The Rural Banking System: The Need for Reforms

TFIE RURAL BH_IKING SYSTEM: NEED FOR by t_.o P_P,

I

r

I

I

I

B. Z,m_em'ee'e _

!qO. 85-08

I

*Researoh Fellow, Philippine Institute for Development Studies (PIDS)째 The author is grateful to MS. VANGIE Y0 for hOE able research assistance, and MS. EMMA PI_RO-C_NCO. for lRalnstaklngly typing this draft.

Paper presented during the Sixth National Credit Workshop, June 20-22, 1985, Development Philippines, Tagaytay City.

A_Ei=ultural _ademy of th_

The views expressed in this paper are those of the author. and do not necessarily reflect those of the Institute.

THE

I•

RURAL

BANKING'

SYSTEM:

rural

banking

system.

_NEED

FOR

REFORMS

Zntroductlon

The network

in

the

proviOing Wi_h

rural

the

a

wellT

aurrentl_ rind

rural•

banking

survival°

is

they

the

in

of

19B3.

middle

viability policy

of which

re lated

most

redis count

rediscounting further

aggravated

Several Under rural

an

questions entirely

banks on

measures

should

competitive

_he

its

new

Own

policy

history

struck

seriously

affected

subJequent _he

use

sha rp of

tax

the

mist of

in

merket-

redu orion exe_ptlons,

taken

and

assure

come

policy

ro_e

be

environment?

for

the

in has

p£oblems.

agricultural

system

however,

's post_war

immediately

a

the

development

to

others,

different

have

.emphasis

banking

their

system,

fighting

The

withdrawal

services.

crisis

taxes,

and

in

ecOnomia

has

among

role

an

banks.

includes,

big

agricultural

1980,

It

extensive

financial

adjusting

country

rural

a

banking

currently

in

in

plays

Unfortunately,

were

initiate0

unpre=edented the

on

obstacles.

While

environment

rural

emphasis

•system

has

sector

functioning

few

which

certainly

agricultural

renewed

should

areas

(RBS)

to

play

in

mind.

If

under

do

.renewed

this

rehabilitate

itssurvival

our

envir0_ment,

development? to

to

so, the this

what • rural new

-

This

paper

The

next

s•ecti_

and.

performance

ZTI

disausses

competitive to

Review

of

aural,

roles The and

the

may

areas

_ailed

of

banks

provided

aa

to

and

Performance

be

considered

Section under

•this

presents

some

the

RBSo

_.he

of

may

not

in

efforts

It

operate

permanent

features

at and.

at the

profitably, and

in

that

the

have

their

iwide c_Id

same

time,

pSy cholOgica initial the

stage

subsidies

timeframe had

considered operatiC_1o

1

government

indirect no

to

located

.fairly

subsidies

_anks

access

countryside

and,

direct

rural,

primarily

areas

The

the

Since

these,

•S4pp!y

institutions

is, noteworthy of

Thus..

rural

expectational

substantial

I) °

the

as was

Creation

provide.

banks

savings

withdrawal

-stipulated.

in

entrepreneurs.•"

them

Table

sect ion

financial

rural,

"favorable on

rural

folks which

people's

effects

RBS

strengthen

well

services

distribution

generate

system.

the

last

Their

provide

urban

enhance

of

policies

System

institutions. to

questions.

finanQial

banking

Policies.

banks

•financial

them

rural

• possible

sankin •

intended

the

important

the

Financial

leading

(see

reviews of

those

addresses

rehabilitate

Rural

in

basically

environment.

measures

ZI°

2 -

for been

_m_st

of

-

.Rural pla.oe,

.Banks they

Ehe-refOre,

were

are

serving.

tO

small

made

_o

Secondly,

dedi=eted

to

mer_hanEs

and

invesEmsnts

to

on

50

agricultural small do

not

tend

to

exceed

of

enterprises

reward

small

they

to

lend

only

land

or

less

to

small

whose And

banks

growth area

and

Pio0.O00o

first

the

permitted

hectares

_he

Their

of

production

business

In

-

growth

were

have

small.

banks.

the

they

who

be

unit

•depend

farmers

policies

designed

were

has

3-

and

capital

lastly,

tax

penalize

big

banks.

The 70S

low

was

rural

interest 8avlng,

rural

loana ble to

At

policy

had

as

The

introdu

se_d

half

of

the

agriou_tural

to

the

60s

credit

operate

credit

informal orion

served

a

to

the

background. to

take.

the

farmers Sinue

and

the

low

disincenEive

with

to lJ.m.i, ted

severely therefore,

still

market°

oT

new

farm

and

,the

70s

policy

the

demands,

credit

up

investment.

small ".

had

50s

have

"loansharks

Unmet

the

to

they

protecting

banks

to

put

that

the

faring

from

funds.

go

from stimu

thus

means

of

rate

at

was

banks,

entrepreneurs

policy

aimed

mobili&ation

responsibility

had

rate

primarily

Savings For

interest

ot

technology

in

substantially government

the

altered from

_e

of

I

merely

protecting

small

_armers

into

agricu

ltural

output.

Aside

ab_t

the

technology

, additional

new

from

one

of

in'=reasing

a_uiring

knowledge

working

¢ap italwas

-

needed

so

technology.

that

farmers

can

Since

small

farmers

their

farm

savings

little working

from

,capital

Instead

of

meeting

new

has

leaving credit

by

taxing

l_rtly

by

_rrowing

has

technology,

output

o

attractive which

on

make by

_

from

Bank bank

the

for

especia11짜 proliferation

the

vigorously each

adoption

making

banks

town. of

new

There

is

completely With

are

One

the of

small

ones.

This

lending

even

new

It_ ra 1 the

rates and

dependent 700,

more

the

hav_ng

objective.s

a

_as

to

widespread

more

resulted in

_f

cost

of

has

this

relatively

policy

to

as

changed

the

technology

accessible

made

agricu

In

the

and

that

increasingly Bank.

pursued

banks

717),

_he and

the

creation,

administrative

credit

rural

mast

adoptico

has

rediscount

to

doubt

rapid

time

relatively

banks no

of

savings

P.D.

increased

Central

task

money

hence,

became

market.

long

a

_ried

(e.g.

cheap

of

additional

were

rural

farm

only

_he

take

The

to cover

reali:e

increased

has

the

farm

credit

through

banks.

between

rural

borrowings

central rural

rural

supposed

risk

banks

could

to

it

spread is

credit

funds.

and

ot

rural

banks

abroad.

However,

character

the

partly

contributed

farm

from

Bank

new

l_e

deposits

commercial

_heee

the

usually

_hrough

on

demand

pertly

policy

the

Central

credit

of

to

rates

u_ttractivev_the

conduits

come

adopt

income_

admittedly

interest

increased

tO

demands

mobilip-ationv_wnich since

4 -

marginal

farmers, An

the areas

- 5 -

where

it

w£thou_

is

£mpossible

substantial

•The

1960

efficiency which

_h@

from

Central to

adopt

Central

ban_

Bank

preferred funOs

snd

to

_a_her

surplus

than

_nd

in

t_8_

_hei_

agrlo_

l_u_al

sector

rediscoun_in% T_e

crisis

_orrowe_s

were

The

switch

re(}uo_ion

Cen_rs1 are

_een

en_Oy

of

_he

they

Central

_ank

_o

between pro%i_

_nderst6n_able

ds_ive_ ly

0%

ls

same

Hence,

view _

the

encourage_,

intermedis_i_

l_g_e

bankin_

economi=

were

in

o_edlt

depends

_O

t_e CB'

o_

pol_c¥.

rural

_urn

oompetltive

Lo

in

are

tir_nciai

conduits

_ctivity.

a D_l_y

Dorrowin_&

real

support.

units

this

a

continued

as

_v•ing_

_han

has

intermediaries deficit

oppor%_ni_ies _hen

s_ill

co_qpetltio_

institutions

be

build_up

support,

removed.

of to

_n_.

emphasi_e0 to

rather

_nks

malnly

Bank

have

finanolal

9over_men_

remain

Central

been

posture

capital

rural

have

All

rural

rural

Barriers

stressed

._he

For

environment,

However,

J_

Bank.

•intermed.iary. new

i_posed to

viable

reforms

competitlon.

has

expected

a

and

financial

legally

moDilizetioo

have

9overnment

_rough

were•

to

_h_t un_Dle

piling to

VOI_

and

ms_:l_e_ surprises

An repa_

sudde_

fated Of

t_dl,

y

198_. _hei_

_r_e_ra_es

_rke_v_e

in_he

B_nk,

st_k to

up

w_S

system

_%_@=t, eO A

io_

Ioa_s,

wi_h

_;he

_he_

i:_

_an_

r_,

s_> wl_h

o_ ._x _J,_y

_]_ the_._

Ce_al

_e_iSoo_n_iIl_

_ha_; we_'e not;

o_ and

r_disGoun_

_i_nO_l

_

._:t_,@

_x_t_£o_

an_,oip_'_ed

1_7

- 6

rural

banks.

would

A0justments

certainly

predicted

and

be

it

data

aDout

some banking

is

system.

Star_ing

in

CB

intensified sector that

This

further

through deposits

indicating savings

per

rural

the in

success

the

per

floating

interest of

since

surplus

rates

in

the

significantly regime

compared of

themselves

in

however,

CB

Dorrowings

for

rural

banks.

the

rate

to

to

the

the an

_uring

the

previous

e_orts

o_

increasingly that

still

even

may

constituted

rates

per

were

the

bank

the

growth also

interest This

banMs

to

may

rate De

one

position

environment.

financial

a major

the

countryside The

years.

i;_

indicate

the

float_.ng

CB

Note

during

competitive a_ter

the

incentives.

rural

more

mobilizing

higher

accounts

fun4s.

increasing, in

in

o_

agricultural

growth

This

to

rural

re_

when

been

The

respond

of

to

time

banks

savings

the

to

window.

have

regime.

refer

sources

the

particularly

capital

of

source

the

were

banks.

to

tended

at

rural

they

system's

RB8

Dank

mobilizing units

rural

re0iscounting

of

were

higher

indication

Note,

Dank

the

main

countryside.

deposits

potentials

their

support

various

if

point

the

occurred

its

than

this

gives be

its

environment

performance

however,

borrowings.

by

at

II to

policy

difficult

financial

used

1974,

new

discounted

Table

Deposits

this

worthwhile

the

_unds.

on

to

•more

properly

Perhaps

-

source

reforms, of

funds

- 7 -

The

performance

increasing those

its

of

other

banking

has

The

rural

system

borrowings

is

commerciai The

and

those

been

Its

ROI

(7.8%)

it

1984

(5.2%),

the

banking

system

(10.4%).

respect anO

the

coul_

be

government The

System

1985

financial

will

likely of

arrearages

with

unprecedented

the levels

outstanding

had

bleaker lending

Central

to

years

(see higher

systems. of

than

should

the

the

had

that

the

CB

system few

of

on

V).

banking

It

the

of

Table

lower

of

the

that

ot

however RBS

in

De this

substantial

the

because

rural of

activities.

Bank

constituting

rediscounts

of

CE

received.

performance De

their

but

mainly it

that

than

performance

attributed

subsidies

reduction

their

favorable

Table

consis_enly

higher

system

that

(see

reliance

past

thrift

banking

noted

in

banking

been

and

was

successful

(see

the

commercial thrift

Its

rural

had

rural

banking

deposits

than

over

co_r_nercial in

total

systems

the

with

of

the

least

conspicuous

o_

share

institutions in

o_

comparison

of

shrinking.

banking

terms

XII).

the

deposits

declining

the

is

in

The

Table

banking

However, ot

in

resources

(see

its

profitability

_han

total

among

thrift

VI).

pales

system

•more

consistently

Table

the

has

system

institutions.

banking

of

banking

resources

declining

share

banking

baen

in

savings

The

rural

banking

been

mobilizing IV).

total

system

system

of

(see

Table

substantial In

already about

banking

72

1984,

reached

at

percent

of

VII).

They

-

will

probably

have

operations,

and

constitute their severe

.III.

ReneweO Role

Rural

on

assume However,

the

Banking

loans

usually

loan

will

f low

lending

portfolio,

certainly

of

nave

credit

to

th_

• one.

used

be

to

agricultural

O_

both

the

on

role

agricultural

framework,

freely

Glow

into

it

the

are

credit

credit

policies

focus

on

the

the

hoped

sector

this

economic

accompanied

policies.

were use

of

,

the

monetary

inputs phased

in

view

will out.

resources

would of

the

changes

in

activity. with

Whereas

stressed

approach Prices

_actor

that

the sector

current

be

the

from

market,oriented. and

will

stimulate

agricultural the

is

recovery.

differs

agricultural of

to

subsidies is

sector

•economic

adopted

is

and

reforms and

the

•products

attractiveness

These

in

subsidies,

development

this

agricultural

before,

deregulated

the

development

the

substantially

with

Under

agricultural

approach

Whereas

pampered

and

System

that

sector

previous

fully

belie_

current

agricultural

monetary

their

their

Agricultura_l_Develop_ment

leading

the

relative

o_

operations

emphasis

the

the

to

agricultural

on

on

renewed

anchored

down

sector.

the

ot

scale

percent

lending

.Emphasis

The

be

80

consequences

agricultural

to

since

about

reduced

8 -

before

recent

selective

policy

instruments

will for

-

stabilization woul_ to

purposes.

still

other

the

flow

on

their Bank

in

market,

rural

banks'

the

countryside on

their

selfvfinanceO most

proOuctive The

is the

the

is

offering

De

to

real

surplus

investment

and

to

the

operations

i.e. remain

themselves

intermediary, saving

units

would

from

financial

stimulate

they

woul_

To

financial

than

ot

important.

a

in

highez

realize

allocate

would

Their •assure

to

through

funds

of

their

to

the

continuous and

their

the

areas

economic

borrowers

would

allow

them o£

to

make

prospective

agricu

where

they

regarding

of a

in

flow

activities

characters

banks

familiarity

stock ••of @information

various

return

the

rural

distribution

agriculture

in

personal

and

of

wide

Moreover,

conditions

and

risk

banks

revenue,

into

role

and

the

funds

main

locality

o_

of

transform

other

funds

economic

potentials

to

any

activities.

operating

by

eventually

rural

savings

side

intermediated related

as

activities,

very

country

well

dictated

rediscounting.

•Like

continuation

indeed

as

be

will

source

CB

by

will

framework,

have

o_

intermediaries.

flow

credit

rate.

through

they

Bank

sector

rate

market

suDsidies

the

the

important

conduits

return

time

policy

most

Central

agricultural

rediscounting

new

Central

mere

the

prevailing

this

the

Although

this

The

the

Under lose

into

sectors,

market.

based

9 -

better economic

in

o_

Iture ,with are the the

prospective assessment projects.

-

In

this

case,

the

risk

of

loans

social

of

will

be

less

financial The

up The

of

in

the

worthwhile

this

than

in

financial the

area

cost true

the

rural

institutions where

except

the

their

existing

enter

on

overestimate

hence,

higher

the

agriculture

the informal

roles

new

they

explore

Rural

no

other

rural

bank.

=redit

would

credit

big

have

some

of

may

be

market

the

important

since

compete

with

especially

Rural

banks financial

banks

may

fully

may

(e.g.,

possible

loan

of

a

to

a

In

bank its

is

That

small

and

very to

institutions,

competing

in

this

ability

directly

specialize

be

locality

banks.

rice

may

with

commercial

institutions.

kind

relationships.

marke_s.

rural

to

financial It

in

financial

be

the

competing

determines

not

on

banks.

and

of

have

other

directly

other

opt

with

the

it

branches

other

clients

size

will

Oepends

institutions

the deposit

regard,

banks

commercial

financial in

rural

environment would

banks

other

that

policy

notably

both

to

slack.

specific

to

be

operate,

unless

institutions,

(2)

to

tend

projects_

other

consequences

felt,

not

currently

operate,

relationship

(i }

banks

institutions

be

would

not

inclined

aOverse

likely

play

likely

to

-

desirable

If

ceased

will

banks

socially

cost.

areas

picks

rural

10

is,

servicing corn

with rural small

farmers),

-

while

Dranches

to

the

needs

banana

planters

course,

banks

so

same

For

ba_ks

to

act

as

at

banks in

•(4)

to

their

Rural

local

can if

Of

is augment

and

commercial

participate 40

are be

rural

turna

worked

funds

flow

to

funds

they

have

onr

commercial

rural lot

may

relatively

in

institutions,

the

have

banks

Thust

a

in

not as

at

latter,

while

a

temporary,

banks

could

that

case,

or

they

borrowers.

There•

perform

penetration

rural

_inancial

own

rural

wholesalers

banks of

act

wo_kin_

out

between

Dut

what

the

is rural

mobilized

locality.

banks

8uDsidiaries regard,

•

may

commercial

The

that

important

and

should

this

permanent

example,

arrangements two

Tn

market

retailers.

the

banks

even

rates.

them

region

advantage

latter

extensive

deposits

lend

as

the

credit

attractive

cater

sugar

same

commercial

between

that

banks. place

the

either

forged

agriculture the

in

may

(e0g.,

functions.

tievup, De

clients

and

comp le mentary

may

big

banks

choice.

banks

formal

commercial

comparative

their

Rural

of

)

their

dictate

(3)

of

11-

may o_

UCPB'

s

become

commercial experience

branches banks. may

or In

be

this worth

.

mentioning. banks of

It

and

P145

from

four

has

in

increasing

the

by

local

managers,

about

local

those in

Some

their

base rural

the

are and

.

bank'

bank

skills

of

information

personal

characters

and

the

increased

together

banks

s

owners

of

blended

thrift

these

of

additional

and

clients,

total

int r odu ced

local

stock

conditions

potential

capital

the

a

of

management the

Thus,

rural

Aside

base

also

the

16

capital".

capital

training

managers.

of

IV.

in

some

nationwide

has

professionalism

and

Danks

in

additional

UCPB

resources

"infused

thrift

million

banks,

12-

truly

to

make

competltive

countryside.

Suggestions

for

Rehabi!itatinglthe

Rura!

Bankinq

SY stem

The possible

discussions "

roles

of

rural

the

flow

of

increasing sector present

under

for

Because

Of

concentration other

the

new

predicament

hindrance

above

banking

their of

to

credit

play

their

institutions

in to

the

banks

such

are

is

the

indeed in

in in

or

agricultural

big

future. an_

urban no

a

the

network

operations

the

However,

roles

limited

out

maintaining

framework.

rural

very

pointed

banks

policy of

them

have

the

centers,

position

to

- •13 -

substitute is,

the

therefore,

banking

policy

and

for

Restructurin_

According

to

to

proposed a

to

should

view

the

of

rural to

be

for

restructuring

include _ar_agement;

deposit required (e)

minimum

potentials

the some

total of

on

potentials net for

the

payment

The

;

worth

broadening

to

the would of

of

loan

set

of banks

snoulc_

of

(c)

(d)

fulfillment

risk

assets capital

the

criteria

potentials

operating;

in

arrearage8

integrity

the

help

strengthen

individual

output

be

However,

to

. (a)

is

can

which

restructuring

bank

Central.

To

seriously.

agricultural

in

environment,

selectively.

rural

the

scheme,

of

o_

participate

borrowers.

government the

percent

arrearages

considered of

80

of

policy

followinq_

• growth

to

system.

with

arrearages

the

_rurai

are

arrears

moratorium

be

(b)

where

the

banking

.cannot

restructuring

applied

the

It

smoothly

.about

loans new

system,

has

area•

the

policy

banking

to

percent

fiveyyear

principal

future.

following

the

banks

defaulted,

lOyyear

include

adjust

The

due

(80)

ad just

to

a. TBAC- study,

programs

attributed

near

rehabilitate

them

rural

Eighty

banks

allow

the

Arreara_es

operating

Bank.

in

to

rehabilitating

of

government

.. even

environment.

suggestions

total

banks

necessary

system

Dew

(I)

rural

ratio; base.

bank of

th_

banks of

the and

_

-

privilege

should,

15

-

however,

be

withdrawn

after

a certain

period.

(3)

Broadenin_

the•Capital

Broadening be

encouraged.

three,

a)

the

not

capital

It

mutually

Internal shows

Base

may

eagerness

the

crisis

may

not

slgns. want

banks. of

One

tax

profits

•which

exemptions

may

ceiling

on

rural

reason has

shares. capitalization

been

phase

by

is

In

that

provides

view of

rural

Our

profits.

20

increase

order

tax

increase

percent

disincentive

need in

the

stoekholdihg

to

the

banks

back.

the

a want

ot

bank

back

group

might

reduced

to

ploughing

their

withdrawal

out

_ners

owners

to

the

'a

some

bank

ploughed

bank

reason

who

why

that

De

shows

capital

is

after

not

still

consistently

have

study increase

may

reasons

individual/family

stockholders

least

operation

This it

are

encourage

bank

at

to

continue

gradually

possible

should

TBAC

owners

additional

capitalization

Another

a

to

infuse

could

to

bank

but

exemptions

in

A

struck.

possible

suggestion

bank

order

There

to

banks

ways.

practice,

positive

rural

accomplished

of

in

economic

of

Buildvu_.

capitalization

widespread

be

exclusive,

Capital the

base

to to

in tO their

increase continue

-

operation

and

increased

stay

buying

Still

deflnitely

be

This

and

other

than

from

a

is not

_e_

the

on

which

yields

problem

more

it

BtoQkholders.

Bills

a maCEoeconomio

is

be

money,

_

Treasury

attractive

approached

new

4_h.

may

that

Of

of

is

CB

more

8hares.

shares

reason

risklese

ceiling

provided

infusion

the

another

virtually

the

percent

. through

accompllshed

-

compet_.tive,

to-50

through

16

are

on

bank

that

cOmprehenelve

must view.

i

However, high

(b)

is

.External shares

presence

would

give

shares

of

mandatory be

those

less

is

same

time,

it

would

out

the

economic

have

the

may

have

been

used

may

and in

to

encourage

qualify

stipulated

in

commercial

give

Treasury

Bi11$

selllng

their

yield. rural

or

investments may

to

involve However,

equivalent

preferred

shares

onerous

CB

guarantee

The

requirement

that

stockholders째

difficulty

either banks.

on

could

This

potential

alternative

here

capitaliration.

banks

shares,

banks

that

Funds.

they

out

seQuritiee

high.yielding

rural

commercial

may

to

unless

feasible sell

bank

point

those

caplta_

rural

Attrac_in_ selling

off

to

on

rates

siphoned

increase

the

important

interest

also to

At

One

banks

to

common, of

a8

to

commercial part

PoD0 banks째

them

a mechanism

oppo_tunitie8

available

of

717.

the This

At to in

the find the

-

rural

(c)-

17

-

areas.

Merger_Consolidation. the

1980

financial

broadening

the

Perhaps, Rural can as

the Bank

De a way

regions.

This

of

examined of

reforms

as

capital

oÂŁ

Bohol

regard

encouraging

been

one

of

base

experience

and

has

with shared

n_re

the

with

oÂŁ

the

means

rural

First to

stressed

in of

banks.

Consolidated consolida_iOn

other

consolidation

rural, in

bank8 other

- IS TABLE EXEMPTIONS

AND

I

PRIVILEGES

OF

RURAL

BANKS '=

!

Taxes,e_-ges anefees1/

Ot,'_rs

FromO_traZ _

nora_

Gov't:,_¢ies

I [,

1.

Tax for banks2/ 2. Income Fixed tax 3. Documentary stamp tax

1. From registration fees, 1. Free assistcharges and documentary anoe technical i stamps on any instruI 2. Free training of bank

4. Tax on income of banks 5. Fireazms tax 6. Deposit interest tax

7._al Prope_yTax

mant relati_ to transact/ons or loans extended• by the _B.

2.Frompublication in

8. All local tax (such as transfer tax, b,d_ding permit fee, mum/cipal secretary's fee, market fees or rentals, tolls for roads, bridges and canals, pemit to engage in business and residence tax} except for the annual business tax 9. Property registration fees I0. Docketing fees, sheriff's fee ii. Regulation fees for motor vehicles 12. Fees to-the Securities and

E_ge i/_

newspapers of foreclosure notices where the principal of the loan and interest due do not exceed 910,000.00.

officers 3. Free from management ta]r_ expemses

2. Co%u_texpartfund fram the Development Bank of the Philippines

I4.Umn byCBto_ on

3.n_e notarial service

,' ;

on doe,amirs by municipal and city judges 4. Borrowings from the Development Bank of the Philippines 5. Com_mory deposit insurance co_ara_ 6. O_antee coverage of oertain supervised

col/ateral of assets of _B, in _ies and financial crisis 5. Loan to _B through CB of fundslfrom internat/onal_iil_!ng I institu_'ons 6. Redi_ of STD Funds from (_

I

Comm_,_n applies o_y whennet_

I

1. A_vice on Business farm m_mgement by and other gov't, agencies

I _

o=m_-t

do_ not_=,eapm_._wer,

go beyond P3M, the taxes, charges or+-fees shall be levied in progc¢+_i_ When net assets exDeeds _3M, the RB shall pay all taxes, fees andS.

to that

if it exceeUs Pm _t does,ot.

Said excess bears to the net assets. i

2/Fixed tax of _2,000.00 shall be coll_ted form banks, insurance companies_ finance and investment ocmpanies, doing bus_ness in the ?l'ilippinesand fre_nc_isegrantees .(Sec. 192 gg). Fixed taxes ih the Natior___ Internal Revenue Code r_-_f_o7_I_ , to fk_+_,taxes on h_siness, i _19u,.++

- 19

TABLE RURAL

Year

BANKS'

De_osiÂŁs F No. of RBs

-

II

SOURCES

OF

B_rr0w_ngs No. of RBs

FUNDS

Capital No.

Accounts of RBs

1972

544839.2

395939.0

487309.6

1973

699044.5 (28.3)

611464.9 (54.4)

514331.2 (5.5.)

1974

821022.7 (17.4)

1454545.4 (137.9)

532670.4 (3.6)

1975

882812.5 (7.5)

1940104.1 (33.4)

554687.5 (4.1)

1976

1062111.8

1903105.5

619875.7

(20._)

(-1.9)

(11.8)

1977

1211764.7 (14.1)

1860000.0 (_2.3)

644705.8 (4.0)

1978

1387755.1 (14.5)

2070891.5 (i1.3)

675617.6 (4.8)

1979

1580838.3 (13.9)

2395209.5 (15.7)

706586.8 (4.6)

1980

1646317.8 (4.1)

2710271.3 (13.2)

731589.1 (3.5)

1981

1974038.4 (19.9)

3104807.6 (14.6)

850000.0 (16.2)

1982

2489835.4 (26.1)

3804453.0 (22.5)

979670.8 (15.2)

1983

2978095.2 (19.6)

4209523.8 (10.6)

1158095.2 (18,2)

Note:

Source:

Figures

Central

in

parentheses

Bank

of

the

are

growth

Philippines

rates.

.

TABLE

DISTRIBUTION

AND

GROWTH

III

RATES OF RESOURCES (IN PERCENT)

OF

BANKING

INSTITUTIONS

f

Banking System

0BM)

80380.0

Commercial Banks

73.8

96666.0 (20.3)

123276.0 (27.5)

157024.8 (27.4)

193559.2 (23.3)

228580.0 (18.1)

276056.6 (20.8)

330943.4 (19.9)

403700.4 (22.0)

72.9 (18.7)

74.3 (30.0)

74.8 (28.2)

74.6 (22.9)

74.8 (18.3}

74.1 (19.7)

75.0 (21.4)

74.1 (20.5)

Thrift Banks

3.8

4.2 (34.9)

4.5 (37.4)

4.9 (36.9)

5.4 (37.6)

4.2 (-8.1)

4.5 (29.5)

4.9 (28.3)

3.7 (-7.9)

Rural Banks

3.8

3.4 (i0.2)

3.3 (21.3)

3.1 (21.9)

2.8 (12.3)

2.8 (17.5)

2.9 (22.9)

2,8 (16.9

2.2

19.4 (25.4)

17.9 (17.2)

17.2 (22.4)

17.1 (22.8)

i8.2 (25.3)

18.5 (22.9)

17.3 (12.1)

Specla)/zed Gov't Banks

18.6

i

Note, Figures in parenthesesare Source:

Fact Book,

_

rats.

Financial system (various Issues)

r

--

20.0 (41.3) •

- 21 TABLE

DISTRIBUTION

1976 _

Banking

System

{_M)

co_ercL_ Banks

AND

GROWTH

1977

IV

RATES OF DEPOSITS (IN PERCENT)

1978

1979

OF BANKING

1980

INSTITUTIONS

1981

1982

1983

1984

/

34666.0

78.2

42506.3 (22.6)

54343.0 (27.8)

69780.5 (28.4)

89498.2 (28.2)

99594.2 (II.3)

119364.5 (19.8}

142181.7 (19.1)

153400.8 (7.9)

80.7

81.5

81.5

81.5

80.6

81.8

84.8

90.i

(26.5)

(29.2)

(28.3)

(28.2)

(I0.1)

(21.7)

(23.4)

(14.7)

Tnrift Banks

6.9

7.7 (37.5)

8.5 (39.9)

9.0 (36.6)

8.9 (26.9}

7.0 (-12.7)

7.8 (33.3)

7.8 (20.2)

4.5 (38.4)

Rural Banks

2.4

2.4 (21.I)

2.4 (25.4)

2.3 (22.5)

1.9 (7.3)

2.1 (20.9)

2.2 (25.3)

2.2 (21.6)

1.9 (-8.6)

12.4

9.1 (11.0)

7.6 (6.4)

7.2 (21.9)

7.7 (37.0}

10.3 (49.2)

8.2 (-4.7)

5.2 (-24.9)

3.5 (-26.5)

Specialized Gov't Banks

m

Note:

Fi_

Source:

r

in pe/e_theses are growth rates.

Fact Book, Philippige Financial STsta_ (Various Ism__-_

- 22

TABLE RATIO

OF LOANS

-

V TO

DEPOSITS

1976

1977

1978

1979

1980

1981

1982

1983

1984

1.49

1.44

1.43

1.44

1.34

1.40

1.38

1.44

1.53

1.41

1.28

1.32

1.32

1.22

1.29

1.23

1.28

1.12

0.85

0.87

0.83

0.81

0.82

0.87

0.86

0.96

1.38

3.00

2.68

2.59

2.57

2.69

2.60

2.53

2.39

2.38

2.06

2.89

2.92

3.24

2.95

2.36

3.10

4.35

N.A.

r

Banking

System

Comercial Thrift Rural

Banks

Banks Banks

Specialized

N.A. Source:

Gov't

= Not Fact

Banks

Available

Bookt

Philippine

Financial

System

(Various

Issues)

- 23 -

TABLE

RATIO

Year

OF NET

Comme rcial Bank s

VI

INCOME TO GROSS OPERATING SELECTED YEARS

'

Thr-l_ _ ......

Bank s

INCOME,

Rural Bank s

Toga 1

1978

18.I

7.7

T'_,_

16.5

1979

14.1

8.0

19.1

12.6

1980

i0.6

6.6

14.5

9.9

1981

8.1

(5.0)

14.1

7.1

1982

6.7

6.6

12.1

6.3

1983

8.0

5.7

10.1

6.9

1984

3.6

6.4

9.3

5.4

i

Sources

Central

Bank

of

the

f

Philipplnes.

I

I

f

•

F

_il

li'(

I

I'f

--

-

24 -

TABLE

RURAL

VII

BA_S' REDISCOUNTING ARREARAGES THE CENTRAL BANK, 1979_1984

Illfi

..........

Period

Anm_n_

n nm

I.

As

II.

_-i

--

S(_.lrce:

unl

--

I

•

--

•

Ili_ll_--

Iil/

P_at Ratio

I _r

Duo (%)

_ ....

December

1979

570 • 0

1980

720.0

2b. 3

28.5

1981

870.0

20.8

29.4

1982

960.0

10.3

26.3

1983

1201 • 7

25 • 2

29 • 9

1984

2579 • 1

1984

/

in_

-

ot end

rf

Ib C_nge Over Previous Year

"

WITH

Selected

28 • 0

114,5

72.2

Months

June

1984

1748.4

46.8

Sep_

1984

2249.6

61.2

Oc_

1984

2370.7

85.5

Dec

1984

2579.1

72.2

/

.....

T_%C

(1985)