A critique of the lending operations and policies of Philippine rural banks

• Main Author: Mina, Cristeta S.
• Format: text
• Language: English
• Published: Animo Repository 1967
• Subjects: Bank loans > Philippines; Business Administration, Management, and Operations
• Online Access: https://animorepository.dlsu.edu.ph/etd_masteral/117; https://animorepository.dlsu.edu.ph/cgi/viewcontent.cgi?article=6955&context=etd_masteral
• Institution: De La Salle University

This study aims to analyze how rural banks operate as credit institutions and to discover ways of improving credit practices to better serve the farmers. The study also compares the rural banking practices as credit institutions with those of the more advanced economies and with other local banking institutions. Information and other pertinent data on the lending operation of rural banks were gathered from a series of seminars given by the Institute of Rural Banks. To gain knowledge on the actual lending operations of other banking institutions, the researcher posed as a probable borrower, it being the only way to have access to the routine which borrowers have to go through and to obtain data on several requirements which borrowers have to comply with. Available literature on lending operations of other countries were also utilized. The lending operations of rural banks including details such as who may borrow from rural banks, how much one may borrow, sources of rural bank funds, types of loans granted and the collection methods used were discussed. Lending operations of different local financial institutions and those of similar institutions in the United States and some Asian countries were also compared. It was found in the study that one who has no collateral or qualified co-maker and whose purpose for availing the loan did not fall under the normal credit needs of small farmers, small merchants, small industrialists or their cooperatives, can not borrow from rural banks. It was also found that only 78 percent of the loans granted by rural banks in 1965 were availed by small farmers. It was observed that a negligent few of the rural bankers advertised their institutions thus failing to draw small farmers away from usurers. It was believed that the Institute for Rural banking could increase the awareness and train the rural bankers in this respect. The increasing participation of rural banks in the total loans granted for agricultural, industrial, and commercial purposes attested to the realization of the government's aim to make credit available to small farmers and small merchants. However, unlike the Farmers Home Administration in the United States which granted loans to farmers based on the borrower's character and capacity to pay, our rural bankers granted limited loans only to productive enterprises of small farmers, merchants and industrialists based on collateral. Such practices can not be duplicated here mainly because of the borrower's attitude to their loans. Agricultural credit in the Asian countries studied, on the other hand, were done mostly through their cooperatives or associations, which can be done here by capitalizing on the bayanihan or neighborhood movement or 4-H clubs.