Philippines maintains lead role in financial inclusion

The Philippines has main­tained its status as a global proponent of financial in­clusion, as a worldwide sur­vey of microfinance by the Economist Intelligence Unit (EIU) consistently ranked the Philippines as No.1 in the world in terms of regula­tory framework for microfi­nance until this year, Bangko Sentral ng Pilipinas (BSP) Gov. Amando M. Tetangco Jr. said.

In a speech before the 14th Citi Microentrepre­neurship Awards last Dec. 6,

Tetangco said that although the EIU has amended its method in measuring fi­nancial inclusion, the Phil­ippines continues to rank as a global leader in the field in the survey.

“In 2016, the EIU ranks

Peru and Columbia as the top two, while the Philip­pines and India are third in the world and first in Asia, with the most conducive environment for financial inclusion,” he said.

“The BSP, since 2000, has been nurturing a policy environment that enables the delivery of commercially sustainable microfinance in the banking sector. We liber­alized regulations by reduc­ing barriers and providing incentives while balancing them with risk management measures,” Tetangco said.

He cited BSP govern­ment figures showing that as of June 2016, 169 local banks were involved in mi­crofinance, most of them rural banks.

Combined, they have more than 1.6 million mi­croentrepreneur clients from 391,000 in 2002, with aggregate outstanding loans of P11.7 billion, an almost five-fold increase from lev­els in the early 2000s or P2.6 billion in 2002.

“At present, these mi­croentrepreneurs have ac­cumulated savings of P 5.2 billion. In addition, the microfinance sector has become a market for mi­crofinance products like micro-insurance and mi­cro-housing loans,” he said.

Tetangco said Improve­ments in overall access to financial services in the Phil­ippines are also reflected in the World Bank Findex, the global database for financial inclusion.

“It showed formal-ac­count ownership among Fil­ipino adults increased from 26.6 percent in 2011 to 31.3 percent in 2014, with higher growth among low-income and less educated segments of our population,” he said.

Mario Lamberte, program lead of Project Compete, a United States Agency for In­ternational Development (US­Aid) for small and medium enterprises (SMEs), noted the growing willingness among fi­nancial institutions to expand their client base to include small businesses.

“Banks are now moving to the small-enterprise market because the large market is so crowded already,” Lamberte said, pointing to some part­ner banks that have said they are now looking at extending credit to more SMEs.

Lamberte also said during a separate conference on strengthening the credit-in­frastructure network that the capacity of small enterprises to present proposals to banks for financing should be improved first. He said the “single-entry accounting system” of SMEs won’t be accepted by the banking community.

Tony Lythgoe, practice manager of the World Bank Group investment unit Inter­national Finance Corp. (IFC), brought up the perception in the lending sector of small businesses being “risky,” and underlined the need to over­come the “lack of appetite” of bankers toward serving small enterprises.

He suggested helping SMEs to make themselves more “bankable,” largely by understanding the way banks think and presenting them­selves in a way that they be­come “interesting” to bankers.

“You have to make (SMEs) understand and devel­op business plans, keep their information in order, and ed­ucate them on what the other side wants,” he said.

Peter Sheerin, a com­mittee chairman of the Hong Kong-based Business Infor­mation Industry Association, said another major issue is the lack of trust in banks of ordi­nary people, who prefer to go to their families or employers to borrow money.

He urged lenders to “de­velop products that borrowers can use,” particularly for the farming and SME commu­nities, and to make sure these services relate to the “whole picture” and include related offerings like insurance. This way, the two sides can devel­op a “comfortable” working relationship with each other, Sheerin added.

Lamberte also cited the high transaction costs of bank­ing as another deterrent, and urged initiatives to make them more affordable to small es­tablishments and agro-fishery communities.

He likewise pointed to poor digital connectivity and underscored the need to im­prove the regulatory regime to foster the development of the information and communica­tion technology (ICT).

“Improving our ICT sys­tems is very important. In many parts of our country, they don’t have access to the internet. Information like what we’re discussing [here] has to be disseminated to them” and this can be done only with in­ternet access, he said. LUIS LEONCIO