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Unit II: Banking

Institutions
J o y c e l y n P. I t u r i a g a , M B A

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Topic Learning
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Objectives
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At the end of the unit, the student can:

1. explain what a central bank is;
2. explain the functions of the central bank;
3. explain the functions of the bank; and
4. differentiate each banking institution as to their functions and
limitations.

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Topic Outline
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Unit II: Banking Institutions

1. Central Bank
2. Functions of the Central Bank
3. Bank Functions
4. Classification of Banking Institutions
1. Universal Bank
2. Commercial Bank
3. Thrift Bank
4. Rural Bank
5. Cooperative Bank
6. Islamic Bank
7. Digital Bank
8. Government Owned Bank

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Classification of Banking
Institutions
To p i c 4

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Cooperative Master title style

• Cooperative banks are financial institutions that are owned and

operated by their members.

• They follow the cooperative principle of “one person, one vote.”

ensuring that each member has an equal say in the decision-making
process.

• These banks provide services such as savings and loans to both

members and non-members, and some may participate in
wholesale markets.

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Cooperative Master title style

• In the Philippines, cooperative banks play a significant role in the

financial system, especially in providing access to baking services
for rural communities and small businesses.

• As of July 2023, there are 22 cooperative banks in the country.

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Cooperative Master title style

• The top cooperative banks in the Philippines by total assets of

March 2023 include:
1. First Isabela Coop Bank (FicoBank) – 4.7 Billion PHP
2. One Cooperative Bank – Newly consolidated from Metro South
Cooperative Bank, Consolidated Cooperative Bank, and Bataan
Cooperative Bank.
3. Coop Bank of Cotabato – 3.1 Billion PHP
4. Ilocos Consolidated Cooperative Bank – 2.5 Billion PHP
5. Mindanao Consolidated Cooperative Bank – 2.5 Billion PHP
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Cooperative Master title style

7. Coop Bank of Benguet (CCB) – 1.1 Billion PHP

8. Coop Bank of Quezon Province – 1.0 Billion PHP
9. Coop Bank of Palawan – 905 Million PHP
10.Cooperative Bank of Nueva Viscaya -778 Million PHP

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Cooperative Master title style

• These banks are required to register with the Cooperative

Development Authority (CDA) in the Philippines to operate legally.

• If you are in Baguio City, you might be interested in the Baguio-

Benguet Community Credit Cooperative (BBCCC), which is a
multipurpose cooperative with assets close to 3 Billion PHP and a
membership of over 30,000.

• It offers various services like fixed deposit/share capital, savings

deposit, time deposit, and grocery service, among others.

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Islamic edit Master title style

• Islamic banks in the Philippines operate in accordance with Sharia

law, which prohibits the payment or acceptance of interest fees for
the lending and accepting of money.

• Instead, Islamic banks make a profit through equity participation,

which requires a borrower to give the bank a portion of their profits
rather than paying interest.

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Islamic edit Master title style

• As of the latest information available:

1. Al-Amanah Islamic Investment Bank of the Philippines is the
country’s first and only Islamic bank.
2. Maybank also offers Islamic banking services.
3. Additionally, there are reports that two firms are eyeing Islamic
banking operations in the Philippines, which include the Amanah
Islamic Bank, and the CARD Bank.

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• These banks provide various services such as savings accounts,

checking accounts, personal financing, home financing, and more,
all structured to comply with Islamic banking principles.

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In Summary
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Cooperative Bank
• They are owned and controlled by
their members, who are also their
customers.
• Profits are usually reinvested into the
bank or distributed among members.
• They focus on serving their members’
interests and promoting community
development.
• Risk sharing goes along with
ownership control.
Islamic Bank
• They operate based on Islamic law
(Sharia), which prohibits interest
(usury).
• They engage in profit and loss-sharing
arrangements and trade-based
financing to generate income.
• Investments are made in Sharia-
compliant ventures.
• Islamic banks share risk with
borrowers and downside risk with
depositors.
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In Summary
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Similarities:
• Both types of banks share some risk with savers.
• They aim to provide ethical banking and financial services.

Differences:
• Ownership and control: Cooperative banks are member-owned, while Islamic
banks may be owned by shareholders.
• Interest prohibition: Islamic banks do not deal with interest, whereas
cooperative banks may offer interest on deposits.
• Investment principles: Islamic banks strictly follow Sharia principles, which
influence their investment decisions.

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Unit II: Banking

Institutions
J o y c e l y n P. I t u r i a g a , M B A

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