CANTILAN, PHILIPPINES – Margilyn Cosmiano has taken out 10 successive loans from Cantilan Bank, a rural bank based in the southern Philippine island of Mindanao. Over the years, she has used the funds to build her sources of income. Starting out with a small farm, she now also owns a fish stall in the bustling town market.
When she took out her first loan – using a water buffalo as collateral – the application process was paper-based and she had to visit the branch to make repayments. These days, she is visited regularly by her accounts officer at Cantilan Bank. John Gallega, 25, takes the repayments and registers them into his handheld tablet device, which feeds the digital information directly into Cantilan Bank’s banking system, and provides Margilyn with a receipt.
She is happy with the service. “I find getting a loan and managing it much faster than it was before,” said the 36-year-old mother of four. And she has further ambitions: “I want to expand my business even more. I plan to open a food store.”
More efficient customer service
The service Gallega provides is part of a pilot by Cantilan Bank to provide more efficient customer service and to start on the road to offering full online banking for existing customers and, potentially, others who have no bank account.
Although Cantilan Bank offers a wide spectrum of services targeted at small business owners, farmers, and the young, there are still many people who have no bank account either because they live too far from the town, have insufficient supporting paperwork, or do not understand or trust formal banks.
Around 70% of people in Mindanao keep their savings at home rather than in the bank, a figure that is on par with the rest of the country. This leaves millions of people with nowhere safe to keep their savings and having to tap family or potentially costly informal lenders if they want to borrow. The situation is similar in many countries in Asia and the Pacific. In Uzbekistan, 37.1% of adults have an account at a bank or other financial institution. The figure for Nepal is 45.4%, for the Lao People’s Democratic Republic it is 29.1% and 26.0% in Myanmar.
Banking services from the cloud
Testing out services on the tablet has been made possible because the 40-year-old Cantilan Bank in January moved all of its core banking activities into the cloud—the first bank in the Philippines to do so. The shift was helped by $150,000 in technical assistance from the Asian Development Bank as part of a project to find new ways of raising financial inclusion in Asia and the Pacific.
Under the four-part project, system migration to the cloud was followed by an introduction of the tablet-enabled digital field application being tested by Cosmiano and another 11 Cantilan clients. Next, the bank will integrate its automated teller machines and interbank transfer systems into the cloud and, lastly, will be the rollout of a full mobile banking application.
Certainly, introducing online banking to new or existing customers will not be an easy process. Cosmiano, for one, still uses a basic mobile phone model and is somewhat nervous about the prospects of shifting to using a smartphone. But she does think that others, especially younger people, think differently. Her three older children—aged 17, 15, and 13 years—are all active smartphone users and even her 3-year-old knows how to manipulate his sibling’s phone, she says.
A journey to economic empowerment
“The Philippine market is ripe for digitalization, we have high mobile phone penetration and high use of social media,” said Lisette Cipriano, Senior Digital Technology Specialist at the Asian Development Bank. “With mobile technology, the reach is tremendous and it is the beginning of the journey to economic empowerment.”
“The Philippine market is ripe for digitalization, we have high mobile phone penetration and high use of social media. With mobile technology, the reach is tremendous and it is the beginning of the journey to economic empowerment.”
Education about data security is also crucial. Cantilan Bank has been working to remind its 166,000 customers to pay attention to the security of their personal and banking information—not divulging bank account or PIN numbers for example—and is planning more activities going forward. Security is also part of the training that the account officers like Gallega undergo before they start using the tablets with customers, so they can assure clients that the technology is as secure, if not more secure, than the papers and files they keep at home or are in the bank.
From Cantilan Bank’s point of view, putting all its operational information into the cloud has made documentation safer from the likes of power outages, fire, or even geophysical risks. For example, the region recently suffered a 5.5 magnitude earthquake that shook the building. And operationally, it is safer too since bank officers can monitor in real-time all branch operations, bank liquidity, and compliance, reducing the chance of discrepancies—and time it takes to unravel and correct them—and reducing operational risk.
“We have to be ready for change,” said Tanya Hotchkiss, Cantilan Bank’s Executive Managing Director who has been working on the project for two years. Just 10 years ago, people in the Cantilan region were using the radio to communicate, she said. “And look at where we are now.”