Inclusive banking for inclusive growth

“We need a rural banker to run LANDBANK”. These were the words of Philippines Finance Secretary Carlos G. Dominguez III before he appointed veteran banker Alex Buenaventura in November to head the state-owned financial institution, which – in line with President Rodrigo Duterte’s promise to bring about inclusive growth – aims to spur economic development and reduce poverty in rural areas.

The Finance Secretary has certainly chosen the right man for the job. With 36 years of experience, mainly in rural banking, Mr. Buenaventura previously served as long-time president of One Network Bank (ONB). During his tenure at ONB, he focused on expanding services to the unbanked and underbanked rural areas in southern Philippines, which will now be his main objective at LANDBANK. Mr. Buenaventura is regarded as a staunch advocate of inclusive banking and countryside development.

To stimulate economic growth in rural areas, LANDBANK wants to expand financial services and access to credit to the nation’s small farmers and fishermen. As of September 2016, just 8.2 percent (P38 billion) of the bank’s total loan portfolio was made up of small farmers and fishermen. Upon his appointment, Mr. Buenaventura said he will increase that figure to 20 percent (P115 billion) by June 2022.

"There is a need for LANDBANK to focus on innovating lending programs for countryside development for inclusive growth to alleviate poverty,” says Mr. Buenaventura. “Based on my 36 years of rural banking experience, I proposed launching the Corporatives Development and Lending Program as a strategy for achieving this ambitious goal.”

Alex Buenaventura, CEO and President, LANDBANK

As part of this innovative program, LANDBANK, in June, unveiled its Joint Venture Corporative plan, which aims to resettle 3,333 poor families on 10,000 hectares of public land. Each family will be allocated three hectares of land for farming purposes, forming a corporation to professionally manage the 10,000-hectare plantation from production, to processing and marketing.

The corporation will be a joint venture – 51-percent owned by a big agro-processing company and 49-percent owned by the families. Aside from receiving a guaranteed monthly salary, the families will buy shares and receive regular cash dividends from the company. Sixty percent of all allowable dividends will be allocated to the families, while the remaining 40 percent will go to the agro-processing company.

“The Corporatives Development and Lending Program is basically a corporate approach of value-chain lending to small agri-producers and microenterprises. It’s an alternative to the existing LANDBANK lending program to cooperatives that has very stringent eligibility requirement (three years profitable operations),” explains Mr. Buenaventura.

Aside from serving small farmers and fishers and other marginalized sectors, especially in the countryside, LANDBANK is “also taking an active role in the implementation of the national government’s development agenda, particularly programs that promote financial inclusion, job generation and countryside development at large,” Mr. Buenaventura said in a statement released in May.

As part of its efforts to reach more underbanked areas of the country, LANDBANK will open 10 new branches in 2017. It also plans to issue a special bond to free up part of an estimated P325 billion that banks have failed to lend out to small farmers and fishers stipulated under the ‘agri-agra’ law.

Overseas Filipino Workers (OFWs) are also a priority group for the Bank. In line with President Duterte’s pledge to have a financial institution serving OFWs, LANDBANK has acquired the Philippine Postal Savings Bank (Postal Bank), which will be renamed OFW Bank and act as its subsidiary overseas with OFW service centers. LANDBANK will pilot its first (OFW) center in Dubai, and later plans to open offices in Saudi Arabia, the U.S., Japan, Hong Kong, Italy and other European countries where there is a concentration of OFWs and Filipino immigrants.