THE BANKABLE BANKS OF MINDANAO

When we assess the economic performance of Mindanao, the development in the banking sector is one of the best indicators. Putting it simply, more banks
would mean that there is money and more money circulating around the island and that business must be robust.

We all know that our country’s banking system is composed of universal and commercial banks, thrift banks, rural and cooperative banks. As of December 31, 2003, there are a total of 7,494 banks in the country; 877 of these are found in Mindanao. The banking sector plays an important role in mobilizing the economic development of Mindanao. It has contributed to the growth of many small and medium scale entrepreneurs

Over the last three years, the Mindanao banking sector has displayed significant increase in the number of banking offices. From the report generated by the Mindanao Economic Development Council (MEDCO) there was a 2% increase in the number of banks operating in Mindanao, from 877 in 2003 to 896 in 2004.

Regional distribution for the number of banks operating in Mindanao in 2004 showed that Region 13 or CARAGA has the highest increase in number of offices with seven additions. Region 11 has four, and both Regions 9 and 12 have three new banks. Region 10 has two additional banks while ARMM has none.

Major factor in the increase is attributed to the physical growth of rural and coop banks, which gained additional 25 banks within the one-year period. Among the regions, Southern Mindanao has the most increase with eight new rural / coop banks, followed by CARAGA with seven and northern Mindanao with five. Rural and coop banks serve the needs of the micro entrepreneurs who , often than not, resort to informal money lenders for their working capital requirements. Because of this, they fall victims to high interest rates.

The period 2005 showed a minor fluctuation in the number of persons served by banks in Mindanao. In 2003, there were a total of 210,419 persons being served; this increased to 210,600 in 2004, but slightly declined to 209,896 in 2005, marking a total loss of 523 clients.

However, in the period between 2003 and 2004, quasi-banks in Mindanao such as investment houses, financing companies and pawnshops among others, rose by 8.5% or 1,713 institutions registered with Bangko Sentral ng Pilipinas (BSP) as against 1,578 in 2003. Of the total quasi-banks in Mindanao, pawnshops account for 99% of these. The presence of these institutions provide an alternative source of funds for the farmers and the small businessmen.

In the 2004 regional distribution report released by BSP, Region 11 which is the center of trade and services in Mindanao has the most number of quasi-banks with 486 financial institutions comprised mostly of pawnshops. Regions 12 with 393 and Region 10 with 331, closely follow.

Interestingly. with the increase in the number of banks, consolidated loan portfolio of Mindanao banks amounted to P61.645 billion in 2004 as against P60.817 B in 2003. Northern Mindanao or Region 10 has the highest loan portfolio at P 19,632 B; followed by Southern Mindanao or Region 11 at
P 16,904 B and the lowest at P 3.4 B at CARAGA. This would also indicate the level of investments and business activity in a given area.

In amount, commercial banks have the highest loan portfolio share at 71%, but in terms of signs of growth percentage rural banks lead at 117.74% between 2003 and 2004. Since the economy of our island is agriculture dependent ; majority of our farmers rely heavily on rural banks as their investment partner.

The increase in rural banks’ loan portfolio could also be traced in the growing micro-finance services they give to small and medium scale entrepreneurs.
Based on 2005 reports from the Rural Bankers Association of the Philippines, out of the 428 towns and cities in Mindanao, there are 286 RB offices servicing the island, which is actually 62% coverage.


Deposit Liabilities has likewise increased for all commercial, thrift and rural banks as they posted a positive growth trend for 2004 with a consolidated P354.26 B savings deposits as against P337.36 B in 2003. This is good news for us because savings again is an indication that the agriculture sector is doing well .

Top three Mindanao regions with the highest savings deposits growth are, Region 10 with P4.48 B increase, closely followed by Region 11 with P4.46 B, and lastly Region 9 with P2.47 B. Savings growth for other regions are, P.007 B for Region 12, P.065 B for ARMM and P.972 B for CARAGA.

The increase in deposits may also be the result of increased awareness of the market on the importance of saving for the future and also because of the robust economic activities in these communities where the banks operate.

The banking sector has been a key growth driver for the island’s small business enterprises as they are poised to expand their microfinance services for small and micro businesses nationwide.

In fact, micro-finance service has helped many banks grow its assets and loan portfolio. This indicates the micro-entrepreneurs' growing confidence in getting access to microfinance programs as a means to start a small business or expand their operations. There are now over 15,000 SMEs present in Mindanao who get capital access from banks.

To give you a better picture, lets take a look at how rural banks are strengthening their operations and are likewise strengthening the financial condition of the SMEs through micro-credit systems.

From the August 2003 report filed by the USAID-funded project Microenterprise Access to Banking Services or MABS, micro-loan portfolio of 37 MABS participating banks nationwide “surged to P291.65 million in August 2003, up from P282.million in the previous month. The number of micro-borrowers also swelled from 32,306 in September 2002 to 43,226 at the end of August. Micro-savings deposits also rose from P205.4 M in July to P228.98 M in August.”

The micro finance systems of banks and other financial institutions are developing new Filipino entrepreneurs and are helping marginalized sectors in the community shape their financial future. This is largely benefiting the poverty-stricken Mindanao regions.

Moreover, signs of growth are present in the Mindanao banking industry. The modest growth only proves that stability do exist in the island and that the economic wheel continues to move upward.