COMPARATIVE AND
MANAGEMENT
INSTITUTIONAL
IN RURAL
BANKING
STRUCTURE
PERFORMANCE INSTITUTIONS
Cesar G Saldafia WORKING
PAPER SERIES
NO 88 16
This paper is also being circulatedas ACPC Working Paper Series No 88.08 by the Awicultural Credit Policy Council
October 1988
Ph,l,ppme Inst=tutefor Development Studies
ACKNOWLEDGEMENT
We wish
to
Agricultural
acknowledge
Credit
tute
for
Development
(OSU)
and
the
Policy
United
8tares
This
financial
institutions their
study
names
financial
Council
Studies
(USAID).
enumerate
the
was
made
for
the
for
in
the
provided
Philippine
Ohio
State
International"
possible
included here
(ACPC),
(PIDS), Agency
support
with this
the
The
Author
Insti-
University Development
cooperation
study.
confidentiality.
by the
We
of
cannot
TABLE OF CONTENTS
I
Introduction
1
II.
A Framework for Relating Management with Institutional Performance..:.
III
The
IV.
Review
V.
Management
VI
Relating Management Structure Operati n g Pe r formance of RFIs
VII.
;
Survey of
Concluding
References
Structure .....
. •
3 8
Related
Literature
Structure
Remarks
and
...........
Policies and
RFIs
....
16
Policies:with
,,,,..,,..,
................
......................
of
i0
31 50 57
LIST OF FIGURES AND TABLES Figure
Table
1.
Management, Structure Impact of External
2.
Performance
3.
Comparative Organization Structure, Average Nigher/Proportion .... ._. ..............
19
4.
Pairwise Comparison of organization structure .....
20
5.
Comparative Degree of Decentralization .......
22
6.
_ducation and Ownership of RFI Management
. .......
24
7.
Deposit Generation ar_ Number of Respondent RFIs.....
27
8.
Loan Administration and Number
28
9.
Ownership Background of RBs and PDBs........
i0.
Managerial Hierarchy and Scope of RFI Services, Mean.
ii.
Staff Size and Overhead Cost, Mean ...........
12.
Branch Manager's Discretionary Authority on Loans, Mean
35
15.
Ownership, Structure and RFI Performance ........
57
14.
Multiple Recession of Return on Assets Ratio on Financial and Organizational Variables .....
17.
18.
Indicators
Banks .....
4
Breakdown
16.
Respondent
the .......
i.
15.
of
as, a Factor Influencing Forces on RFI Performance
by Bank Type Average
.....
9
......
17
of Respondent RFIs . .
31 .
. . . .
32
59
Manpower Deployment Policies and Service Performance of RFIs
41
Management Marketing Policies and Deposit/Loans Performance ..............
42
Savings Campaign and Deposit Performance for RBs and PDBs
45
Profitability Performance of RFIs .........
48
COMPARATIVE MANAGEMENT STRUCTURE PERFORMANCE IN RURAL BANKING
AND INSTITUTIONAL INSTITUTIONS*
by C_sar
I.
G.
Salda_a**,
INTRODUCTION•
Various
government
policies
and
•:
ways
programs
have
f,
to expand
and
increase
the
quality
of
bank'i.ng •
the
rural
areas.,
Most
of
these
efforts
directed
at
financing
programs
promote
the
effective
participation,...of basking
the
rural
financial
system.
and
Because.
focused
on
the
•
rpgulatory
of
their
services
.in
. ,, ,
were
specifically
policies
meant
institutions economic
to in
importance
*Paper presented during the ACPC-PIDS-OSU sponsored seminarworkshop on "Financial Intermediation in the Rural Sector: Research Results and Policy Issues" held on 26-27 September 1988 at the Cuaderno Hall, Central Bank of the Philippines., This is part of a larger study on..comparative, bank analysis jointly conducted by .the Agricultural Credit Policy Council (ACPC), Philippine Institute for Development Studies (PIDS), and Ohio State University (OSU). T.he project was coordinated:by Dr. Mario B. Lamberte (PIDS) and Dr. V. Bruce J. Tolentino (ACPC). **Price Waterhouse/Joaquin Cunanan & Co. Professor of Accounting at the College of Business Administrat.ion, University of the Philippines. The views expressed in this.study are those of do not•necessarily reflect those of the Institute,
theauth
and ,
2
in
therural
areas,
activities
and
The
the
practices
of
'rural
banks,
private
ongoing
Philippines
assumed,
this
of
a comparative performance.
better
understanding
and
A
the
results
of the
how
model structure,
is presented
which
are
and
financial
of
interaction
these
suggested
are
related
these
the
of
the
presented to
their
and
to market
a
institutions
performance.
between and
2.
section
This
variables the
in
like
to contribute
policy
by
towards
management
policies of
the
finance.
institutions
intended
to
Bank
a;id
then
banks
incentives banks
in rural
set-up
and
of
point
government
in Section
definition
which private,
and
are
management
descriptive
operational
hypotheses
evaluated,
operating
performance
of
rural
system.
is due
organizational,
three; types
-
financial
Development
role
and
commercial
government
the
the
the
of
uv
operating
(RFIs)
system
past,
policies
of
rural
play
a,,u
institutions
branches
the
a considerable
their
organizational
banking
of
and
The
determine
influence
their
descr,u=
organizations
institutions
the
Bank
to
banking
and
free
basis,
overall
conditions
monitor
structure,
financial
study,
characteristics on
the
In
National
In
part
increased
Philippine
are:
private
financial
markets.
of
banks
major
in
for
financial
These
rural
study
types
development
reforms
allowing
regularly
management
major
.the
in
this
observed
areas.
represent
Interest
of
three
in the
needto
performance,,
objectives
evaluate
-
policymakers
market,
institutional also
covers
including
several
descriptive
model.
.
-Section.
3
describes
the •survey data..
government
regulatory
management
structure
findings the
by prior
observed
data
for
and policy and
studies
management
the ..
three
ini,tiativesWhi;C,
policy are
choices
also
structure
classes
SectiOn, 4 ,.reviews
by
•impinge
RFIs.
some om
Related
reviewed.
_ec_lon
and policies
and analyzes
the
individual
and
of
RFIs
on
an
5
cover8
,.
comparative
basis.
Section
6 extends
the
analysis
to
relate
1?
management
structure
operating some
and policies
performance conclusions
of
of
the
the
with
RFIs.
study
overall
financial
anti
The last
section
presents
andsuggestsareas
for
extension
and analysis_
II.
A FRAMEWORKFOR RELATING MANAGEMENTSTRUCTURE WITH INSTITUTIONAL PERFORMANCE
This familiar The
study
of
contingenc model
policies
simply represent
the
management
y,;model
used
in
, states
that
an
_-he firm's•way
aspects
of,RFIs
_adopts
business
policy
and control.
organization
and
of innovating
grow in the face of,,p_eva, i, ling regu)ation/leg_l • , ....
marketplace, RFI's "to
in
means of exploit
constraints limitations). framework.
short,
management
competing.
opportunities of
regulations
These
policies
are
available or
Self-interest
its
in
I
will
seek
example,
see Porter
to
'_
:
is
market
maX_'mize
at its
the
(1980)
while (e.g., I !
core
returns
and Soriano
in
the
are
the
by management
1/ For
and
,.,•
chosen
own weaknesses
behavior
'_The RFI
the
to .survive
artd pra_tices
methods
management
structure
_
th_
(1976).
avoiding resource of
this
(commensu-
4
rate
with
available
risk) to
the
Management staffing, impact
selecting
RFI
management;
structure
and
policies
better
of
RFIs.
guiding
and
related
The
in the
this
study,
to the
and
these
of
regulations
•among
of
alternative
operations
of
on this
is reflected
of a
bank
bank.
The
performance
can
aspects
individual
management
structure,
management
management of
policies
organization
changes
context
_erformance
.interaction
conditions
the
market
understood In
from
consists
of.regulationsand
be
shown
when
are
described
RFIs.
structure in a
structure
with
schematic
below:
MARKET FACTORS ' o InterestRates oF,ndsBources oCmpetition o Economic Units_ --
..... RFI's NANA_MENT
STRUCTURE oOrganization )tructure o _cope ofAuthority oManagement Capacity REGULATORY STRUCTURI .---)oOwnership ..and oMandate ofRFIs .Managmnt Control o CreditProgram •oCredit Policy oSupervision of .. RFI_ intheArea
FIGURE
1.
L
INSTITUTIONAL PERFORMANCE OFTHE R FI oReturn onAssets oReturn .onEquity oI)eposit Generation oLoans toRural Borr_rs oProd,ctivity ofStaff
MANAGEMENT STRUCTURE AS A FACTOR INFLUENCING THE IMPACT OF EXTERNAL FORCES ON RFI PERFORMANCE
market diagram
The
organizational
should
be
Seen as the
available
to
standpoint,
these
the
reflect
the
main
adaptive
and
institutions.
observed
management
and regulatory
design
their
a s positive
structure
It
structure
RFIs
mechanism theory
of,
to .RFls,,for
conditions.
own management c
by
adjustment
•From
best.mechanisms.available
market
self
and management_policy_structure
RFIs
•must
coping
is
implied
that
in
accordance
with •
RFIs
will
with
their
-.
interest,
rather
than
based
on the
"equity"
objective
of
the.
2/ government.
As reported
government
remains
subsidies,
in
concerned
when channeled
Tolentino
with
(1987,
"how to
through
RFIs,
ensure are
p.
28),
that
not
the
rural
captured
farm by
the
banker." A
number
descriptive and
of
implications
framework.
make
its
One,
staffing
emerge
an RFI
will
•decisions
from design
to
suit
will
For
staff.
Two, the regulatory
as
a constraint
If
there
of
in
or in ',
the
difference
in
performance
it and
perceived
mandates
choices. (e.g.,
' "
the effects
management
,_
structure
cost-minimizing
in regulations
across the RFI types),
market
opportunities,
will be primarily
L .
size of capital first
structure
organization ..
choices of organization
to the achievement
are differences
:
i
any given set of market
seek cost-minimizing
its
suggested
available
•
opportunities.
the
should
structure;
be seen overall
_..,
will be evaluated
later.
Three, any planned
regula-
2/ Many RFI managements can claim that profitable results and growth in the rural market is not possible unless they service the agricultural lending needs of the local area. This is likely to be true in many cases, i.e., the efficiency and equity objectives need not be inconsistent.
6
tory be
change,
(e.g.,
evaluated
in
eventually or
directed the
modify
Profits._For
any
change
in
on
efficiency
the
its
at
"equity"
context
of
management given
regulatory of
the
the
ability
process
state
regime
Considerations),
of
will
of
in
have
an
the
favor
management
should
of
RFI$
"efficiency"
structure,
adverse
to
any
short-run
such
effect
RFI.
#
In taken
this as
structure
study, given
and
of
three
the
indicators
of
identified
and
Certain of
the
the
current
a descriptive types
and
performance,
RFI's
management
legal
prerogatives,
within
its
In banking, branch
management
the whose
resolving the
impact
RFI's owners
and
of
are
are
management Operational
structure
generation
other
the
are
using
relationship the
can
be the
be SO
personnel,
the
as
that
adversely
among minority
application. policies
the
Second,
designed
restrictions and
are
Third, the
owner-management
holders.
to its
funds.
to
expected of
flow
of
preceding
use
the
management,
conflicts
from
primarily
be expected regulatory
dominate
the
generated
.and the
can
funds
potential
government
these
network
policies the
the
management
structure
optimize,
RFIs
of
be
an
affect
elements
regimes
is conducted.
can
First,
minimize
RFIs
of
hypotheses
framework.
physical
regulatory
analysis
of
key
and
utilized.
management
resources.
market
to
for
means
for I group,
7
Some
preliminary
performance
and
,I_,.If
management
wants
policies
will
to optimize
resource
deployment the
of
RFI
bank
choose
specifically
a)
of
retention
3L
Is
deposit
there
potential policies
stockholders
themselves
three
which
c:,_iteria,
manage
to directors
RFI
involves
aggregate
and
across
RFI
analysis
along
and
highlight types.
of
deposits
between
certain
are of
RFI? those
the
whereby Specific
related
to:
RFI;
andofficers
and
its
impact
performance.
an
more
policies
to:
condition the
be addressed
lending
The
available
area?
the
b)
operating
the
can
and
to stockholders
types
to minimize
percentage
relationship
,returns
RFI
related
local
a)
study
lines?
exploit
those
in the
service
policies
and
a certain
management
on
utilization,
mobilization?
a
questions
The
lending
along
management
" opportunities,
b)
staff
restrictions
for
between
itselect,.for:
b)
does
relationship as follows:
service>offerings?
How
the
presented
a)
regulatory
the
on
are
management
what
2.
questions
of
the
operating,
certain
measurable,,
quantitative
indicators,
practices the
are
covered,
comparativeaspects
policies
of
and.,,qualitative of,_ in, of
management order the
to issue
8
III,
THE SURVEY The data
Of
66
rural
banks. and
unit
banks
the
of
actual
shown in
Table
banks
branch
are
banks
located
a primary
development
and
schedule
survey.
survey
commercial
were
designed
A breakdown
of
the
1. broken
development
These
from
interview
the
66 respondent
municipalities
was taken
and an to
is
banks.
study
and branches
prior
and
commercial
of
banks
pre-tested
The
25
in this
A questionnaire
responding
16
used
down into
banks,
are
in eight
spread
and out
provinces
23 rural 27
banks,
branches
over
10 cities
from
seven
of and
regions
country.
The survey (a)
instruments
Documents
submitted
statements, special
organization
one
for
Research
and
bank
selected
types: such
as
personnel
financial data,
financial
and
information,
Stockholders
questionnaire
banks
assistants
responses,
three
and
Related
loans;
pre-tested unit
the
Officers,
(DOSRI)
14-page
of
chart,
of
Directors,
Interests A
by
schedules
e.g.,
(b)
used were
to
and
another
interviewed follow-up
in for
two
branch
respondents questions
versions:
to with
banks. clarify ,misslng
responses. (c)
A
two-page
and/or
interview
sensitive
schedule
questions.
for
the
more
difficult
Table
1
BREAKDOWN OF RESPONDENT
Location
Region
Rural Banks
BANKS
Development Banks
Commercial Banks
I
Pangasinan
3
2
4
0
4
3
3 0
3 3
3 4
3
1
2
4
1
3
3
1
3
7
1 ,.
5
Region.III Nueva Region
Ecija IV
Batangas Laguna Region
V
Camarinee Region
Sur,
VI
Iloilo Region
VII
Negros
Oriental
RegionX Misamis
Oriental
Total
23
16
27
10
The
instruments
structure,
operating
systems, sheet
covered
including and
income
requested
the
general
policies,
and
bank
reporting
and-evaluation
statements
including
financial
for more
the
variables,
of
operating
procedures
1981-1986
number
of
and Balance
were
schedules
DOSRI,
management
systems.
period
detailed
e.g.,
,areas
also
for
selected
deposit
,and
loan
accounts.
The
questionnaire
well-covered
by
submitted obtain most
were
IV.
REVIEW
OF RELATED
operate
problems
RFIs.
the
reforms. the
reforms
was
bank
data
difficult
to
branches.
encountered
sometimes
in
leading
From
an
operational
reduced
the
capitalization,
banks
investments
branching as and
facing
Lamberte
(1987)
For
terms
of
gaps
in
to
important
and the
the
most
remain
compared
on
requirements.
However, to
rural commercial
by
the :._the of
regulatory
these
differences
restrictions,
out
organization
current
limitation
branching.
requirements
and
between
reserve
set
reviews
operations
differences
of
enterprises,
framework
viewpoint,
However,
minimum
regulatory
on the
institutions.
reserve
were
financial
it
commercial
formats,
of
environment
rural
corresponding
generally
LITERATURE
within
financial
implications the
from
were
information.
RFIs 1980
banks,
schedule
In particular,
statements
in reporting
item
but
incomplete.
responding
line
interview
respondents
financial
differences
and
fina.naial inkey
ownership Lamberte particularly
banks and
enjoy
areas of ciited on lower
development
11
banks.
;t
s@ems clear
the entire
theft
f.inaDcial system
.these
regulations
were
set
out
with
in mind._;.However, see_-..onIyfrom the
subset, of the rural0financ,)al sectory,pthe framework.still for
the
operation
equity ;bases
ran.gimg;from a minimum
and _500 million whether
of_,three,::institutionswith
this difference
in resource
The_reduction.of
resource offer
base
services
banks,
requirement
base, as pointed outby
and open branches
environment
a_g
Lamberte. ba_k types may in
the
can. ,l.egal_l_y
nationwide,.simiclar co,commercial
banks are.,6maller prevent
availing.,;ol, this legal,opportunity.
The
,is
iRdeed,,:.offset
Wh-ile development.,-banks
the fact that these
basis. ;
can
due to. the_remaining)di_ference=
.of banks.
the.opportunity
ques_jo_ugges,ted
_functtonal. differences
,have been less. effe¢¢ive
dif,ferent
of _500,O90._,f_F r,ural.:,.banks
for unibanks,.. A r_a_ch
the diff.erent, ial reserve
vastly
allows
them, from
The sa_e..,ca_, be s&jd, .abQut
for rural banks to open.branc_h_,.S, _n a region_w),de r.e_ponse,,of
RFIs, .,._o the)'_-_eregulated
market
can also be seen in the-same context,. , Such ba_ks may
sti].l be. unable .(Lamberte
to.,_njby ,benefits from any economies
1987.,.,
p.
7)
potentially:
,of. scope
avai,3_a_le
through,
deregulation. Meyer to
take
absence speci._y
(1987_)
up, ,of_
the
inadequate
task
thadit.ional
,theiP-.ow_
comme_t,;to,
,conjectures
the
<rules.
of
credit Central.
_f
rural,banks
evaluation
._nd
Bank_nitia,L_ed
and regulations,-.
potentia],, lack
organ_zat_qn
that
of
may be,_unable lending,
in
programs,,
Thisca_,be
taken
the which as_-a
;.management. capa_,i,ty ,_nd
rural bankS... Centra_,.Bank',s a_empt
12
tO
'wean
rural
programs
was
financial
lenders
one. of
reforms
measures agricultural,
portfolio
conclude
his
programs,
studies
_ thatt_ese
motives
of
of
'_rofit-maximizing their
lower,
;_under
restrictions earnihg.
given _ _rates.¢harged
on
reasonable
reports
agricultural
The.
at
,reserves, :the
under
market
remain
1,east
behavior. 75
the
part
of
sa_e _ area."Lamberte
portfolios, this
legal
are
_legal
RFIs
for
deregulation, " Che
lehder@. _
'consiste_it
retention
.-from
1OanS-',t'O
condi'tions..in
are
scheme
of on
with
-r@quiF_s
generated,
portfolio
Here
seotO,rs
Whenever
.OF.
as
re,]atively
stop L makih_
commercial
requirement.
those
simply
regime
" In
"'len_ers_.
preWented"
that
RFIs
_@riCUlCbta1
rates
loan
(1987)found
of
profit_@eeking
to
deposits
the
to. 1986.
loans.".
unattractive
total
banR_
constrai_ts._
lend
regulation
of
fewrUral
that
default
:A._deposit
percent
should_become
not,meet
to
_he the
supervision
.thecurrent
RFIs ,_ responses
regiohally-aggregated did
RFiscan
.that. risk-and
loans
profit-seeking' that
Profits,
Even
Tolentino
interest
reviews
formal
concludes,
and
in the
.... correct
by.
in
to
s_ctor
performance
regulatory
funds
lending"
and
credit
the. rural., bunks.'
up
driven
, Seek
of
that
least
the decline
businessmen,
on.
agriculture.
and
p.. 5)
combinedcost
at
are
,to:market
causes
to,'
reports:that
behavior
institutions
the
(1987)
indicating
the
credit, _'. '.Tolentino,"(1987,
Where
He
speci_1
agricultural
implemented
per@ists,
on
in .responding
review
Bank
still
and
Tolenti_o
.of banks,.
these
_ndition
Previous
.@or the
1980-1985.,
Central
parti¢,ipate@_i'n arrearage@
the .agenda
of
which
frromrediScounting,
net_c the
the
of
RF.I _in bas$s:,',of
bank
(KB)
was
a
branches
case
where
13
manage/_nt,
pollcie_
restric_i_,@,,
apparently,
On_.the
violated
....other
han d , the
incentives._@p.pear.more d_fficult requirements ,advantages
this
advantage
_of l_Fger to
as compar@d to
@or
of:
intende_,.!to,gffset the
â&#x20AC;˘ Lamberte
was_unable of
_sstrictions
universal pp.
seem to
also
be a deterrent
Note
that,
,the
i,e.,
at
rather
than
the
ratio RBs,
the
be less
noted
10 percen_
that
the
the
while
regulation
banks
_elevant
of
adopted,,
except
bank
bank. of
at
is
the
,For example,
RBs, it
,unit
can
is
8
banks. actually
by
banks.
bank
_KB head,
Lamberte
the
...HoweVer, it
and loans
(POB) and
a KB branch.
affects
1eve],, offices
was unable
The,implication
is
be effectively
to
that, ignored
Of KB and PDB branches.
the qomparative!.performance.of
the
three
basis of reg.i.onal.ly-aggrega_ed_.financial data.
the.. results
differential have
development
reports
types on.the
Some
(RBs)
at
.._iforother
regulation
expansion
rel.¢vant
"equity"
management
tO asset i sonly
branch
ascertain
RFI
trace
worth to risk ,aSsetS. ratio
bank@.and
5-6)
could
Lamberte.
to
rural
_an: in_itation.fo.r banks,_to_expand their capital."
by the
_,
KB branches.
(1987,
the
regulato.r
Di.fferential.reserv_
profitability
level.,, . The,. minimum_net
Lamberte
to assess.
banks.
any superior
Some regulatory
Bercent
effects
i.n.favor of rural-banksare
cost
RFI
exp1_icit..-regu1&tory
management, Fi, rst,
have
a
d_rect
policies KB branches'
relationship
with
that;each.RFl..type.appears deposit
mobilization
the to
,is more
It i@,_ conce._n of head office and the branc_ i.gnores,..it on instruction from the top. " '_
14
extensive
than
PDBs
and.RBs.
a cl'_oser"look into 'the RFI
type
deposit
in the..case
of
lower
for
RB
finding
organization
•regarding
reversed much.
This
and
suggests
policies
mobilization.
loand;:
branches
The
loans
for
PDBs
than
the.need_.:.:'for
adopte8
by .e&_h
The._'s_ituation to
deposit
and
RBs
ratiOS
in
.is are
E_mber_e's
study.,
Various offered
conjectures
relative
Lamberte
related
to the
dep6_it.and
Claim8 '_that
KB
discretionary
authority
authority
Ori"ginating
that
for
the
RB
environment Central some
this
On found, loans
aspect
that
for
have
less
the,capaclty that
in
banks at
of
are
their
regions
(1987,
have
to thenew
strictly
T__i"ted suggests
unregulated
is supposed,
scheme,.
RFIs.
greater
p_"6)
deposltretention
1983-85
to
'replace
vioI_tion'_by Lamberte
followed
banks
programs
under
outside
the
by
noted
R_Is."nor
that
regionally
of
specializing
in deposit
banks.
In contrast,
headoffices.
These
branches
generation
findings
aggregated
Central
.to "devejop Lamberte of
noted
commercial
to support,
suggest
Bank
Management
regulatoryregime,
Manila,
(1987)
'deposits. •: This
the
to these
generation, Metro
Lamberte
exceeded
importance
credit
deposit
performance,
period,
and.rural the
incentive,
for
"but .very
apparent
institutional
the
and
for
Meyer
are
authorities.
highlights
rediscounting
deposits
"to. respond
is'nei_ther
development
finding
ma'_
thefaceof.the
banking
this
of
ra4sing loans. •
In
of"the
the
management
deposit, m®bilization
regulation by
on
aspects
management
loans-Pelationships
branch
unable
funds."
branches
enforced
be
where
Bank
KB
that
may
to
certain
lending basic
15
dlfferences this to
_n organlzat_on
study
The aggregated
be verified
the
and
Due
retired
Comparisons
on the
complicated
using
to
the
disparity
unprofitable fund
.
transfers
to
in
the
ire
explored
Lamberte's_study
organization
income system in
study
in
also
_d
of
makes
are net
clearly
accounting,
negative
on
meaningless
needs
management
KB
transfer
at
deficient
in this net
most KB
to
suggests
that
to
of
at
the
Given will
this result
situation measure,
branch
true
in
operating
This
studies
of
used
efficiency
future
for
revenues
losses
unad3usted
arrive
estimates
respect
traditional
applied
appear
measure
branches
be
branches
as a ratio
branch
to study
reported
Even the income
out
Lamberte
price
head offices,
a
the
and loans
operating
techniques
turned
in
understated
equity,
Lamberte
measurement
to
for
when
statement
ratios
cumulative
equity
return
profitability
reasonable
branch
--
is
of
standard
W_thout from
--
bas_s
in deposits
and PDB branches
Lamberte's
on
data
which
bank level.
more
KB
and management
financial
should
innovate
p_cture
of
RFI
performance In
summary,
policy
mechanisms
proflt-_eeklng
branch
the is
current that
RFI
one of
Equity
evidence
RFI
motive
regulation, regime
the
with
low cost
deregulation,
eauals
management
Faced
seeks
assets
suggests
less
follows,
a market _nternal
RFIs
will
a menu of
adaptive
guided
condition
by
of
arrangements seek
l_ab_l]tles
highest
of the
its
income If
the
portfolio
KB
or
PDB
16
returns
while
loans or
keeping
w111 decrease
if
urbanized
alternat19es
if
loans open
conditions
low-cost
is
loan yield
to
sources interest
more returns
more d_verse
Restrlct_ve
regulations
violated,
the
case
Restrictions
may have full
in the
areas
of
rural
but
regional/national
be required reserve
to
assets) of
and
Performance
management
loans
have
policy,
using
etc
summary
)
functional
like
profits
strategies
V
MANAGEMENTSTRUCTURE AND POLICIES
or
of
unit
the
pursued
branches
worth
to
risk
responses
(deposit
policy,
be exercised
the
may
(e g , lower
adaptive
must
banks
management
g , net
due to
measures
when
lnteract_on
of
by RFIs
OF RFIs
Mana_emenl_S!_ructure The
study
basic are
lndlcator_ (a)
of
(c)
(d)
Organization
ownership terms
operating bank client
of
(1)
officer
management
organization
decentralization
in
of
care
the
1
unique
RFI
strategies
extra
followed penalties
an incentive (e
come out
or
on competing
a restriction
lnd_cators
with
to
be taken
without
management
The
Lt__ÂŁJL
be
same areas
ad3ust
However,
with e_ther
or
on the
_n the
results
by way of
with
no consequence
simultaneously
requirement)
dealing will
regulated
deregulation
may either
even
impact
banks
in
Agricultural
become too
under
Incentives
_gnored
funds
rates
management
latter
of
to
and (11)
structure
staffing
the
and
the
used
(b)
management
structure
number of
the
structure
from
bank_staff
in
of
background
and
number
and types
the
face-tO-face of
staff
the
degree
_s charadterized
levels
in
further
bank's
chief
contact
with
poslt_ons
in
17
the
bank organization
the
location
cllent_
of
approval
and Investment
background in
The degree
the
covers bank
Finally,
size,
of
decentralization
for,deposlt
bank funds
mix of
distinction,
terms,
Staffing
managerial
and rank
any,
between
to
management
and file
of
to
loans
and
background
_f
refers
key
staff
officers
management
and
are explored
These management selected
authority
and the_educatlonal
_he
ownership
the
of
indicators
deposits
reference
shown in Tab]e
varlables
of bank performance
loans
point,
structure
and profitability
a summary of
w111 then be related to The usual aspects To provide
key
performance
an
are
initial
Indicators
are
2 Table
2
PERFORMANCEINDICATORS BY BANK TYPE AVERAGE (In thousand pesos) .....
===================================================
Rural 1
PlO 440 97
J21
Commercial Bank
823 260
Amount Number of
3,722 4,434
14,406 3,772
Accounts
7,137 980
10,838 237
Excludes outstanding ¢ommerGlal banks
transfers
Loans
P70,480 1,372
Generation
Accounts
a) b)
of
Total Assets Premises
Deposit a) b)
3
Developmen_ Bank
Bank Size a) b)
2
Bank
m/
Amount Number of
to Head Office
67,148 10,131
6,165 63 for
branches
18
The
size, and
depends
on
expertise certain .can
complexity
bank
and degree
size_,
development types
of
other
by a bank
policies.. banks
are
significant
similar.
Only
of
each
structure
differences.
An
'
personnel
Assuming
personal
services
such
disparity
,
hiring
personnel
by
all
bankbranches
as
transfers,
exchange
services,
in
size
function
makes
extensive
branch
three
offered
telegraphic
asset
a
expertise
and
offered
commercial
foreign
banking
force,
proper
of
services
great
importance
labor
structure
services,
structure...
through
scope
checks, the
the
The
bank
drafts/managers' Nevertheless,
of
organization
of-
regulatory
mobility
be contrdlled
a bank's
range
prevail_ing of
of
and
and
in
for
L/Cs.
relative
organization structure
for _
commercial
banks
authority
compared
branches
Commercial
o?fice
guidelines
of
banks
branch
or
indicator extended
differences
like
RBs
in
and
Unlike common
regional
need
held of
by
maintain
banks.
maintain
also
less
assets
organization
books
unit
to
managerial
PDBs
with
less
places.
can
may
comparatively
more
to
banks
Central
better
lead
banks..-can be expected.to
compared
financial
also
to
infar-flung
Unit levels
can
for
KB
an RFI's
banks,
workload
branches
services
branches
the
organizational
at
Well-developed
supervision.
a bank,
unit support
level.
allow
more
to
number
of
of
and
consequent
hierarchy.
Table
3 shows
structure
indicators
for. the
three
Reference can be made to standard-bank like Johnson and Johnson (1985).
the
accounts
supervisory
the
operating operate
.Instead
of
with value! of
may need
a
bel
a
fori
a
compari'son
.types of
management
RFIs.
._ext-
19
Table
3
COMPARATIVE ORGANIZATIOR _ STRUCTURE ' AVERAGE NUMBER/PROPORTION ( Standard Dev i af,'i on)
B
A
N
K
S A
1. 2.
Number : Plantilla a)
Levels
3.
Number Per cent of Total Personnel
Hierarchical
Proportion of Managerial/ Supervisory Positions to Total Staff
b)
Average Number of Customer Accounts Per Manager/Supervisor
Among r
a
sample
average and
distribution
$_gnificance
3.6 (0•52)
,N.S.
.03
9.15 (3.36)
8.46 (3.33)
84_ '(10_)
76% (27_)
8.31 (2.89) ' ' 57_ (25X)
27_ (9_)
20_ (i3_)
3,995 (2,336)
of
number PDBs.
distributional (Kruskall
3.5 (0.90)
28_ (8_)
Kruekall-Wallie (K-W) Chi-Square significance:
branches
4 (0.94)
KB Branch •
0.002
Mix
a)
highest
Development
Positions
II
b)
of
Rural
of
is
39 of
Given
One-Way levels
'
2,4-50 (1',2_1)
N.S.
One-Way ANOVA (correc_d'for"_es) , ,f., _..... N.S. - Not Slgnl Icant at 0 _2 S(Level) - Signific_bt (level)
RFIs
RBs turned
organization the
characteristics Wall
1,985 (1,614-)
0.12
small
o? the ANOVA) across
three
i_Out
levels
was
have
followed
sample data,
to
size
the by
'_ and
unknown
a non-paPametric used
bank
".
to "
"
test
compare
types.
• c:
The
KB
,Lthe *
test,
20
essentially
based
on
difference
in
numbe_
proportion
of
distinct
to
KB branches,
in
primary
and KB.
difference
in the
in
the
case
parametric
test,
unitbanks
in
I.
the
banks
loan
higher compared
diversity
compared
.staff
explanation
a statist_cal
the KB
can
to
at
.may
accounts
difference, be made
using
(K-S)
organizational
branches
OOMPARIBON
P'lantilla. PositioD
a
their be
the
handled
by
KB branches.
Table PAIRWIS.E
by
support
Kolmogorov-Smirnov
and
significant
organization
unit
possible
no
maintain
be explained
central
comparison
the
their
of...deposit and
conclusion.regarding
between
for
when
statistical
to
functions
number to
in
likely
Another
banks.compared
pair-wise
The
is
shows
RBs and:PDBs
positions
branches
groups.
ranking,
levels,
support
corporate
As
of
This
reliance... by
unit
comparative
is
another
Two-Sample
structure,
is borne
found,
out
a non-
.Test.
difference
inTable
4
OF ORGANIZATION
STRUCTURE
as _/.
Percent
of
Total
Personnel
.0023
RB Vs, PDB RB Vs. KB PDB Vs. KB 2.
Hierarchical
(N.S.) (0,001) (0,08)
Mix
Pro.por;tion of Managerial/ ... Supervisory Staff to Total Staff RB Vs. PDB RB Vs. KB PDB Vs. KB
12
(N.S.) (0.13) (0.14)
L
K-W One-Way K-S
Two-Sample
ANOVA: Test
All
Three
Bank
Types
21
Table these
3 also
banks'
personnel
and supervisory staff
of
over
.
shows a difference Again,
personnel
KB branches RBs
as
operational
compared
explanations
supervising
in
KBs
may
s_mply
functions managerial
mix
d_fferences
along
of
a
unit
bank)
approved
or
of
the
Committee
or Office
comparative
basis branch
(for are
i/
control several
in
of
the
be mu_flc_ent
On the
involved
is
other
hand,
fewer
banking
comparison
s_gn_ficant
_ for
statistical
PDB or
exercised (of
than the PDB managers
1n the
refers banks)
by the
a
more
decisions
KB branches) in
allowed
Table
to
(of
in
a
loans
to Head
results
a br
on
a
5l
much higher
although
to
_central]zed
an Area
The
is
manager
Under
or
context
O_e way
a PDB or KB branch) terms
unit
summarized are
evaluated
bank environment
manager (for
managers
and file
are
RBs may not
The palrwise
on deposit
President
of
direction.
manager
the
rank
The expertise
shows
latitude
branch
structure,
llmlts
of
mix
lesser
functions
decentralization
degree
larger
There
regard
a staff
4 also
the
branches
banks
above
and decisions
Central
d_verse
unit
hierarchical
indicates
_n the
and a unit
authority
KB
to
the
multi-branch the
with
_n Table
aspect
consider
this
be operating
compared
The
KB
personnel
units
to
finding
to
the
RBs and PDBs have more managerial
contrast
This
managerial/supervisory in
in
in
loan
the latter's
Defined as the number of organizational manager See Koontz and 0 Donnel (1984)
units
approval llmlts
handled
are
by a
22
,Table
5.
COMPARATIVE DEGREE OF DECENTRALIZATION Mean (Standard Deviation)
B
A
N
RB ...........
DB
K
S KB
Significance
w ....
1.
Maximum Loan Approval Limit of a Manager Amount
2.
(in
thousand
pesos)
P8,667 (6,673)
_43,750 (41,908)
P651,667 (837,972)
0.0001
Level of Organization When Decision on Deposit Terms are Made a) b)
Board President/Top Management at H.O. Manager Board and Manager Board and H.O. "H.O. and Manager
c) d) e) f)
_,
_=_
50.0%
18.8_
4.4_
18.8 31.2 -
68.8 12.5 -
69.6 13.0 13.0
100.0%
100.0_
100.0_
.........
K-W One-Way
_
ANOVA
Z/ not
far.
behind.
Disregarding.
other
factor,s,
higher
loan i
approval such
as
limits better
correspond
to
a "decentralized"
knowledge
of
local
conditions,
set-up.,
Factors
availability
Of
Z/ Interpreted here in a distributional sense. KB (..branches) has a distribution which is skewed to the right. Most loan l.,imi_s for KB branch managers are in the range of PDB's except for a few exceptions with very high limits. One KB reported branches with loan approval limits of _2 million, resulting in the large mean and standard deviation values. Various industry sources questioned the adherence of KBs to the actual excercise of such large approval limits in practice.
23
centrally
_ _idm_istere_
service
are
gu+delines
some reasons
for
and faster
allowing
or
on loans,
These
RBs
accessible _ .
branches ._ ._.
of
PDBs,
pass on loan
approval,
to
a Credit
decisionmaking
units
managers
more must
Board,
these
short
level top
for
for
whether
are
normally
absent
While
PDB
for
and
Committee
.can be readily
the
or
RB the
convened
RFI
regulatory As mostly and legal
it 1cans
of
on
function.
would
'given pol-icies
are;e_.pected
centrally
to
monitored.
be intere@ttng
within%he,
lower
importance
Generally,
functions are
are
the
to
From
to')find
approval
be
out
limits
set
PolicY. and decisions
RFIs are especially
the
lending
allowed
to
are
considered
foral.,liRFI._:,.types (Table 5).
,rela_ea _o aepos_s how
discretion
more Critical
average
policies
prerogative
the'
decentralized,
a matter
Deposit
of
may be related
standpoint,
actual
RFIs as
the
to
and if
performance
degree
loans
management
centralized
by
the
officer.s
and decisions
a
reasons
â&#x20AC;˘managers
notice, Furthermore,
by
personal
PDB and KB branch
more discretion and
more
sensitive
are a_so
positions
management
The cbmpe_i,tiveness
to deposit
less frequent
itself relative
top
terms.
and closely
to the
market
of
Decisions related to and
the
managers
are
environment,
can
be
expected,
related to'-busin_s
familiaPity aspects.
the background or law._
by RFI managers
of
RFI
This impl,ies prior',,trai_ing
with,
business
management
A summary of this fi_ndin.gis @i_Swn in
Table
.and 6.
24
Results
also
i,ndica_e
,ar_.stockholders
of
that
their
most
,presidents
respective
.Educational RFI Managers
AND OWNERSHIP
2.
a.
Business
b.
Other
Background
or
OF RFI
MANAGEMENT
DB
KB
61.1_
81.8_
92.3_
38.9
18.2
7.7
18
;.3
of
Law
Fields
Ownership Number of which are
and Management: banks or.branches
a)
Owner-Managed
b),
Not
Own.er-Ma_aged
-l.
Ma_Bqemen_
Po}j:_ies
RFi" management compared
in
namely,
deposit
addition,
the
capital deposit goals, presented
terms
and and
of
pol-i_ies of
the
ODer_tina
can
banking returns.
toit comparative
is
Bothaspects adopted by
the form.,
._.3 ..
owners.
,,,
24
,Dec,isi_ons
functional
and
business
24
b.e systematically
two key
generation
•loans•policies
assigned in
and
O.
IO
19
2.
RBs
banks.
RB.
-1.
..Q_,
6
Table •EDUCATION
or. man_gere
described areas
loans
with joint
by management All
banking,
administration.
concerned are
in
and
these
In
adequacy
consequences relative ae,l_ects
to , are
of of _the -now
2S OeDo_i_
Geh_eration
Table deposit
7
shows
relevant
generation.
noted
References
to
statistical
item
numbers
results in
Table
for 3
are
in parenthesis.
Except are
for
existing
five
RBs,
written
all
such-' de_osit_policies number
of
manag@r
although
RFIs'
deposit
deposit
the
monthly
deposits
(and
Most whiYe
branches
of
deposits,
.specificalt, y,
terms
I).
KB
such
is is
of
polici@s to
the
carry
branches
do
conduct
Board
main
'A
by
the
of_Trustees
for
six
RBsi
(Item
the
2).
The
r@spbnsib_lities
Area
Head
this
daily
branches,
decided
reviewed
out it
are their
PDB
management.
Except
the
with
and
office/_oD
'regularly one
reported
Among
policymaker.
KB branches
:meanwhile,
there
RB's point
jointly
some
RFIs
by_head
that
function
manager
branches).
set
performance
_view
RFI
are
majority
as
on
that
(Item
RBS indicated
(Directors)
surveyed
policies
andinterest,-raÂŁe'scheddles
the
aata. ana
in
the'case
evaluation (Item
their_review
of
function
3).
_8
month]'y .
of:KB
_nd
PDB
_uarterly
or
annually;
The
nature
KBs anchor giving
them
depositors.
their
also will
deposit
campaigns
incentives On the
comparatively to
of
more
to other
campaigns on a motivated contact
hand,
more KB and
customer-oriented,
depositors
and
TIPID
arise'0n
who
initiates
be across
RFI
types.
depends
movement and Host
on
internal people
PDB branches'
schemes. how
long
RB and
with
enlist
raffle
staff
by
them
as are
prizes
differences
deposi_
PDB deposit
type.
campaigns
Certain the
RFI
bank
and
usually
the
qampaigns
campaigns
are
26
initiated, comes
by
from
the
the
last
"only
from
one
year
for
LQan_dm
in which
Many
policies.
Directors.
'
KB branches,
4).
Most
months
compared'
branches
(Item
the
RB savings
mandate
to
campaigns
six
months
to
and
statistical
5).
locatioo,
of
planning,
role
In contrast, the
RFIs
in
decide
by the
a significant policies, The
preparation
of
a loans
PDB
and
branch.manager
appraiser,
of:rural lending
activity.
loan
or
the
diffenence
as
banks
of
operate
decision budget
to is
a
organizational
branches.cen._ralize
or
head/are_
and
written
RFl.types..(Item
the
to
in
Board
KB
responsibility credit
all
to
noted,_
based, on
Office.
for
p_ragraphs
are
leaving
clear
the
lend
number
a
delegate
table
to
Head
administration
the
following
the
loans
at
data the
of
this
RBs
items
I) set
written
is
relevant
conclusionsin to
management.
There
the
surveyed
(Item
activity
including
the
However,
such
operating
2).._
KB
Reference
parenthesis,
r_gular
tosix and
for
(Item
summarizes
based.
without
office
one PDB
8
infer.ences
loan
head
whereas
in_ st rat ion
Table
are
branch
;this
office lower
collection
level.
level
staff
staff
and
the
cashier.
â&#x20AC;˘" Except. for RBs where "Who sets loan policies?" respondents). ..
_the modal response is "Central .Bank"
to the:_,question: (nine out of 22
27
Table :;DEPO_:I,T GENERATION,
7
AND NUH_R
B
OF RESPONDENT
A
N
K
RFIs
S i
RBs __ies a)
b) 2,
3,
With Formal/Written Policies No Written. of
a)
Regular
b)
No Regular
Policies
5
0
Analysis
15
16
6
0
25 ,,_.,
23 0 _, ,,
forDPJ:_osits
.09
Presence
No Staff
of
Staff
Incentives
Decisions Ca_,paign
on Savina_
a,).
Board
or
b)
Manager
c)
Other
DuraJ_i_n CamDaian
16
._03
Incentives
5.
16
Deposits
Review
Incentives Generation
b)
Significance .035
Monitorin_
a)
4.
KB Branches
Head
Office
Officers of
a)
One Month
b)
Three
to
6
8
15
7
10
4
5
1_:
13
5
1_,
4
1
. 4,_
z
2
1
4
2
7
'_l
1.
PDBs
Savinas
Six
Months
_Z "-
c)
One Year
1
3
3
d)
Other
3
2
1
Chi
Square
Test.
N.S,
at
0.2
28
'Table LOAN ADMINISTRATION
ANDNUMBER OFRESPONDENT RFIs
================_
________
S ITEM 1.
b)
b)
S
KB Branches
No Written
14
14
7
2
Policies
0,1
21 2 째N.8_
Regularly Not
Significance _
With FormalWritten Policies
Prepared
17
13
-21':
5
3
2
8
5
0
2
5
4
4
11
2
2
Prepared
a)
Rural
b)
PDBs
d)
5.
PDBS
K
_
Ma_ior Competitor fOr. Loan_
c)
4,
N
_ .....
Loan Budqet a)
3,
RBs _
A
....
Loan Policies a)
2,
8
KB
Banks
branches
Others
2i 2
Loan Collections
_._,
a)
Incentive
to
b)
No Incentives
Loan Restructuri a)
Written
b)
No Formal
Chi
Staff
6
8
17
9
13
n_
' O.'t_
Guidelines
Square.
5
16
14
18
6
1
1
Guidelines
N.S.
at
0,2.
29
Wlth most
regard
KB
branches
competl_ors RB
an_
area
other
This
across is
loan
giveaways
from
posters,
_mportance
of Joan _n,the
The _raRc_l
regul&rly_
collection of
their loans or
by.#he
effective
bank
way
souvern_rs
the
w_tb
based
of and
respondent
5)
However,
a s_gn_flcan¢
such guidelines
To help
lncent_ves through
and interest O_ne_shio
to
for
borrowers
interest
rebate,
d_scount
of
loan rural
these
(Item R_Is branch)
by means
on loans
are
restrUCtUring barks
do
contingencies,
for
early
Increased
or
_re
all
PDB
due accounts
number of
m_n]mlze
staff
one
Problems
RFIs
and bonuses
portfolio
(except past
guidelines
by all
by the bank
lean
on ]oam_;outstand_ng
on existing
emphasized
_ncreas_es
efforCs
reviews
RFZ
is
merlt
a syscem fer_monltorlng
re_gorts
of
dealt (Item
not
have
many RFIs prompt
assurance
loan of
new
on new loans.
Background
Management background
form
manager
Every
malntaln_d
loans
as
,
for effective_o11@Ctlon
repayment
most
targets
vistts/centacts
aside
main
in the
loaB_market
most
gIyen
provide
their
RBs_a_d PDBs
as the
_nce_%jves
status
Llk@w_se,
3_
RFIs
thus,
4)
(Item
in
Personal
services
as
segmemtatlon
a dqfference
by the
many PDB and
_ranche_
_l_er
demonstrates
types
regarded
advertising
The
f_ndlng
RFI
KB
perceive
RFZs refle_$t_g
cllen_ele
loans market,
o_ _perat_ens
man_ PDB branf_he$
of
staff
in t4_
perceive
In !_elr
co,k_tltOr$ market
¢o _tltlon
policies
of
The geographical
RFIs
are
distance
related between
¢o KB
%he
ownership
branches
and
3O
their
NCR
between
head
KB
owners
management to
are
extent,
RBs are under
On
to
branch the
managed
by
other
other_,financial
"arms'-length"
hand,
the
stockholders
of
institutions,
of _Bs
few
banks
businesses,
manufacturing,
and '_that
PDBs_surv_WYed
ofrural
other
formal
Tab1'e 9_ shows
Stockholders of
in
situation
while
a number
_ Pelati6nship
manifested
is different.
management.
ownership
an
managers,
PDBbranches,
thesame
concurrent
leads
and
policies.
some
most
offices
have
including
trading
and
service
enterprises.
Certain the
RFI
with
finan_=ial
held
facilities
for
expanded
(e) to
other
"learning up
in
These indicative
the
other of the
for
the
RFI
as:
holding
(b)
other
the
thrift
businesses;
RFI
banR enables
staff"and
ba_R
holding;
(c)
(@)
use
the
and
creditor
the
were
financial
RB
No
businesses
of
int_rcompany
orher of
'institutions. other
relationship (a),_
use
aS depository
from
in
with.
owner;
multiple
financial
by
and
stOckhOlders corresponding
reported
by
RFI
survey,
findings of
RFI
of_the
experience"
disadvantages managers
by
of
such
particularly
base
businesses
advantages
' businesses
transactions
client
.:se_
claimed
"assistance,
enterprises
other
_espondents
the
on
deposits,
more
loans
observable
and
ownership
characteristics
a_e of
RFI ..,_",_,.
management.
t'he
RFI
Their
l_mitation
Defined as cases when is also a stockholder,
the
lies
president
mainly
or
general
from
manager
the
of
31
Table OWNERSMIP
9'
BACKGROUND OF RBs AND POB_
RBs (n=19)
1.
Ownership a) b)
2.
ana
Management
O_ner-Nanaged Manager is Not
Other Businesses RFI Stockholders.. a) b) c) d) e)
of
judgemental
VI.
.questionnaires
elemen_
of
18 I
7 10
10 8 11 4 3
.3 0 0 0 1
by
RBs., PDB,;_Thr_ft Ba_ks, Real Estate/Agri-based Service Enterprises ManUfacturing Merchandising
inability
(n=13)
_Number)
a Stockholder
Owned
PDBs
etc.
to
management
ca_t_re
the,..subjec'cive
and
policymaking..
RELATING _ANAGEMENTSTRUCTUREANDPOLICIES WITH OPERATINGPERFORMANCEOF RFIs"
1.
Mana_emen_St_ucture
The related
structural to
raised
are a)
its as
Can
and
features
of
performance.
Per:Eorntance
the
RFIs'
Several
organization
questions
which
can
be
can
be
follows: the
larger
be possibly-explained and
RFI
loan
customers
number
of
staff
positions
by ÂŁheir (compSred
larger to
PDB and
in number
unit of
banks deposit
KBbranches)?
32
b)
Is
there
a
relationship
organization c)
Can
the
types
be possibly by the
Can ownership add
personnel
difference
serviced d)
and
to
in
loan
related
the
overhead
cost
approval
limit
to.the
respective and
between
size of
of
the
an RFI?
among
typical•
the
RFI
cli,ent:-,group
RFI's?
organizational
an understanding
structure
of
significantly
RFIfinancial
status
and
L
performance?
The unit"
difference
banks
services •generation clients
may be
and
loan
The
result
number
possibly
and
size
and
lending
served,
relationship
in
of
reflected
accounts shown
managerial
explained client
to
the
in
Table
as
a more in
the
number
An
shown
ratio of
,positions
of
diversity
in
extensive
by the
extensive
staff
deposit
large
•number
staffing.p}an._
of
10 supports Table
MANAGERIAL
staff
by relative
base.
operations
can:justify is
of
the
number
positions this
This of
in
claim,
deposit the
KB
10
HIERARCHY AND SCOPE-OF Mean (Standard Deviation)
RFI
SERVICES,
====
B Rural
Per
RFI.
.PDB ,and
.......
Number
of
of
Accounts
Bank
K-S
Two-Sample
N
Development
K KB=Branch
Serviced
Manager/Supervisor
K-W One-Way
A
ANOVA: Test
3,995 (2,336)
1,985 (1,613)
2,450 (1,211)
N.S. for
Each
Bank
Pair:
All
N.S.
33
branches
service
relatively
fewer clients which may help
explain
its leaner organization.
Personnel
cost.
is a_noverhead
expense
which
is
normally
m;"
allocated
by
structures
banks • and used in can
•competit_iveness each
RFI
then
influence
ioans.
RFIs'
H"igher •cost
profi tabi Iity
and
in the/maf.ket,place.. Table 8. (.I.t, em I), shows that.
type
staff.
priclng,
has a different
This
may
be
level of
due
to
.qualifications.,r, local job.market
compensation
inherent
,.._pr its
differences" " in
an_i..requirem_nts."__.MeanIAgful ¢
comparisons,
should
In. determining
theh; be made only within
whether
the organization
each
RFI !_ category.
size is Fe).ai_ed.,'tothe
overhead
cost of an RFT., the ratio of staff posii_ions
personnel
i"s related to the
to
total
assets
Although
an
ratio of personnel
in .which
orBanization
corresponding
resource
a
positive
may
generated
overhead
cost - for
It
compensation
increase
..;_;:i,t;s`_ _,staff,
effects:,
KB branches
RBs.
A
types would
e.g.,
the
11...(item. 2") shows•signi:.ficant • / ,c
but not
for p]DBs,and ;SBs.
to relate the difference
not be 'vaiid if
if traders
there
go to RB brancheswhile
Possi_;ble approach"
characteristics
the
.- more staff .is . associated..w._i.th higher=
seems more difficult
RFI
cost
re'_ationship _ •holds.
approval, limit of RFIs to the_ir lending"performance. across
't_0tal
by the new staff may ilower
latter ratio.. The result, in Table posi.ti-v.erelationsh!p
to
in assessing
for
control ling
the degree of
in.
loan
Comparisons"
a_'e "clientele" farmers 10an
go "to
portfolio
decentr_alization
of
34
Table STAFF Mean
11
SIZE AND OVERHEAD COST (Standard Deviation)
B
A
RB 1.
Difference Types
Across
to
shows
that
_ranch" loan
the the
is RFI's
sizes
normally
59,800 (21,210)
0.03 (0.03)
N.S.
to
take
average
degree
managers
Significance
049
0.02 (0.01)
N.S.
.013
0.04
ANOVA
authority
limit
S
KB Branch
35,210 (24,720)
0.04 (0.02)
Relationship Between Compensation as Per Cent of Assets and Staff Positions as a Per Cent of Total Personnel (Kendall's Correlation CoefficientTau)
lending
PDB
28,810 (8,880)
Total Compensation as a Per Cent of Assets, Net of Premises
K-W One-Way
K
RFI
Average Compensation Per Employee ..... (Pesos Per Year)
2.
N
appear
of
the
ratio
loan
size.
lending to
handled
of
the
The
discretion
be comparable by each
RFI
manager's
result given
after type.
in to
lending Table
RB
considering
and
12 KB the
35
Table
12
BRANCH MANAGER'S .DISCRETIONARY AUTHORITY ON LOAN8_ Mean (Standard Deviation) m
B .
Branch Manager's Limi_t "
Average
Significance
_P651:_667 (837,972)
. .O0aOl
_ 93,529 .(58,005)
.0001
P11,127 (10,937)
Insufficient
data
K-S_.Two-Sample theory
is posited
S
KB'Branch
P8,667 (6,673)
135_ (132_)
..,
and
K
Lending
Manager's Lending Limit as Percent of, Average Loan Size
ownership
N
RB
Loan Size
The
A
_1,102_-: (i,491_)
..
N,S,
,
on PDB branches,
Test
regarding management
the
potential
i.s still
conflict
not
that contro.l and efficiency
between
well-established. problems
It
ariee_if
owners
delega_e, tHe"management, of the firm 'to profess:ional managers. such
a
cats,, managers, might allocaCe
prerequisi=tesand
still not work as.hard
who manages .the business,_himself)..In the question makes
of the optimal
for corporate
_anager,
an
owner
For example,
to
themselves
(as compared
eliminates
By simultaneously
one more layer that
see Horngren
corporate ¢o.an owner
a sense,_ this: is related to
number of organizational
efficiency.
In
(19e6),
Van Horne
levels which acting separates
(1983);
as
a him
36
from
the source of revenue-
management reduce
strategy
to:
organizational
officers
from
An
the
cut
the
owner's
are
owner-managed
costs
layers
bank's
immediate
the client.
a
the
+s
chief
arises
operating
in comparing
RFIs according
As previouslY
shown,
on owner
versus
be practically
distinguished
RBs and PDBs as separate indicated
that
significantly
groups.
For example
.... " A
organizational
assets.
to
loans
in would related
of
13, it
is
RFi's
is
significantly
managed RFIs.
evaluation
structure
them One
significantly
not
same result holds .true for. RBs 10/ as well. • simultaneous
including
in Table
base is
But • the branches
basis
c
from that of a comparison
lower while ills equity non-owner
not.
management
the return• on assets of owner-managed
different •from
RBs
are
• ,
cannot
to
most
while most PDB and all KB branches comparison
to
_/
role in management.
Consequently,
often-recommended
and,increase_rofits
separating
clients.
problem
An
variables
of
to key
the
return
a balance
ratio and productivity
on sheet
indicators
to
PDB
the ..owne_rsh_p., and
(level) .can
a muli;iple regression expect
relati've
be
involving assets ratio like
made
by
return
on
ratio like the
to
be
deposit ra-tio of
9/ Reference
to Johnson
and Johnson
(1985, p. 32).
10/ As Table 10 (item I) shows, K-S test using RFI type as basis yields •significance level of .0001 for return on asset. There is no significant_ difference in equity percentage for RBs and PDBs.
37
Table OWNERSHIP, STRUCTURE Mean (Standard
1_ AND _FIPERFOPJ4ANCE Deviation)
B
A
N
K
aJ RB ..
.
.
â&#x20AC;˘
.
..
Type
Analysi_:_
a)
Per Cent o_Total Owned-Managed
b)
Return
95%
on Assets
PerCent Equity
21_
0.02
0,08
(0.07)
(0.03)
o{ to Ne_
0.70
Assets
,
Owner
Type
a)
Return
b)
_er
Analysis_
,
Equity Ass_s
K'S
compensation organization of
the
that
Net_
Two-Sample
to
K
0.05 (0.04)
0.03 (0,07)
0.24 (0.42)
0.73 (0.43)
.02
N._.
Test
assets,
levels
N
The
question
significantly
is
whether
increase
the
ownership
explanatory
and power
regression.
The as
of to '
A
.... N.S.
(0.44)
Not Owner OwnerManaged ,H_nage(
on Assets
Cent
,0001
_ 56
(0.43) B
2.
Significance
,,
RFI
c)
PDB Branch
the
regression dependent
since
analysis variable.
Commercial
bank
uses
return
on assets
A clarification branches
transfer
ratio
on this a
large
for
1986
measure
is
proportion
38
of
branch
income
deposit
on
the
such
annual
methodological
out
rate.
funds'waS
is
its
funds
Regression ratio
deposit
to
net
head
Reference
loan
(both
to
to head
compensation,
of
an
and
the
interest
branch.using
('MRR).
assumption
not
sum
This
that
current
the prime
significant
compensation
the
ratio., and
to
at the
were
personnel
loans
offices,
.Rate
office
results
office"account)
head
imputed
equivalent
average
from
respective
Manila
step
lends
lending
their
transferred
average
branch
to
of
net
deposits
to
to loans
for
assets, and"due
total
assets
ratio.
Organizational owner
and
variables
thenumber
results,
but
â&#x20AC;˘-percent
level.
Table
in
wherein"
organization
related that
to
average.loan
are
highly
the
small
analysis
these
cannot
were
at
management
shows
signs
are
on
asset.
size
and with
in
be done.
this
levels
best the
by
stockholder/
showed
significant results
as expected,
ownership..by
correla.ted sample
II
the
and
return
as
of organizational
better
evaluation
such
at
of
this
i.e.,
management
more
are
Correlationanalysis number
of
accounts
return
on assets.
initial
data,
somewhat
.bank
However, a
valid
10
latter levels
negatively also
per
the
showed officer due
to
regression
39 Table
1_
NULTIPLE,REGRESSION OF RETURN,ONASSeTS RA_IOON FINANCIAL AND ORGANIZATIONAL VARIABLES
i"
L ,
,.
Regression Coefficient (t-value) (,e,ig_ificanc_..]Oyel,.of ._stati_jg).._iVariables Explar_a_ory Variable
1.
1,
DepOst¢_to
2,
Number Levels
3.
Dummy for
4.
Zhterc_pt_
Ne_
of
Loans
Organizational
-0.026 (-1.798) (0,087)
-0,027 (-1.831) (0.080)
Owner-Manager
-0.044 (-1.495) (0.150)
of
Cases
unit
managed
banks The Completely
ana)ysds,_based
RF1-type-r_]ated,_,cha,
.are
•Shows that associated
•Ownership by on
_'ts the
aspect owners ownership
racteristtcs.
0.136 (2.760) (0.011)
O.07t ....
_O.t04
2;00 (0.1574)
25
table
3
-.0.018 (-1.350) (0.190)
0_'138 (2,350) (0.027)
2,44 (0.0924)
F-Value
2 and
-0.034 (-1;254) (0.2_2)
0.1,72 (2,919), (0.008)
of Regression Significance of Number
2
(0.786)
0;153
structures,.,
any
1 and
( o;,699 _
The;'¢receding of
3
0.0018 (0.274)
_2 5_ R _
7,
2 and
Regression
-0.003 (-0.434)
:
6._F
in the
2.'81 (0.1025)
27
the,
organizational
_ith'_ is
27
structure
higheP_ _ financial more
unlike
ambiguous.
other
variable The
cost
average
RBS
RFZl;types, reflects loan
are thus
all'
other
size_and
4O
number
of
accounts
investigation
in futu_e
indicative
of
eventually
2.
reflected
Given
(b)
deposit
overall
re_urns
Services
The significant
into•three
that
loans
administrative
Table
like
15
KB
banks
and
of (c)
....
branches (see
Table
more
frequent
generation
.•placed,
by
bank
staff
administrative
In this
of
this
area
a
staff
deposits
RBs.
branches
is
managers_.and
than
preceding
Centralor
more
15).
of
and
emphasize
rather
study's
policy
importance
loans
allocate
_DB
deposit
deployment
deposits,
branches
and
depl_ymen_
stockholders.
A classificatign
some
policies,
and
performance,
••.relative
KB and
management
incentives-based
the
results
the
are
.man_ement I; -along the
proceeds
loans RFI
the
by
differential
offered
and
shows
supported
regular
on
manpower
support
concentration..by
policies,
KB
which
PerfQ_m@nce
tO the
namely
while
operations
analysis
lines.
rural
potentially
Staffin_
of
categories,
further
performance.
(a)services
aEd
its,service
more
the
mobilization
indicator
support'showed
•
RFIs,
management's
management'on
REI
deserve
variables.are
RFI
background
and_"benefits
RFI
These
profit
an_
on:
OffEred
variables
scalein
its
by.
implication.s
staff,
operate
in
preceding
pursued
possible
studies.•
Policies
the
policies
officer
economies•of
Management.
for
per
and
regard,
?
The
ondeposit
servipes
is
findings
on
head review
programs
analysis_
POBs
control,
dePos_,_
of
deposit
of.
balances,
support
the
and
emphasis
41
Table'15 MANPOWERDEPLOYMENT
POLICIES
AN_ SERVICE PERFORMANCE _ Mean (Standard Deviat{onT.
B
A
R_,Is
N
K
S
a
1.
Number ....a)
of
Per_sonnel
RBs
PDBs
KBs
1.17 11)
1,31 (1.14)-
1.93 ('2.32)
-
2.7 (1.61)
0.88 (1 ,54)
0.41 (0.84)
-
3.83 (2.57)
4.25 (2 _74, )
4.0 (_.31)
-
in:
DeDQsits (i.
2.
b)
Loans
c)
Administrative
Percentage Total
of
a)
Deposits
b)
Loans
Support
Personnel
to
0.12 C0,_,10) 0.31 ('0.
• c) 3.
Administrative
Service
S i gn i f i cance
Support
10)
0.42 (0.!2)
r
0.18 (0.12)
0.24 (0.12)
0.08
0.05
('_..,1
_,)._
.02
.0001
r(,0.08)
0.56 (0: 12)i
0.56 (0.10)
.004
Performance t
a)
Deposits
to
Loans
0.52
_j_66
41.38
•
b)
Deposits
1;o Asse_s
.0001
( 0,34_- f_, 6o.)- (se,_5:_., ,,,
....(0._23)
j
(0.'30)
:a[ ......... .. Kruska]i-Wallis(K-W)
One-Way
Analysisot_variance:
'
42
of
KB and
may also
PDB branches
be
related
profiles.
As
branches
are
on .deposits.
to
a
shown
much
in
"clientele" Table
largerthan
16,
â&#x20AC;˘These
management
effect
on the
thp
those
of
Table
average PDBs and
policies
RFI's
deposits
deposit at
KB'
RBs.
16
MANAGEMENT MARKETING POLICIES AND DEPOSIT/LOANS PERFORMANCE Mean (Standard Deviation)
B
A.
A
K
S
RBs
PDBs
KBs
Significance
3.7
14,4
67,1
,0001
(3.7)
(10.3)
(41,6)
8,7 (6.7)
43.8 (41,9)
651,6
,0001
11.1 (10.9)
222,6 (218,6).
93,5 (58,0)
,0001
Deoosit/Loans.(Thousand Pesos} 1,
Average
2,
Loan
3,
Average
a)
Deposits
Approval
Limit
Loan
RB vs.
b)
Size
PDB or
PDB vs,
KB
,0001
KB
N.S,
r
B.
N
C_.r re lat i on_Analxs Loan Loan
Limit Size:
is
and Average Kendall's
Significance
ANOVA
=/ K-S
Two-Sample
0,24 0,16
A/ K-W One-Way
Tau
Test.
43
Given
the
branches' deposit made
presentdata,,it
lend
so
funds
based
they
managers
higher
loan
(per
(A2)
be of
statistically
16).
do
borrowers level.
the
three
RFIs
_,
the sizes
suggests
specialization "large"
of each
segment
of
market
compared
to
smaller
local
loans
the
higher
pass
on
the
type
local
resources may
can.be their them
difference
Quite
three
significant appears
RFIs
while
in
RBs
(see
take
segmentation
to (A3).
care
and
of
possible
_
RFI
the
the
KB
low~cost
allowing
clientele
lending
;.
of
encourage
The is
Why"
suggestions
by
loans
for
poo:l
banks
their
"wholesale"
This
Several
Ot
different
PDB â&#x20AC;˘branches loans.
large
to explain
large
commercial
to
among
in Table
"retail"
First,
limits
limits
the
generate.
lend
approval
approval
and
16. to
loan
compared:to
normally
on Table
branch
KB
little
is difficult
in certain
loans
market
available
to
not
be able
transaction
to
segments.
Third,
appear
be
KB
limited
branches.
pay
costs
to
high
the
F_9__,
interest
associated
if
KBs
with
this
average
loan
clientele.
Another size to
of
an
the
,has
include
the
average
case
the
with
tend_cy
of
limit
and
is whether
discretionary relationship
i.n"expanding, the
l'arger clients.-
only
lending
to
A positive
"a role
actual
slight
question
is related
correlating
RFI's the
RFI
manager.
manager
16)
interesting
loans
manager's per
sufficient positive the
suggests
test loan
data).
The"
loan
size
of
the B
result
the
the
.RF_I to in
limit
done â&#x20AC;˘`for
between
allowed that
(Section
approval
account, was
relationship
average
authority
client".ba-se of
A statistical
RFI
the
Table to
RBB
(being
indicates the
bank.
the
a
manager's. For'
the
44
limited
sample
of
to
their
authority
this
study,
RBs
which
allowed
managers
are
able
summary
is a response
to
higher
reach
out
lending to
larger
borrowers.
An
appropriate
Lamberte
(1987)
branches
may
be
branch
managers
loans.
The
policies
due
disparity
to wide
for
results
and
manager
that
in this
initiatives
is given
a
are
limit
market.
This
main
factor
which
determines
is primarily given
to
appears
faced
determined managers
to
designed
a deposit
be
to
set
may in
avoid
by the
branch
limited
evaluate KBs
whether
appear
test
of
serve to
and
survey
data
such
efforts
far
relationship
generation
will
on
campaigns
savings
even
The
as
head
a
is
the
the
head branch
lending
limit
because
lending
rather
the
the
of
deterrent
costs)
branch
than
Once
higher
office
the
policy
performance
basis.
Deposit
higher
operations.
by KB
originating
and
office
KB
than
it
norms
(e.g.,
'the
market
office.
to have
any
this
by
opposite.
office
head
in
enjoyed
for
is far
the
transaction
Deoos_Mobilization
The
branch
relation
high
that
priority, on
the
which
implies
not
head
comment
performance
but
at
the
authority
suggest
made
lending
loans
mandates
deposits study
local
office
in deposits
discretionary
raising
on
be done for
on
savings are
greater
RFIs,
and
can
shown
used
Data
in Table
and
to
SinCe
capacity,
compaigns PDBs.
be
fruitful.
generation
savings
for. RBs
these
campaigns
potentially
deposit
between only
Performance
Loans
the
deposit:
is available 17.
45
Table
17
SAVINGS CAMPAIGN AND DEPOSIT PERFORMANCE FOR RBs AND PDBs
B
A
N
K
RBs
1.
Savings of RFIs)
Campaign
(Per
PDBs
Significance
Cent N.S.
a)
With
b)
No active
active
campaign campaign
71.4
68.8
28.6
31.2
B .....With
2.
S
Deposits (Mean) (Standard
to
A
N
K
Campaign
S No Campaign
Assets. 0.69 (0.31)
Deviation)
0.37 0.29
.02
i
Chi
Square
From
this
campaigns
is
table, statistically
resource
generation
campaigns
is
sample.
Meyer
problems image
in
prizes
performance
and
of
tothose
(1987,
p.6)
among
of
to
RFIs
undertake RBs
which do
not,
that
The
undertake
for some
customers.
evidence such
promotion, Evidently,
and
deposit PDBs.
undertake
mobilization
customers. RFIs
for
conjectured
person-to-person
give-aways
to
which
theiraggressivedeposit
otherwise.
combination
propensity equivalent
superior
problems
indicates
the
RBs
survey
may
program
campaigns staff
deposit the
in
have
due
this
to
study
through
incentives deposit
The
a and
campaigns
46
in
the
rural
managed
RFIs
problem
cited
The
sector can
think
by
wide
relative
to deposits than
relative
RFI
to
and
many
market,
extreme
are
of
PDBs
Ownership..
The
be expected example,
RFIB
lead
to
This
the
of
rural
of staff of
the
ODeraJ_tnq
would
influence the rates
KB
to
well-
avoid
the
their
lackof,
RFI
banks
lend
more
generate
far
more
lend
in.
branches
for
loans
the
financial
can
loan
be seen
the
local
once
more,
and
RBs',
in Table
are
to 15
for
limits
there
areas.
deposit
(loans
different
approval
types
pairs of
KB
just
Given
-
this
not loan
assigned
to these
functions
financial
portfolio
of
RFIs.
Performance
strategies_followed
to
lower
staff
those
in the
indicator
operating
of
to)
is significantly
exceed
and
case
bank
while
number
Management
prepared
RFI.
ratio
loans
a good
For
the
far
the relative
and
across
Rural
indicator-of
Hence
sizeable
is actually
can
the
deposit
approach
and. KB branches
(or
deployment
types.
branches, too
PDB
can
performanceof
.loans
approach
generation
performance.
is a significant
deposit) the
in deposits
while
they
in
an appropriate
loans
Excluding
functions
of
to
impersonal
(1987)..
disparity
over
the
not
of
Meyer
carries
deposits 11/ area.
are
by
the
summary
deposits
management
operating to finance
of .profitability?
Is
the
of
RFIs
performance. lending
wby
concentration
11/ The some PDBs branches.
result for PDBs may be somewhat in the survey are unit banks
contaminated since while others are
,12/ .002:
Significance of for RBs and KBB:
K-S Two-Sample .0001.
Test
are
for
RBB
and
PDBs:
47
of
staff
on deposits
a lower
overhead
questions
may
starting
point,
cost,
the
expense
in branch
some branches.
problems
are
disappear
• with
a
to
for
these
books
leading
periodic
of
to
pricing policy
the
exceed
For
losses are position •,
deposit
interest
for KB branches
"profits"
Reference the
Rate
profit
assets
on transfers
funds to head office.
calculated branch
income
figure
is shown
banks,
The
_cheme
_nvolves
is not adjusted. 18.
by
branches
i
of
their
return on assets
is
(due to the absence of "equity")and
In KB branches
in Table
for
margins", _in_" which
In this study,
include an imputed
(MRR).
and
accounts
L.
imputing
such
,decisions
commero_del
on "contribution is implemented.
iriS.crest
head office
branch
some
KB
loans,
equity
operating
as
of
their
The_e
the
of
case
deposi{
a negative
consolidation
reporting.
far
income.
to
immaterial
These ratios
in
show large
viewpoint
are evaluatedbased
traMsfer
be resolved banks
•with
profitability?
profitabi'lity
interest
From•the
entirely
the
would
lending
financial
branches
using
statement
but. minimal
bank-wide
and higher
questionneeds
income
aggregated for
structure
When deposits
branch
among PDBs and KBs associated
be addressed
A technical branches.
function
income based on
the
which use transfer A comparison
of
Manila prices,
return
on
'
48
Table
18
PROFITABILITY PERFORMANCE OF RFIs Percent (Standard Deviation)
B
A
RBs
1,
PDBs
K
S
KB Branches
Significance
I_Leturn on Assets, Net of PcemiEes (Percent) a)
All
three
b)
Pairwise i) li) iii)
2.
N
RFI
types
1.96 (7.02)
-
Adjusted Return o_AssetB, Net of Premises (Percent) (Net Income + ManagementFees + Directors Fees) to Assets, Net of Premises
K-W One-Way
With branch
that
in the
their
actual
imputation transfer
the
PDBs ROA
for
KB
N,S,
at
return
by KB
branches
income
head
-
2.67 (7.45)
described
highest
followed
method to
Test.
previously
income,
found
.0001 "
-
7,70 (3.04)
.0001 N.S. .002
N,A.
.00i
ANOVA
Two-Sample
the
2.41 (1.78)
Comparisons
RBs and PDBs RBS and KBB PDBs and KBs
K-S
7,66 (3.07)
includes
0.20
procedure on
branches
asset and
is understated a margin
over
is
applied
on
â&#x20AC;˘ending
office
without
considering
for
adjustment
(ROA) R Bs.
ratio It
to the MRR
of
and
branch turnover.
can
is extent the ba]ances
KB be
likely that income for
49
It
can:
developmem;b Since
bank
=recalled.that,these
banks
inmost
personal _nd
oases,
on the
.include
Item. 2), out
rural
owners,
_in,,their data
banks
_ If
key performance
profit notat.low
the
net
on
bqth
under_aking.
jZt the
incentive,
is RFI
different'
returns, is
the
.assets
expert, as for
variable
thei,r
profits.of
return
lower
the
seeking
variable,
statistica]l_
have
in evaluating
did
oR both
still
private
manage the. bank,
' of .bank, are
.....and
the. owner.ship,,
also
fees.
returns
thatthe
particularly
of
consist@
thi_type
i..e.,
equity_-
of
basis
RB stockholders
the--adjusted
pointed,
rural-banks
management/directors' ..,to
types,
lack
differ
(or;.family).income
adjusted
(.see
be
shouldbe
returns
on
and success
of
Unfortunately,
application
of
this
the
measure
in
this study, The
,analysis
of the incentives
with the management of
DOSRI loans. â&#x20AC;˘
the
From the
"advantages"
interests,
it
benefits_
of
the
responses
loans
to
rates points from failed,
ow,DOSRI, to
the
subsidies but
gained
through
i-s inâ&#x20AC;˘this
possibility
that
rural
intended banker
got
rich").
or
businesses.
RFIs
is. equal
below-market
bankers
beneficiaries
business
In to
the
management/directors
oontext
rural
regarding
incentives
other
any
consideration
other
further
of
interaction
banks
with
plus their
l_ans_,.It
t_;.(_ther the
their
to_ the.owner-managers,
advantages
by unit
can obtain
sum of the net.'income of the-RFI fees â&#x20AC;˘ plus
given
ana
without
stockholders
owners
(DOSRI)
_rof_t
is not complete
having
shows that
through
concept,
choices
to owners
that
interest
Tolentino
capture,the ("The
(1987) gains
rural
bank
What may be to of
•analysis obtain
'DOSRI
favor
can show the a correlation
loans
of
correlation
other between
expected
is
of
by RFIs.
the
reversed
effects
If
of
return
are
businesses
there
these
variables.
if
the
loan
is
One
on assets
DOSRI loans
-two
DOSRI?
to
approach
the
amount
concessionary
should
be
a
The
concessionary
ih
negative
correlation
in
favor
of.the
13/ RFI. +
The result: 0.06
be
Kendoll's
has a significance
due to
the
on assets
average
gross
with
the
the
survey
on loans
of
is of
(income)
not
sufficient
RFIs.
subjects
to
Also,
for
only of
0.38.
RFI"s
This
in
may be to
on loans
deriving at
and oorrelate the
an analysis
of
explained,
on equity
used.
is
could
look
Unfortunately,
allow
of
result
expenses
approach yield
Tau
as previously
future
this
data
the the
•These
the
in
yields results
Would
be
inquiry.
CONCLUDING REMARKS
The results presented the
Coefficient
each RFI.
when • returns
interesting
VII.
effect
DOSRI for
the
differ
of
. Hence another
interest
size
level
intervening
return
may
COrrelation
relevance
toward
of analyzing.organization
understanding
performance
of
some• extent,' _eposit
the
the
three
PDBB -
and
re'Strictions.
in the.paper,
loan
of
organized
services
.These
RFIs
for
within
tend
to
of
Tau
is
-1
to
+1.
Unit a
banks
balanced their
show
more
show
structure
characteristics
RFIs.
13/ The range
and management
differential
types
are
while preliminary,
!_a_d
- RBs and:_-to 'o@Terimg
own.
:of
regul,atory
organiz.ati_nal
51
levels,
,,hierarchical in staff relationehips,
positions
compared
RFI
managers
so,
RFI
structure
deposits
banks
deposit
another,
The major rural
operate
Subject
and loans
the
of
overhead of
these
sl_udy:,.support
ones are
now cil_d
and
of
the
local
are
not;as
private
community
time,
to
RFIs designed in
Tolentino
found
of
effects
favor
loans
operated out
that
campaigns
and
operating
strategies
two
of to
(1987).
predominantly was
dominance
the
to
bank
on
appears
to
r
the and
the
authority
evidence
,
community
(
indicate
way
_Commer¢,$a]
oriented
the
by
serving
decisionmaking
At this
one_RFI
;development
banks,
area.'
cost
banks.
and how
banks
central
multi-level
RFIs
like
policy.
higher
policy
associated
and
i n._,this
more
to
be
(and remain
lending
to
performance
operations
like
and
found
derived
bank, branches
being
to
on asset
tending,needs
deyelopment
banking,
related
size
decisions
The hierarchical
about =the
Eirst,
_
is
deposits
,given ,to
of bank
Many
was also
conclusions
from
unit
key
organizational
The authority
policy,
structure
return
the
summary,
on
banks
findings
differs
banks,
and
unit
Many _of
type
management
performance.
and lower
previous
of
RFI of
structure ,,t
than
Management
overall
KBs,
to be more of a function
especially
aspects, with
appear
type)
centralized,
to branches_of
and
a
urban,
factors:
the
large-scale KB
and
as deposit-taking can
substantially available
motive
regulatory/incentive
Hence,
RFIs
profit
conduct
benefit to
structure
ventures PDB
of
as
cited
branches
are
branches,
Second.
savings
mobilization
from â&#x20AC;˘ them. management
The in
this
range
it
of
regard
52
appears
sufficient
to
small.,,banks.
in
the the
factors
issue
local (a)
market;
offices
large
structures their
also
larger
make
accounts.
deposits.
into
loans given
the of
serve
functions
of
by
looking
audits
Fifth,
,the
variable
in
Policymakers to
the
for
of into
whether
interested
in
instead
aspect
of
view
its
incentives
to
RFIs
factors loan
loans
market,
loans
and
deposit
emphasizes
loans
assessment high
of
indicator.
to
RFI
_,of
costs
surrogate
be
a
key
performance.
regulatory a total
for
small
the
and
in
and
,of
appears
proposed owners
salary
a deterrent
periodic
this
decisions
head
These
it
avoid at
bank
profitability
state
can
be
of
developed
higher
banking.
indicate
management should
from
appear
staff
RFIs
ownership
signal
to
its
to
poorly
banks
current
commercial
(b)
The
community
by
a combination
encouraged.
a prerequisite
Policymakers
banking
relation
are
branches
already
financial
with
with
effect;
a continuing
deployment
functions
the
(c)
portfolio
be associated
commercial
Eourth,
management's
or
concerns'associated
lending
"clientele"
loans
of
developing
"small" may
a
and
that
cost
of
area
like:
loans
common
..
Third, banks
overcome
schemes
context,
in
in this ;
respect,
innovations
ratios.
This the
need
ownership
office
in
case
should
interpret
of
to
variable
commercial
regulations
be
made
is the bank
in the
regarding
traditional
counterpart
branches. light
of
of
Policy the
6"
wider
the
t head
analysts options [
available intended
to commercial effects.
banks
toward
a better
understanding
of
53
Recommendations emerges
is',an
not,,,as
impression'_that
be
addressed
• in
the
.ru,ra_,
financial
_'_restriGted"
order
to
easy.to
bring
about
-One,_
banks_
and
branohes
ruPalbanks
more
An
"centralized"
relationships
with
deve]ol_ment
of
competition
of
commercial
like
and
banks
thrift
"_..', ,
for
and-small., RFIs
develops'):. _h,rift
On
loans
may
Alt_rnati've_y,,_
appl-ied
branch
suggested
"that
• brar_hes
Central
-,Bank
thec.ountr,=yside ..granting
'
bank
branches
will
not
them
to
larger
."
_ank-s.houqd
,in
countryside.
should..fi,rst in
_"im_ent:iyes
more
(e.g.;,
lower,
businesses
here
more
can-also
be
_-tem, _ .,,,_a banker
,study
role r_n.ge
by
cost:_structures
g.ive incentives _Thi.s
, the
foil,owed,
ca n_,,ac_ud_re
banks'
by
"community
local
ban_
reexamine.the
the.o_text_of
exhortations
to,be
recen__news
central the,
the
The,,#,indings
bank.inQ,.... In.a
operate
.'", ,.
necessar,ity.be
these
"community'oriented
te
bank
"
enable
hand_
commercial
banks_,in-or_er<to,Bnjoy
,.
other
grow
a,_d, be more
open,
the
comm_,cial
, rural
o.f
corresponoen¢
,:,
banks
bu_s-orA_ted",
unless
lack
commercial
establish
..
commercial
branches.
pol,icymakers
bank
or
•
more
must
loans..
to make
, :,-.'
,clearly
Conditions
condit,ionis._¢he
more,,.community-based
initiative :.
current
(and.restrict,ions
centralized•in
, _
..... )What
an_,organized
Profit_seeking-_bshavior
made,,,
specify.-
a number,.of
s:ys,tem..
rural
brancbes, it)
are
suggests
of of
for, banks,
branch
services
that
•baRks
in
prior
to
,.: ".:"
14/ August
"PCIB 30,
seeks 1988.
easier
bank
branch
rules,
to
"The,,Joupr_al.
54
Policymakers monitoring
RFI
development
for
issues
one
area
as
of
are
,the
of
branch
and.
enable,
.,government
and
planned
regulations,
and
,managers
technical,,
analysts
whether
reflect
owners
wherein
and
that
of
to
financial
development
enable
them
subsidies
"captured"
by
the
of
,.to
intended
banker,
in
the
areas.
are
,foremost
of
analyzed,
in
example_
various
also
.which
all
that
there these
measures
studies a
RFIs
of
starting
"sectoral"
that of
of
t_e.
the
management
levels
do ,not necessarily
into
need
a "sectoral"
possibilities
qualitative
management
and
,fully
The
the
this.
address
basis
study.
for
study
is
results
This case
and
the
methodology
pictur_.;_
can
in
variety.
describe
combine
management
offered
aspects
manager-staff
involving
microstudies
point
to
study,
and
structure.
the
the
"quantit_ative"_
structure,
addresses
Such
framework
fact
organizational
research
more
limitations
mainly
surveyed
are
The as
of
merely
but
features.
are
variables
RFIs.
interesting
the
the
here
across
is
study
dimensions
â&#x20AC;˘ adOpted
significant,,
the
distributions
with
impact
means
understanding tO
the
innovative
variables
should
beneficiaries
There
of
key
iincentives
is
such
into
A, better
researchers
certain,
rural
actual
This
by
understand,
along
understand
programs. needed
look
institutions
to
credit
to
finance.
the
financial
analysts
For
rural
and
rural
need
performance
of
operations
is
also
me=n,s studies
the
other
,,organizational useful
comparison
in of
_Gase
results
55
Another related
issues
example costs,
llmltatlon that
results
of
special
pollcles
and
lndlcate
is the
malnly
affect
studies
o#
government
savlngs
contemporaneous
In
studles
borrower
and
the
lack
lender
programs
in
of
transaction prlclng
rural
RFIs
aspects
to For
transfer
moblllzat_on
these
reference
structure
and
management
on
of
management
credit
capaclty
influences
apparent
areas
may
There
which
need
are
to
be
evaluated
REFERENCES
Horngren, Edition
C
Cost_ccountlnq Prentice Hall 1986
Johnson and lllinols
Johnson The Dryden
Koontz, _'Donnel York MoGraw
and H_ll,
Lamberte, Marlo B Paper Working for Development Meyer,
Porter
Commenclal Press 1985
Welhrlch 1984
and
Sorla_O, Emienuel and_Cases 2nd
Home, Prentice
J Hall,
Bank._Manaaeme_ _
Managemen_
Strategy
Co_JnDetl_o.rs
Free
V Bus_ness Policy Edition Slnagtala
Tolentlno, V Bruce J Developments _ in Phll_pplne and Sociology Occasional University, March 1987 Van
Financial 1983
5th
8th
Chicago,
Edition
New
Background institute
Finance in the Philippines Recent Issues, Economics and Sociology 1358 The Ohio State Un_verslty June
CQm_e_j._lve
_duStr_es
EmOhasls
Comparative Bank Study A Paper Series No 87-04, Philippine Studies April 1987
Richard L Rural Change_ and Priority Occasional Paper No 1987 Michael
A Mana_erlal ,
Techr_aues Press,
Analvzln_
1980
In_n As_an Context Text Publishers, inc 1976
Current Agricultural Paper No
Management
for
Imperatives and Ppllcy, Economics 1324, The Ohio State
and_l_cv.
6th
Edition
56
PIDS WORKING PAPERS W.P. No. 88-01
A General Assessment of ,'Foreign Trade Barriers to Philippine Exports. Erlinda M. Medalla (P23.00)
W_P,No. 88-02
Economies of Upland Resource Depletion: Shifting Cultivation in the Philippines. Marian S. delos Angeles (tw23.00)
W_. No. 88-03
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The Size, Financing and Imp act of the Public Sector Deficit, 1975-1984. Rosario G. Manasan (P17.00) An Analysis of the Role of Pawnshops in the Flnancial System. Mario B. Lamberte (-P'14.00)
W.P. N0 88-10
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The Financial Markets in Low-Income Urban Cornmunities: The Case of
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W.P. Nol 88-14
Political Economy of Credit Availability and Financial Liberalization: Notes on the Philippine" Experience. V. Bruce J. Tolentlno (PI$.00)
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and Richard ¢1_17.00)
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Comparative. A_eement Structure and Institutional Performance in Rural Banking Institution. Cesar G. Saldafia (_0.00)
W_v. No. 88:17
Borrow Transaction costs and Credit Ratldning in Rural Financial Markets: The Philippine, ,, q2ase. ' Virginia G. Abiad, Carlos E. Cuevas and Douglas H. Graham (P27.00)
W.P. No. 88-18
Transactions Costs. and the Viability of Rural Financial Intermediaries. Teodoro S. Untalan and Carlos If. Cuevas (P24.00)
57
W.P. No. 88-19
Credit Rationing Under a Deregulated Financial System. Ma. Lucila A. Lal_r and Douglas H. Graham CP13.00) W.P. No. 88-20 The Analysis of Savings Behaviour: The Case of Rural Households in the Philippines. Jocelyn Alma Rodriguez and Richard L. Meyer (1"23.00) W.P. No. 88-21 The Demand for Funds Among Agricultural Households in the Philippines. Raquel Clar de Jesus and Carlos E. Cuevas (P28.00)
W.P.No. 88-25
W.P. No. 88-28
ScienceEconomic and Technology and Development. Mario B. Lamberte (P13.00) ,
W.P. No. 88-22
W.P. No. 88-29
The Impact of Trade, Trade policy and External Shocks on the Philippine Economy Based on the PIDS-NEDA Macroeconomitric Model. Winnie M. Constantino and Josef T. Yap (el3.00)
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