The Bangko Sentral ng Pilipinas (BSP) recently approved a measure that further promotes financial inclusion by expanding the scope of allowable activities in micro-banking offices (MBOs).
MBOs are scaled-down offices which provide a specified range of banking activities and services such as acceptance of micro-deposits, disbursement of micro-loans, selling of microinsurance, purchase of foreign currency, bills payments, government pay-outs, and e-money conversion. Prior to the recently approved measure, MBOs could perform the customer identification process and facilitate account activation but the approval and actual opening of the deposit account shall be done only at the head office or branch. Clients who want to transact in MBOs would therefore still need to go to a head office or branch to open a deposit account. This practice did not fully capture the potential of MBOs as a banking presence in remote and rural areas where travelling to a bank branch may be prohibitive in terms of cost.
The new issuance by the BSP enables MBOs to complete the process of account opening from application up to the acceptance of initial deposit provided that the necessary controls are in place.
The MBO policy is one of the initiatives of the BSP to extend the physical reach of financial services. As of June 2015, there are 531 MBOs present in 337 municipalities, of which 64 municipalities are being served by MBOs alone. Increasingly, areas that were unbanked before now enjoy banking presence due to MBOs. In 2014, for example, 11 out of 19 previously unbanked municipalities gained banking presence as a result of MBO establishment, while the remaining 8 municipalities became banked because of regular OBOs.
Banks have also taken advantage of the opportunities presented by the MBO policy. The number of banks with MBOs increased to 35 banks in 2014 from just 5 banks in 2011, a year after the release of the MBO regulation. Because of MBOs, these banks are able to expand outreach at lower costs. Some estimates indicate that monthly operating expenses are 7 to 8 times lower in MBOs as compared to a bank branch.
The recent policy issuance is also expected to further promote savings mobilization through micro-deposits collected in MBOs. Micro-deposits, which are basic savings accounts especially designed for low income earners, have maintaining balance less than P100 and have no dormancy charges. As of June 2015, there are 2.3 million micro-deposit accounts amounting to P4.6 billion.