Expression of Interest for Financial Inclusion Framework Strengthening - National Consulting Firm: Fintech For Inclusion Transformation (Fit) Program For Rural Banks

Financial Inclusion Framework Strengthening - National Consulting Firm: Fintech For Inclusion Transformation (Fit) Program For Rural Banks For The Past 70 Years, Rural Banks In The Philippines Have Played An Important Role In Promoting Financial Inclusion In The Regions Where They Operate, Offering Front-Line Financial Services To Rural Populations Underserved By Traditional Commercial Banks. Rural Banks Remain As Key Financial Service Providers For Farmers, Fishermen, And Msmes. Rural Banks In The Philippines Are Now Facing Growing Competition In These Rural Communities That Used To Be Served Exclusively By Them. Large Commercial Banks Using Digital Financial Services Are Extending Their Reach Into Rural Communities. Despite A Wide Range In Size And Activity Levels, Rural Banks Remain In A Unique Position To Extend The Reach Of Financial Services In Rural Areas. However, To Face This Competition, Rural Banks Must Address Two Challenges: • Improve Their Efficiency To Reduce Their Cost Of Operations, Mainly Linked To Outdated Time- Consuming Manual Processes That Slows Their Business Down And Makes Their Operations Inefficient; And • Offer Better Services To Their Clients Who Are Increasingly Demanding Access To Digital Financial Services And Mobile Apps To Manage Their Personal Accounts Without Having To Travel To The Bank’S Branch. Digital Transition Of Rural Banks Has Emerged As One Of The Key Elements To Address These Challenges. In June 2017, The Asian Development Bank (Adb) And Cantilan Bank Inc. (One Of The Major Rural Banks In The Philippines) Conducted A Pilot Digital Transition Of Their Hardware-Based Core Banking System To A Fully Cloud-Based Core Banking System, And Adb Supported The Transition. The Pilot Was Completed Successfully. Based On The Multiple Lessons Learned, Identification Of External And Internal Success Factors And Challenges, And The Active Support From The Philippines Central Bank (Bsp) As The Regulatory Body, Adb Has Developed A Framework For The Fintech For Inclusion Transformation (Fit) Program To Enable Other Financial Institutions, Starting With Rural Banks, To Use Fintech To Further Financial Inclusion Of Underserved And Unbanked Groups In The Philippines. The Fit Program Is First Targeting Rural Banks To Leverage The Innovative Use Of Technology With An End Goal Of Increasing Financial Inclusion, Promoting Agriculture And Expanding The Depth And Scale Of Financial Services That They Can Offer To Both Existing Clients And The “Unbanked” Population In The Rural Areas. The Fit Program Seeks To Encourage Rural Banks, Especially Those With 1–2 Branches, To Invest In Their Technology Support System So That They Can Successfully Compete And Thrive In The Finance Business. During The First Year Of Implementation, The Fit Program Intends To Primarily Support The Digital Transition Of Core-Banking Systems To The Cloud As This Is A Pre- Condition To Any Further Development Of Digital Products And Services. However, On A Case-By-Case Basis, The Fit Program May Still Consider The Development Of Other Innovative Digital Products, Services And The Use Of New Delivery Channels, To Expand The Rural Banks’ Market Reach.