One great advantage of banks engaged in development finance is having the reason to look at the brighter side of performance, regardless of the outcome. However, NRBSL never uses this notion as an excuse. The discussion over the results of its 2022 financial operations is a good way to present how the fundamental principles in banking and finance are at work in the manner NRBSL reacts to economic forces. Also, the above reasoning is a good reference to understand better the profile of clients of NRBSL and their behavior which underlies their performance and its ultimate impact both on the volume and quality of the Bank’s business portfolio and profitability. This understanding is important to contextualize the approaches the Bank’s leadership deemed most suitable in balancing its financial objectives and mission implementation.

   Among NRBSL regular loan clients, there was a subdued credit appetite due to lesser demand of their products and higher prices of commodities. The volatility of the market and higher interest rates have discouraged targeted clients to borrow. This caused the Bank’s loans outstanding to drop by P53.16M pushing the level from P1.120B to P1.066B on year-to-year comparison. Indeed, the expensive fuel prices with rising food and commodity costs are adding strain to cost of living particularly of vulnerable sectors which make up the niche market of NRBSL. The vast majority of NRBSL clients are agricultural producers at the lower end of the domestic value chain. They lack control of resources of production thus least benefited in the exchange of goods and services. They bear the brunt in the increase of cost of imported fertilizers as they are leveraged by big importers and local input suppliers. Aware that these farmers are in dire straits, NRBSL continued to prioritize the promotion of low-cost financing under the credit programs of the Department of Agriculture - Agricultural Credit and Policy Council (DA-ACPC) despite the meager 3.5% service fees it collects as lending conduit.

   With less loan bookings, NRBSL paid-off substantial amount of Bills Payable using idle funds in order to save on cost. Despite the reduction in the amount of cash maintained, the Bank’s liquidity remained stable. The timing of pay-off could not be any better as NRBSL’s major funding partners increased their lending rates following the Bangko Sentral ng Pilipinas’ (BSP) action to raise the benchmarks in order to counter inflation and stabilize the economic situation. The bigger cost reduction came in the form of non-interest expenses as the Bank succeeded in streamlining its operations and reducing the number of employees. While the situation made the path to pre-pandemic status challenging as lesser revenues are generated from lesser loan released and lesser interest rate charged, NRBSL in 2022 was able to match its previous year net income at P10.41M. Expectedly, the Bank’s returns on asset and equity are both below compared in 2021. Even so, NRBSL’s Capital Adequacy Ratio (CAR) improved from 17.62% to 18.83% year-on-year as more of its loans are under guarantee.

   The effect of the inflation weakened not only the purchasing power of NRBSL clients likewise their capacity to meet their financial obligations. With higher incidences of past-due, NRBSL booked P21.71M in allowance for credit losses, P3.36M higher than previous year’s provisioning. This huge financial sacrifice is the price NRBSL willingly absorbed in its unceasing service to the vulnerable sectors.

   NRBSL’s experience and involvement in development finance always come with attendant costs but it never left the Bank financially injured. It may not be among the front-runners in the race for growth and profitability but definitely in the lead pack of rural banks still committed to the cause of the industry. Accordingly, NRBSL is gradually returning to regular portfolio development after doing semi-government function in small agricultural financing. At the end of the year, the Bank introduced new financing schemes on real estate; equipment and retail trade in its continuous search for the appropriate solutions.