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Rural Banking Industry Remains on Solid Footing


The rural banking industry demonstrates its strength as shown by the positive growth in assets, loans, deposits and capital based on the latest data as of end-March 2018. The industry also continues to be profitable and operates with a wide physical network.  

The industry’s assets expanded by 8.3 percent to P216.7 billion as of end-March 2018, funded by the 6.7 percent growth in deposits which reached P154.8 billion. Capital adequacy ratio stood high at 19.1 percent. Meanwhile, return on equity was solid at 7.1 percent while annualized net profit was reported at P2.9 billion at end-March 2018.

Rural banks continue to support countryside development and growth of retail banking through financing of rural communities. The industry catered to the needs of  agri-agra and micro, small and medium enterprise (MSME) borrowers, with compliance ratios far exceeding the mandated requirements. Rural banks have established strong presence with a network comprised of 2,800 banking offices nationwide as of end-July 2018.  To further expand reach and maintain competitiveness, they have also leveraged on innovative technologies, such as the use of cloud-based banking solution and cash agents.

The industry outlook of rural banks remains positive. Based on the preliminary results of the Banking Sector Outlook Survey (BSOS), the top three strategic priorities of the rural banks over the next two years are to grow the business, protect the bank, and to optimize available technology. These strategies enable rural banks to provide a wide range of innovative financial products and services appropriate to the needs of the local communities. Recently, a number of rural banks have gone on board with the electronic payment platform PESONet and InstaPay1/. All these indicate that the rural banking industry welcomes the use of technology enabled solutions and displays strong interest in participating in the digital finance ecosystem.

In this respect, the BSP remains strongly committed in providing an enabling regulatory environment to contribute to the growth of the industry while promoting its sustained safety and soundness.  The BSP will continue to be sensitive to the application of the principle of proportionality to ensure that requirements for rural banks remain commensurate to their size, scale and complexity of operations.


1/ These are the two priority Automated Clearing Houses (ACHs) launched under the National Retail Payments System (NRPS).

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