Unleash the Full Potential of the Rural Banks in the Philippines through Disruptive Technology

4 min readNov 21, 2018

It doesn’t come at a better time for the Philippines to utilize technology to foster growth and to extend better economic support to millions of its citizens. With the changing market landscape and the continuous onslaught of challenges — both local and global — we need to find ways to emerge and succeed. As RBAP’s theme, this year emphasizes: we must redefine ourselves, overcome challenges and embrace opportunities.

Rural banking’s adoption of blockchain can be that very essence of redefining what RBAP’s members do. It also can present a framework for solving some of the industry’s most pressing financial challenges to remain afloat and address the rising global concern on financial inclusion.

Financial inclusivity

According to the Asian Development Bank, “establishing financially inclusive ecosystems for low-income clients, including small and medium enterprises, has become a rising global concern.” Across the world over, there are more than two billion adults without access to insurance, savings or credit with a bank or any other formal institution. BSP Governor Nestor A. Espenilla, Jr. said in his address during RBAP’s 65th Annual Convention and General Membership Meeting that Global Findex by the World Bank estimates there is only around 34.5 percent of Filipino adults who have formal accounts, and these already include bank deposits and e-money accounts.

Despite the margin to close, we can remain optimistic about converting the rest of the Philippine market. Rural banks have already proven to be “exemplary models of customer outreach,” according to Governor Espenilla. Throughout the years, they have demonstrated their capacity and commitment to bring progress to the countryside. Offering financing opportunities to rural communities has allowed rural banks to become valuable contributors to these parts of the country.

Likewise, rural banks especially RBAP members are in the best position to be effective purveyors of innovative technology, better financial inclusion, and more regional economic development. Rural banks have close ties to the communities based on a relationship of trust. Their deposit profiles in the Philippines show just how much confidence the local communities have on them. The facts speak profoundly. Around 87.3 percent of the retail depositors have accounts maintaining no more than P10,000. The same profile tells a lot of what life most of the Filipinos have and how important entities offering financing to this larger part of the country can be.

Blockchain’s potential in the Philippines

There is always the intention to improve the Philippine financial sector to help Filipinos, but current technologies and regulations often limit how much progress can be achieved. Not to mention, some current technologies and solutions come at a high cost not feasible even for institutions as committed as rural banks.

One technology that promises to bring just as many solutions and to revolutionize how Filipinos transact minus the high asking price is blockchain. As an incorruptible digital ledger of transactions — it can be applied to any transaction with a value in a system. It is a distributed database that cannot be controlled by a single entity — it also does not have a single point of failure making it an immutable historical record of all transactions.

In simpler terms, it cuts out the middlemen in financial transactions and can introduce scalable peer-to-peer transactions. Blockchain can also get rid of “double-spending” that always comes with modern transactions. As the potential implications of the technology is huge, more and more companies are looking into the possibilities of adopting blockchain. Rural banks should not be any different.

RBAP’s extensive network — comprised of 2,745 banking offices nationwide — gives it a unique strategic position to be the catalyst for embracing technologies like blockchain. Imagine cutting down interbank processing times from one day/1 month to just five minutes at most. Not to mention revolutionizing the remittance system where OFWs can send money just as fast without the minimum requirement or high transaction costs.

Just as remittances empower Filipino families and the Philippine economy, advocates of blockchain like Pearl Pay aims to empower rural banks, OFWs and micro, small and medium enterprises (MSMEs) across the Philippines by providing a fast, secure and quality ecosystem full of opportunities. They say, people often overestimate what technology can do within 2 years but largely underestimate what it can do in 10 years and blockchain may very well change Filipinos lives immeasurably soon.

Cited Sources:

Unleash the Full Potential of the Rural Banks in the Philippines through Disruptive Technology

Written by Spark Perreras