bangko sentral at 15. 7 %. the business of rural banking has also continued to show viability and profitability. net income after tax ( niat ) increased by 20 % from php 2. 3 billion in 2006 to php 2. 8 billion in 2007. return on assets and equity also continue to increase. savings mobilization and lending activities have also been on an uptrend. deposit liabilities in 2007 were at php 108. 1 billion, a 21. 5 % increase from the previous year. similar double digit increases were seen in the sector ’ s lending activities. total loan portfolio of rural banks increased to php 93. 3 billion from only php 77. 1 billion in 2006. while lending activities expanded, the high quality of the portfolio was maintained. as of the 4th quarter of 2007, the non performing loans ( npl ) ratio was 9. 67 % which is an improvement from the 11. 11 % for the same period for the previous year. using these indicators, rural banks are faring equally or even better than its universal, commercial and thrift bank counterparts while remaining true to its core mission of serving the needs of the countryside. rural banks alone cover around 80 % of the total municipalities in the philippines with nearly 730 banks and over 2, 000 branches nationwide. the real value added of rural banks, however, does not lie solely on their broad geographical presence but just as importantly on their deep understanding of the character, peculiarities and needs of the rural customers. at the bangko sentral, we have no doubt that rural banks are the ideal partners in invigorating local economies. toward this end, we are working assiduously to ascertain that abundant opportunities are available for rural banks to ensure their institutional viability, expand their businesses and more importantly improve their products and services. the issuance of the revised branching guidelines last december 2005 ( circular 505 ) aimed to enhance competition in the banking system and maximize the delivery of financial services especially in underserved areas. the new guidelines enable existing banks to further increase the depth and breadth of their outreach and better serve more and more clients both in the rural and urban areas. the benefits of such policy to the rural banking sector are immediately evident. as of end 2007, number of rural and cooperative bank offices increased to 2, 133 offices from 2, 075 in the previous year. while the number of banks decreased by 12, the number of branches and other offices increased by 58 from end 2006 to end

amando m tetangco, jr : the growing significance of rural banking in the philippines keynote address by mr amando m tetangco, jr, governor of the central bank of the philippines ( bangko sentral ng pilipinas ), at the inaugural reception of rbap board of directors and officers, manila, 8 july 2008. * * * secretary arthur yap, mr. tomas gomez iv, board of directors and officers of the rural bankers association of the philippines ( rbap ), our friends in rural banking, good evening. i am delighted to have this opportunity to keynote the inauguration of the new directors and officers of the rbap. it is, indeed, an auspicious new day for the rural banking industry. seeing the new set of directors and officers at rbap ’ s helm, i am certain that you will provide the impetus needed for the rural banking sector to once again forge ahead. rural banks have an important and challenging role in our country ’ s economic development. in the law that created rural banks, they were envisioned to be catalysts for comprehensive rural development, channels of equitable distribution of opportunities and wealth, and support for expanded productivity in rural communities. the end goal was to raise the quality of life for all, especially the underprivileged. this task of great magnitude is relevant today, as it was then. in fact, with the shifts in the economic landscape, the increasingly changing needs of the market, the advent of new technologies and channels, it may be said that the demand on rural banks today is even greater than it was then. rural banks must commit to continuously upgrade their capacity, efficiency and sustainability. rural banks must uphold good governance and management practices to ensure that they are sound and well managed. finally, rural banks must be dynamic and progressive to keep in step with these changes and developments. i am happy to note, that by all measures, the rural banking sector has geared up to face the challenges and to seize the economic opportunities they present. year on year, rural banks are exhibiting robust asset growth and strong capital build - up. as of end 2007, the sector ’ s total assets reached php 149. 5 billion, an 18 % increase from the previous year. total capital accounts have also shown double digit growth of 13. 4 % from php 18. 4 billion in 2006 to php 20. 9 billion in 2007. the capital adequacy ratio ( car ) has remained above the minimum 10 % required by the