Rural Bank of Suares

CASE

STUDY

BACKGROUND:

RBS was incorporated in 1974 by a small group of stockholders from the town of Suares located 25 kilometers away from the capital city in a province in southern Mindanao. Since founding, RBS remained the only banking institution operating in this town of about 45,000 people. After its founding, the bank immediately found patronage among the townsfolk so that its stockholder, who was all townspeople of Suares, had high hopes for their bank. Within a few years however, the bank came into serious financial difficulties. Whether because of lack foresight or because of pressure from the government agencies during the Marcos regime, RBS, like nearly all rural banks in the country at that time, assumed heavy exposure in the government’s disastrous countryside lending program called Masagana 99 which resulted in the millions of pesos of unsecured and uncollectable loans to rice and corn farmers for the bank.

For nearly two decades, the bank burdened by these uncollectable loans, eked out a survival existence as the Central Bank authorities allowed the bank to carry these uncollectable accounts in its books and gradually write these off against whatever operating income the bank earned from its regular lending activities through the years. Until recently, therefore, the bank had not been able to expand or pay dividends to its stockholder.

EXTERNAL ENVIRONMENT | OPPORTUNITIES | THREATS |

ECONOMIC | * Additional employment chances for various positions required for the new branch. | * Should they push through the branching in the city, competitors might offer their staff with tempting deals just so the new branch will have less or no stronger human assets to run the operations. |

SOCIO-CULTURAL | * A branch in the capital city already has sure barrowers. These barrowers are residents of the capital city that transact with the main branch of Suares. | * There are two operating rural banks in...