Challenges Facing Rural Banks

Presentation by:

Atty. Arifa A. Ala12 November 2013

Main Challenges• Stiffer competition• Changing environment/market• Building talents/expertise• Building capital • Strengthening management– Common management issues

Stiffer Competition in the Market• Big banks start to serve rural

areas– Economies of scale; wider network – More expertise in

marketing/launching products– More innovative– More competitive interest rates

• Impact on rural banks– Loss of customers– Lower margins

Changing Environment/Market• Customers are more

demanding• Technology is rapidly

changing; increased IT risk exposure

• More regulations

Building Talents/Expertise• Difficulty in attracting and

retaining pool of talents– Big players offer better

compensation packages– Many professionals prefer to

work in urban areas– Better career prospects in

bigger institutions

Building capital• Compliance with capital

requirements• Expansions require

additional capital• Challenges in attracting

investors– Especially for financially-

challenged banks

Strengthening ManagementThe need for -• More active board and

management oversight• Establishment of appropriate

risk management system

Common Management Issues• In some, management is

confined to family members • Limited technical capabilities

and experience of people running the banks

Management IssuesLimited workforce results in-• Overlapping Function• Weak segregation of duties • Conflicting functions

Thank youaala@bsp.gov.ph