BSP wants banks to establish branches for low-end market

MANILA, Philippines — Philippine banks could soon do away with the capital-intensive brick-and-mortar branches as the Bangko Sentral ng Pilipinas (BSP) is set to adopt the “branch-lite” concept as part of efforts to promote financial inclusion.

In a speech during the general membership meeting of the Chamber of Thrift Banks, BSP deputy governor Chuchi Fonacier said the new concept that would allow banks to design offices aimed at the lower-income segments is part of the central bank’s liberalization initiatives.

She said the branch-lite concept would help banks be more responsive to the changing preferences of financial consumers and market conditions.

“The adoption of the branch-lite concept provides banks with more flexibility in expanding their network and offering a wider range of financial products and services,” she said.

Fonacier pointed out a “branch-lite” unit may perform activities and provide any of the products and services that a branch may perform or provide except those suited only to sophisticated clients with high-risk tolerance.

“The range of activities and services to be carried out by the branch-lite unit should be consistent with the bank‘s business model in providing financial services to a specifically defined market or sector,” she said.

According to Fonacier, the regulator would issue a circular detailing the guidelines on the branch-lite concept before the end of the year.

The BSP currently allows banks to set up branches, together with extension offices, other banking offices, and microfinance units, subject to capitalization and documentary requirements.

Latest data from the central bank showed there are 595 banks operating in the country as of end-June, 21 lower than the 616 banks in end-June last year. The banking industry’s footprint went up 4.6 percent to 10,798 branches from 10,318.

Despite the increase in the number of branches, Fonacier said there are 571 cities and municipalities in the Philippines that remain underserved or unbanked.

“Our fellowmen in these areas are somehow deprived of access to their needed financial resources. With this in mind, we will continue to advance financial inclusion initiatives to make banking services more accessible,” she said.

To address this, the BSP official said the central bank is set to issue the guidelines on the basic deposit account for those who are still unable to open a regular savings account because of the perceived cost involved and difficulty in complying with documentary requirements.

“With this account, the unbanked customer will be able to use electronic payments, eventually allowing them to transition to more sophisticated financial services like financing and insurance,” Fonacier said.