How BanKo, aid groups help Pinoys borrow from banks, not sharks

By Neil Jerome Morales and Karen Lema, Reuters

Posted at Dec 02 2014 06:42 PM | Updated as of Dec 03 2014 02:43 AM

MANILA - Housewife Jenny Orquiza, whose home was damaged by super typhoon Haiyan (Yolanda), did not imagine that the Philippines' biggest natural disaster would lead to her getting something she never had - a bank account.

After the November 2013 calamity, the 33-year-old mother of three had a piece of luck. She was one of 26,000 people who received $90 from global humanitarian agency Mercy Corps via the Philippines' first mobile phone-based savings bank, called BanKO.

Orquiza used the money to repair her home in Merinda, an hour from Haiyan's ground zero in Tacloban, and became part of a pilot lending project organized by Oregon-headquartered Mercy Corps and BanKO.

The project allowed her to set up a small convenience store with loans totaling P10,000 ($223) - which she collected at a nearby pawnshop that is an agent for the bank.

"Now I know that banking can be done through mobile phones," said Orquiza, who uses a 10-year-old Nokia phone to access emergency cash.

Only 27 percent of adult Filipinos have a bank account and one-third of the sprawling country's 1,630 cities and municipalities remain uncovered by banks, central bank data shows.

Growth by BanKO, a unit of commercial lender Bank of the Philippines and the country's only mobile-based lender, is boosting "financial inclusion", where more people become customers of banks instead of informal moneylenders who charge far higher interest.

Orquiza says she's meeting her repayments schedule, and Mercy Corps says the annual interest on her loan is 5.6 percent. A loan shark would likely charge at least 20 percent.

"The unbanked is a really huge market," BanKO President Rubio said. "And understanding financial services through the lens of something you carry every day makes the product really easy and relevant on a day-to-day basis."

BanKo and its part-owner Globe Telecom Inc, one of country's two biggest phone companies, naturally hope that mobile-based banking can expand their customer bases.

Globe Telecom, which has 43 million mobile subscribers, owns 40 percent of BanKO, as does BPI, the country's most profitable lender. The other 20 percent belongs to Ayala Corp, the parent of both BPI and Globe.

Rubio said BanKO is still unprofitable after five years, but it should be in the black by 2016, helped by a bigger loan portfolio and transaction volume.


At the end of August, BanKO had 850,000 accounts, compared with 370,000 a year earlier. Mercy Corps' financial assistance program brought in the single biggest chunk of depositors.

Work with Mercy Corps and other non-government organisations, as well the Philippine government's Social Welfare Department, and the U.S. Agency for International Development have added 300,000 clients, BanKO says.

BanKO has just five branches nationwide, but clients can transact business such as converting cash to e-money through its agents, like the pawnshop where Orquiza received her loan. Some pharmacies and grocery stores are also agents. BanKO clients can also withdraw money through any ATM, for a fee.

Globe and BPI hope the BanKO project can eventually be exported to other emerging Southeast Asia markets where levels of financial literacy are low.

"We hope to be able to, once we get the model right, look at other markets," said Globe President Ernest Cu.

Possible targets are Myanmar and Cambodia, Cu said. The International Finance Corp., an arm of the World Bank, says fewer than 20 percent of Myanmar's population has access to formal banking. In Cambodia in 2011, according to the World Bank, the percentage was less than 4 percent.