Rizal Microbank eyes PhP1-M net income in 2016

MANILA, Nov. 25 (PNA) — Rizal Microbank is all eyes on Mindanao, which it considers as the key to be able to register its first net income of about PhP1 million in 2016.

In a briefing Wednesday, Rizal Microbank President Ma. Lourdes Pineda said they are currently in net loss but she is hopeful to break even by end-2015, with a projected portfolio of about PhP390 million.

She explained that on the average financial institutions in Latin American countries, where microfinance is already a mature business, recover after about six to eight years of operations, thus, she is elated that Rizal Microbank would be able to do it in about five years.

”For 2016, I know we will be above water…with about Php 1 million net income by the end of the first quarter,” she said.

As of end-October 2015, the RCBC subsidiary’s total portfolio reached Php 346 million, higher by about 74 percent against the PhP190 million same period in 2014.

Pineda said they have been posting strong growth given the huge opportunities and strong demand for microfinance loans.

She said Mindanao, where the bank is now headquartered, is a major growth driver due to fewer players compared to Luzon and high demand.

She also cited that 70 percent of their loan portfolio is accounted for by Mindanao while the balance of 30 percent is accounted for by Luzon.

The bank have eight branches each in Luzon and Mindanao and three micro banking offices in Luzon and two in Mindanao.

Pineda said they plan to open three more branches in the northern part of Mindanao in 2016 but clarified that this depends on the eventual approval of the proposed Bangsamoro Basic Law (BBL).

The bank currently do not have branches in the Visayas due to the operational challenges presented by the island group’s geography but Pineda said two branches will be opened in Cebu in April next year.

To date, the bank have close to 1,500 borrowers, with an average loan of PhP160,000-170,000.

Pineda said bulk of their borrowers have microfinance loans but in terms of amount, the sub-small and medium enterprises (sub-SME) loans have the bigger share at 68 percent.

She said they only have about 200 clients under the sub-SME, which was introduced to address the needs of entrepreneurs who want to take out loans amounting to PhP301,000 to PhP10 million, which is the range of microfinance loans.

She explained that the microfinance segment has higher yields compared to the regular bank loans because it is a high-risk business.

She said interest rates of microfinance loans ranges from 2.5 to 2.75 percent month or about 33 percent per annum.

She, however, said that these rates are still below the 20 percent monthly rate being offered by informal loan providers like the 5-6 system of Bombays, whom small entrepreneurs normally tap because the latter do not require borrowers to submit any personal and financial data.

”That’s why we provide an alternative against the high rates they offer,” she said.

Microfinance borrowers are not required to present collateral but they should have been in the business for at least a year, she said.

Pineda said their borrowers have good payment standings and noted that the payment schemes depend on the nature of the clients’ businesses.

She said borrowers who operate eateries and canteens normally choose to pay their loans on a daily basis since their cash flow is so fluid while those in the services sector, like tailors and repair shops owners, have a monthly payment schedule.

Meanwhile, the bank is now studying the possibility of offering a “kick starter loan” to young entrepreneurs starting next year.

Pineda said they are now in talks with higher learning institutions that offer entrepreneurial courses.

She said students enrolled in these courses are required to put up their own business and Rizal Microbank is considering to aid them since they already have the business theory to back them up.

”Chances are it will be pilot-tested in Mindanao in 2016,” she added. (PNA)