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NRT 2011 - Recent BSP Regulations: Opportunities for Rural Banks
Recent BSP Regula.ons: Opportuni.es for Rural Banks Pia Bernade9e Roman Tayag Inclusive Finance Advocacy Staﬀ Bangko Sentral ng Pilipinas RBAP‐MABS Na.onal Roundtable Conference 23 May 2011
Save Invest• Microentrepreneur Borrow living in Baggao, Cagayan • 1st class municipality Send/ with no banking oﬃce Receive Expensive • She is one of the Money Unsafe 73,000 living in the town Time Consuming Pay Bills• She manages a small Unsustainable sari‐sari store business
How do Recent BSP Regula.ons Allow Banks to Address this Market Need? • Wider Range of Products • Expanded Physical Network • Expanded Virtual Reach • Lower Barriers in Customer Acquisi.on
Opportunity for Rural Banks • Become more responsive to the wide range of client needs • Increase the microﬁnance client base • Provide microinsurance products which were previously an exclusive domain of large universal and commercial banks • Diversify income streams
Expanded Physical Network • Circular 694, Establishment of Micro‐banking Oﬃces (MBOs) – Addresses obstacles in establishing bank oﬃces • Rela.vely low cost (i.e low infrastructure, no theore.cal capital needed) • Need not be a9ached to a microﬁnance bank or branch • Viable in light of complete range of product oﬀerings
Expanded Physical Network • Circular 694, Establishment of Micro‐banking Oﬃces (MBOs) – Expands the products and services that can be oﬀered • Micro‐loans • Micro‐deposits • Check deposits of exis.ng microﬁnance clients • Microinsurance • E‐money Conversion • Collec.on/ Pay out of beneﬁts from government • U.lity payments • Purchase of foreign currency
Expanded Physical Network • Circular 694, Establishment of Micro‐banking Oﬃces (MBOs) – Provides requirements propor.onate to the level of ac.vity • Demonstra.on of bank strength • Clear reason and plan for the establishment of MBOs
Opportuni.es for Rural Banks • Set up presence in areas which were too expensive to serve (i.e. hard‐to‐reach, etc.) • Capture savings in areas which were previously not reached through opening of micro‐deposit accounts • Increase value to exis.ng clients • Lower costs of servicing exis.ng clients • Entertain other non‐bank customers which can eventually become bank clients (i.e. bills payment, foreign exchange, etc.) • Possible opportunity as CCT pay‐out
Expanded Virtual Reach • Circular 649, Electronic Money Circular – Deﬁnes electronic money – Allows the establishment of e‐money issuers (whether bank or non‐bank) – Provides the pladorm for an eﬃcient retail payments pladorm – Fosters the establishment of a ubiquitous agent network
Opportunity for Rural Banks • Develop linkages with e‐money issuers. As clients can transact remotely through the e‐money pladorm, banks: – Increase value of service to clients – Increase eﬃciency – Lower costs • With exis.ng clients, develop an e‐money ecosystem in the local community • Expand and reach more clients
Expanded Virtual Reach • Circular 704, Electronic Money Network Service Providers – Recognizes the poten.al of E‐money as an eﬃcient retail paymentc channel – Recognizes that the E‐Money business has specialized opera.onal and technological requirements – Allows en..es that want to be EMIs to outsource to EMNSPs
Expanded Virtual Reach • Circular 704, Electronic Money Network Service Providers – Allows the outsourcing of automated systems, network infrastructure and network of agents – Establishes clear outsourcing rules and arrangements
Opportunity for Rural Banks • Become an E‐Money Issuer without inves.ng in the en.re network infrastructure • By outsourcing to an EMNSP, banks will be able to: – Use the wide agent network established by the EMIs – Convert E‐money – Use E‐money for the payment for goods/ services – Transfer funds from one electronic wallet to another
Lower Barriers to Customer Acquisi.on • Circular 706, Updated An.‐Money Laundering Rules and Regula.ons – Provides scope for banks to have a risk‐based and .ered system of classifying customers – Establishes a framework for applying reduced, average and enhanced due diligence based on the type of customer as well as for customer acceptance, reten.on and iden.ﬁca.on process and record keeping
Lower Barriers to Customer Acquisi.on • Circular 706, Updated An.‐Money Laundering Rules and Regula.ons – Allows the outsourcing or relying on a third party, the following: • Face‐to‐face requirement • Gathering of informa.on and documents – Uses the liberalized list of accepted IDs
Opportuni.es for Rural Banks • Classify transac.ons, based on appropriate framework, small value transac.ons as low risk • Lower cost in acquiring customers • Less physical barriers in reaching and serving new markets • Decreased transac.on cost in customer reten.on and record keeping, par.cularly for microﬁnance. • Increased opportunity in remi9ance business
The opportuni,es are here for the taking. Strong and stable rural banks are well posi,oned to seize them.