The news that BSP closed down another troubled rura bank in Zambales made me recall the brief stint I had as a rural banker.
1. In 1976 at the urging of my mother, I resigned from my lucrative job to be an AM of a rural bank where she was a cashier. I had no background in finance nor in banking much less rural banking. To make up for that weakness: I enrolled in MBA, meticulously reviewed RA 720 (the Rural Bank Act) the CB manual of regulations, and all the related financing programs of CB (still CB at that time)
In due time, we had new programs for masagana 99, and the Babuyan, programs applicable to the town where the rural bank is located. The fund generation was prepped up by the Tipid Program being promoted as school. This worked well with my work experience being a promo man at Pharma
After a year the performance of the RB yielded positive results as the PNL doubled and so with the deposits.
I encouraged the towns folk to go for OFW jobs and invited classmates from MBA to talk about such opportunities
But my action did not ring well with the stockholders and board who said that I was their town (they are not from this town) responsible for keeping the bank alive. But I saw poor quality loans from the said now MM municipality and many ever green loans. I convinced my parents to sell out our shares and agreed to put our local rural bank
2. In 1977 we organized an SLA and by this time my knowledge of organization and the banking business was much better I studied well the SLA history in the states. I set up my system on how to run an SLA In the seniors training program for SLA execs, this post ended one of the lecturer and many other SLA execs from Central Luzon visited our small office in this town.
In that short stint, this post had this achievements:
1. Had 3 branches in 5 years;
2. Had been involved in BIR tax collections (that beefed up our PNL)
3 Became No 2 bank in NHMFC mortgage origination.
4. We attracted the attention of Housing officials that they bought us out.
The MBA helped me a lot and so did research, research, and passion for self improvement. Certain quarters sought my assistance in acquiring troubled
We did fine with new owners but some quarters always went for shady deals through the chairman and soon we had string of troubled accounts. Fake ICR for discounting of receivable's, watershed as collateral, scams loans (the borrower refused to pay for the loan because of an assignment - claimed he did not receive the php. We were naive. But we were able to save a number of accounts who difficulty with their take outs
The govt was forced to sell the SLA to private party. But at that time there were about P100 million in deposits,, 3 branches, and 50% liquidity. This was offered to me first to take the deal: pay 13 m, and then the following day, take out DOSRI loans to pay the P13 m paid. That's what the buyer a real estate developer did and used the bank as his piggy bank for his real estate projects He was known to live lavishly traveling in private helicopter and staying in P30,000 a day suite's He sold to another development bank for P1.00 only.
I could see the difficulties of many rural bankers:
1. The board does not do its job, Most members come for the per diem. Most of the chiefs have their board by their noses.
2. The owners or majority stockholders use the banks for piggy bankj and use the same to save the interest of their business group. Some love DOSRI account
3. Most banks cant compete in the new world of fintech and low cost high speed banking. Without access to capital and technology, the rural banks cant compete and are bound to fail.
4. Need to professionalize management - MBA continuing program of professional development for the staff
5. In one of the advice giving sessions, I was asked to evaluate a PDB which was for sale
1 I predicted that its going to run out of cash in 2 months time (based on FS I had)
2 I talked to their suit donned executives and they looked the least worried about their predicament
3 I evaluated some of the major items in their balance sheet. One was a memorial park in
SL and worth P40million and this turned out to be raw and, maybe P1M at most. So bank
is all ready in the negative on day 1. It is going to take forever to erase this negative
4. In an alcom analysis framework, the bank was in a negative carry for 10%. How could it survive
(the bank was incurring 10% more interest expense than it did on its loan generation
There was no other economical way of keeping the bank alive further. It had to be foreclosed and true enough 2 months affer PDCI took over
I rura banking a bad dream for Philippine banking system
