Acquiring a rural bank under Republic Act No. 10574, the Rural Bank Strengthening Act (RBSA), provides fintech firms with one of the most efficient and strategic pathways to obtain a full banking charter, penetrate underserved rural markets, and build a scalable, compliant, and technology-driven financial institution deeply anchored in the principle of financial inclusion.
This approach bypasses the protracted and resource-intensive process of applying for a de novo banking license, allowing rapid market entry while leveraging existing infrastructure and regulatory goodwill.
The Philippine rural banking sector has undergone significant consolidation over the past decade, declining from 533 institutions in 2013 to approximately 398 as of the latest reporting. This reduction reflects ongoing mergers, closures, and regulatory pressures, but it also highlights structural vulnerabilities: many remaining rural banks operate with severely constrained capital bases, rely on outdated legacy systems, and lack meaningful digital capabilities.
These challenges not only limit their growth potential but also position them as attractive acquisition targets for fintech players seeking immediate access to a regulated banking platform, branch networks, and an established customer base in rural and agricultural communities.
The RBSA explicitly empowers non-bank entities, including fintech companies, digital platforms, and holding companies to acquire at least 60% of the voting stock of a rural bank, thereby granting effective control and the ability to reshape operations under a modern governance framework. This provision is a deliberate policy mechanism designed to inject fresh capital, innovation, and operational efficiency into a critical but under-resourced segment of the financial system.
The Bangko Sentral ng Pilipinas (BSP) actively endorses technology-led transformation of acquired rural banks, provided that their foundational developmental mandates remain intact. To ensure alignment with national financial inclusion goals, acquirers are required to submit a comprehensive, BSP-approved modernization plan that outlines capital infusion, IT system upgrades, risk management enhancements, and operational streamlining.
A non-negotiable condition is the maintenance of at least 25% of the total loan portfolio in rural and agricultural lending for three consecutive years. This threshold is not merely symbolic but it is rigorously audited annually by the BSP, with non-compliance triggering a range of penalties, including monetary fines, restrictions on business activities, or, in severe cases, revocation of enhanced authorities. This requirement ensures that technological modernization does not come at the expense of the sector’s social mandate.
At its core, rural banking exists to extend affordable, accessible credit to farmers, fisherfolk, micro-entrepreneurs, and agrarian reform beneficiaries—segments traditionally overlooked by commercial banks. Any fintech-driven transformation must therefore prioritize impact amplification: digital tools should streamline loan origination, reduce transaction costs, enhance credit scoring through alternative data, and improve financial literacy, without eroding on-the-ground presence or developmental focus. Technology must serve the mission, not supplant it.
In summary, by strategically leveraging the RBSA framework and adhering strictly to BSP oversight and rural lending obligations, fintech acquirers can secure a banking license, deploy cutting-edge solutions, inject growth capital, and scale inclusive financial services across underserved regions, transforming legacy rural banks into agile, digital-first institutions that fulfill both commercial and societal objectives.
This guide provides a general overview of the above transactions at the time of writing only and is not intended to be a comprehensive legal advice. This should also not be taken as an opinion on the topic. For more details and information, you may coordinate with any GVES Law Partner regarding the matter.
Atty. Jon Henley C. Godinez is a Partner of GVES Law.