foreign funding, with six rural banks receiving investments ranging from 6.04 percent to 60 percent of their total capital. Other notable sources included Hong Kong, Malaysia, North America (USA/Canada), and Australia. The study highlights that the liberalization of the rural banking industry through Republic Act No. 10574 in 2013, which permitted non-Filipino citizens to own up to 60 percent of a rural bank's voting stocks, has opened new avenues for capital infusion and fostered growth within the sector
FOREIGN CAPITAL RURAL BANKS PHILIPPINES BSP PROFITABILITY GROWTH INVESTMENT
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