What’s the difference between rural banks and cooperative banks?
They differ in type of ownership.
Rural banks are owned and managed by private entities or individuals.
Cooperative banks are owned, organized and managed by cooperatives or federation of cooperatives.
What are common between rural banks and cooperative banks?
They serve rural communities. They lend money to farmers, fishermen, merchants, cooperatives and owners of small business operations in their areas on reasonable terms.
According to Republic Act No. 7353, an act providing for the creation, organization and operation of rural banks, and for other purposes, here are what rural banks can do and shall do:
Rural banks are organized in the form of stock corporations.
Rural banks shall grant loans primarily to farmers or farm families that own or cultivate agricultural lands, fishermen, merchants, and cooperatives.
They’re required to prioritize loan applicants who are applying for smaller loan amounts.
They can lend to owners of small business enterprises in rural areas, but only up to 15% of any one bank’s total net worth.
They can offer these services:
- Accept savings and time deposit
- Open current or checking accounts (only rural banks with net assets of at least 5 million pesos (subject to change)
- Act as a correspondent for other financial institutions
- Act as a collection agent
- Act as official depositary of municipal, city or provincial funds in the municipality, city or province where it is located
- Rediscount paper with the Philippine National Bank, the Land Bank of the Philippines, the Development Bank of the Philippines, or any other banking institution, including its branches and agencies.
- Offer other banking service (Section 72 of Republic Act No. 337, as amended)
- Extend financial assistance to public and private employees (Section 5 of Republic Act No. 3779, as amended)
Here are some rules on cooperative banks, as described in the BSP Circular No. 682, Series of 2010:
- Cooperative banks are organized by cooperatives registered with the Cooperative Development Authority and are licensed as cooperative banks by the BSP.
- No cooperative member shall own more than 40% of the total capital contributions of a cooperative bank.
- Only one cooperative bank is allowed in each province, except in cases where economic conditions of the province make a second one viable.
- The primary clients for financial, banking and credit services are cooperatives and their members, although non-members may be served.
Do rural and cooperative banks have the same capitalization requirements?
If locating in a 4th class to 6th class municipality outside the NCR, the minimum capital requirement for establishing only a head office is 10 million pesos. The minimum capitalization if with one to 10 branches is 15 million pesos.
If locating in a city up to 3rd class municipality outside the NCR, minimum capitalization if establishing a head office only is 20 million pesos. If with a branch up to 10 branches, the minimum is 30 million pesos.
In the NCR, the minimum capital for a head office only is 50 millin pesos. If with a branch up to 10 branches, the minimum is 75 million pesos.
Are there how many rural banks and cooperative banks in the Philippines?
As of April 2020, there are 422 rural banks (head offices) and 2,672 branches.
There are 25 cooperative banks (head offices) and 138 branches.
The top rural banks are BDO Network Bank (a subsidiary of BDO) and EastWest Rural Bank (a subsidiary of EastWest Bank).
Reference for minimum capitalization requirement:
BSP Circular No. 854, Series of 2014: Minimum Capitalization of Banks
There are not many differences between rural banks and cooperative banks. They serve the same communities and have the same banking goals.
Top Rural Banks in the Philippines (latest ranking)