Amando M Tetangco, Jr: RCBC - banking on emerging corporates
Speech by Mr Amando M Tetangco, Jr, Governor of the Central Bank of the Philippines
(Bangko Sentral ng Pilipinas), at RCBC's (Rizal Commercial Banking Corporation)
relaunching of its program for Small and Medium Enterprises, Makati City, 26 March 2008.
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Ambassador Yuchengco, Chairman Dee, President Tan, other officers and staff of RCBC,
special guests, good evening.
In many countries, including the Philippines, small and medium enterprises constitute the
backbone of the economy. As such, initiatives that provide meaningful support to SMEs
represent welcome news indeed.
It is in this context that I view RCBC's re-launch of its SME Lending Program.
Through the years, consolidated lending of the banking sector to SMEs has shown
considerable growth.
In 1991, the year Republic Act No. 6977 or the Magna Carta for Small Enterprises took
effect, credit to SMEs amounted to P17 billion. By December 2007, or 16 years later, total
loans extended to SMEs have reached P352 billion. This is roughly 21 times more than the
1991 total.
We at the Bangko Sentral ng Pilipinas acknowledge the banking sector's commitment to
support SMEs. As a whole, the banking sector has consistently exceeded the mandatory
credit allocation for SMEs under the Magna Carta for Small Enterprises.
Although this law lapsed in August last year, Congress has already ratified the bill extending
and enhancing the SME law. We expect this to be signed into law in the very near future.
In the meantime, the Bangko Sentral ng Pilipinas encourages banks to continue supporting
SMEs.
It is in this light, that we commend RCBC for taking a leadership role in promoting and
allocating resources for its SME lending Program. As one of the major banks in our country,
RCBC is bound to influence others to take a similar stance.
To me, support for SMEs translates directly to a vote of confidence for our people and our
country.
Recognized as the biggest employers in our country, SMEs account for about 80% of
employment generation. If, therefore, we are able to keep the SME sector on a consistent
growth track, we would be able to accomplish broad-based and sustained growth for our
country.
Equally important, we would have a strong domestic economy that is less vulnerable to
global economic shocks.
Ladies and gentlemen. Last year our economy posted the best GDP growth in 31 year. One
of the reasons for this is strong investor confidence in our country, as a viable emerging
economy. This was coupled with the 2.8 average inflation rate in 2007, which was the lowest
in 21 years. Other indicators likewise exhibited stronger economic positions such as the
country's balance of payments, which posted a record surplus of USD 8.6 billion in 2007 and
our all-time high level of international reserves.
As for the banking sector, it remains fundamentally sound with the average capital level well
above the minimum regulatory requirement and the NPL ratio that is now almost back to the
1997 pre-crisis level of around 4.0 percent.
The RCBC group in particular, has shown marked improvement in performance as it posted
a net income for the year ended 2007 which was 50 percent better than the previous year's
level. Further, we take the Bank's recent issuance of P7 billion worth of Unsecured
Subordinated Debt as a sign of bank's commitment to further strengthen its capital base as it
assumes new risk exposures.
RCBC's SME Lending Program is anchored on the theme "Banking on Emerging
Corporates." This signals the belief and confidence of RCBC's leadership in the future of
SMEs to become growth drivers of the Philippine economy. I believe you are on the right
track.
I hope this will steer the tempo of competition in the banking industry as it opens
diversification of possible sources of income for banks.
Indeed, the challenge of setting a footprint on SME lending is a milestone RCBC and other
banks should take, as its contribution in providing a strong foundation for sustained and
broad-based economic growth for our country.
Again, my congratulations to RCBC. Mabuhay!