Press Release
January 28, 2013

Senate allows foreign capital infusion in rural banks

The Senate today approved on third and final reading a bill amending the Rural Bank Act to allow foreign capital infusion in rural banks.

Sen. Serge Osmeña, chairman of the Committee on Banks, Financial Institutions and Currencies and sponsor of Senate Bill No. 3282, said the proposed measure aims to open up the ownership of rural banks to foreign equity and spur economic development in the countryside.

"This measure amends Section 4 of Republic Act 7353 and once enacted into law, allows foreign individuals and entities to acquire equity of up to 60 percent in rural banks," Osmeña said in his sponsorship speech.

Presently, he explained, Section 4 of RA 7353 allows foreign banks to acquire equity in rural banks but prohibits foreign individuals or foreign entities from doing the same.

"Rural banks need to look beyond their limited resources and take advantage of funds available elsewhere. The opportunity to forge international equity partnerships would put rural banks on a level playing field with its thrift and commercial banking counterparts that are able to take in foreign partners," Osmeña said.

He underscored the importance of rural banks in countryside development. A report from the Bangko Sentral ng Pilipinas (BSP) for instance, he said, showed that rural banks involved in microfinancing has steadily increase by end of December 2011 since its launching as one of BSP's advocacates in 2000.

"The report stated that as of end-September 2011, rural banks provided a total of P5.4 billion worth of microfinance loans to 808,021 micro-borrowers," Osmeña said.

The same report, he said, showed that rural and cooperative banks had deployed 233 automated teller machines (ATM).

"The rural banking industry is one of our most successful sectors. Total assets as of end September 2011 reached P169 billion, 9.2 percent higher than the P155 billion recorded in the previous year," Osmeña noted.

He said rural banks extended majority of its loans to the agricultural, fishery, hunting and forestry sectors.

But even with the high capital adequacy ratio, Osmeña said, the BSP report showed that only 482 out of the total 565 rural banks were able to comply with the minimum amount of capital requirement.

Infusion of foreign equity investments, he said, is vital to rural banks continued existence.

"This legislation will open up a new source of equity infusion, particularly to benefit the smallest lenders who cannot expand and the smallest borrowers who cannot borrow," Osmeña said.

"It will stimulate more activity among rural banks by creating an environment that is beneficial to foreign investors, local banking patrons and the national economy," he concluded. Meanwhile, the Senate also passed on third reading House Bill No. 5495, declaring the Jaro Cathedral, Molo Church, the Iloilo City Central Business District, Fort San Pedro, Jaro Plaza Complex, Molo Plaza Complex and Plaza Libertad Complex in the Iloilo City as cultural heritage tourism zone. Under the measure, the tourist spots will be accorded priority development of the Department of Tourism (DOT) in coordination with the Iloilo City Cultural Heritage Conservation Council, Tourism Infrastructure and Enterprise Zone Authority (TIEZA) and other concerned government agencies, who will assist in preparing a development plan involving the construction, installation, and maintenance of appropriate facilities and infrastructure. "Tourist destinations are treasures which our country holds. It is indisputable that tourism in the Philippines is a fast-growing industry. As the nation's resources continue to be gradually spent, government must focus its development efforts towards tourism as this is the next bright prospect for economic growth," Sen. Manuel 'Lito' Lapid, chairman of the Senate Committee on Tourism, said. (PILAR S. MACROHON, PRIB)

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