Households to enjoy benefits of mobile microfinance banking

Low-income households may soon avail of loans with the aid of their mobile phones, with the mobile microfinance bank of the Bank of the Philippine Islands (BPI) and Globe Telecom, Inc. about to commence operations. BPI President and Chief Executive Officer Aurelio R. Montinola III said the joint venture of the two Ayala firms had obtained central bank approval earlier this month, which will allow it to start operations in a month or two. "We are going to have our first board meeting [this week or the next]. We will have our operating systems — loans and deposit-taking — [in place] within the next month or two," Mr. Montinola told reporters late last week. The joint venture will use the banking license of Pilipinas Savings Bank, Inc., a BPI subsidiary, as vehicle for extending microfinance loans. BPI, the country’s third largest bank, would transfer its microfinance business — it extended wholesale loans to microfinance institutions — to the mobile bank. It used to lend P500-P600 million annually to these institutions. Globe, the country’s second largest telecommunication firm, is no stranger to the microfinance business either. It has been facilitating money transfers between rural banks and their clients using its G-Cash platform. The mobile microfinance bank would use G-Cash’s network of over 3,000 outlets and initially extend wholesale loans to microfinance institutions. Mr. Montinola said the mobile bank would start servicing retail customers next year. "We will use the rest of the year to put things together. It’s really next year when we are going to concentrate on doing more things," Mr. Montinola said. He added that aside from giving retail microfinance loans, the mobile bank would also offer deposit services to clients. Details on how the retail microfinance loans will be distributed through mobile phone technology are still being ironed out, Mr. Montinola said. "The bank knows certain things, and people from Globe are experts on technology. You put the two together and there are a lot of possibilities. We are hoping the synergy will be positive," he said. The joint venture was hatched after Globe and parent firm Ayala Corp. bought stakes in Pilipinas Savings Bank from BPI. BPI and Globe now each have a 40% stake in the thrift bank while Ayala Corp. has 20%. Based on central bank data, Pilipinas Savings Bank, with a lone office in Greenhills, San Juan, has assets totaling P367.84 billion as of the first quarter. The mobile bank will have a capitalization of P400 million. The mobile microfinance bank will have Gerardo C. Ablaza, Jr., former Globe president, as chairman and Teresita B. Tan, currently senior vice-president and head of BPI overseas banking and channels services group, as president. BPI’s move is consistent with those of other universal and commercial banks that are venturing into microfinance. Yuchengco-led Rizal Commercial Banking Corp. (RCBC) bought Batangas-based JP Laurel Rural Bank in February, while mid-sized commercial bank Asia United Bank is acquiring the Rural Bank of Angeles to gain a foothold on the retail microfinance business, which has been very lucrative for rural banks. In microfinance, loans not higher than P150,000 can be extended with relatively higher interest rates. Repayment can be done on a daily, weekly, bimonthly or monthly basis, making the turnaround of funds faster compared to providing consumer or corporate loans. BPI’s mobile microfinance bank will also complement Globe’s business, said Rizza Maniego-Eala, president of G-Xchange, Inc. (GXI), Globe ’s wholly owned subsidiary running the G-Cash platform. "GXI is the vehicle for providing financial services but there are some things we cannot do. That’s why we decided to invest in the bank," she said. - Gerard S. Dela Pena, BusinessWorld