86 million Filipinos ‘unbanked’, says DoF

By Luis Leoncio

Despite the rapid growth in the local banking industry the past few years, more than 86 percent of the population or roughly 86 million Filipinos do not have a bank account, Finance Secretary Carlos Dominguez III said.

Dominguez, thus, stressed the need to continuously introduce technological innovations to the country’s banking system to bring “unbanked” Filipinos to the financial mainstream and effectively mobilize local capital for investments.

Dominguez said premier institutions such as the Maybank Group, which has trail blazed new frontiers in financial services, will play pivotal roles in helping the Duterte administration realize its goal of financial inclusion for all Filipinos through innovations that would help the country rapidly modernize its banking system.

“Over 86 percent of Filipinos remain unbanked to this day. That is an intolerable ratio of the population excluded from the financial mainstream. We aim to reduce that number dramatically over the next few years. Continuous technological innovation in banking practices will help bring us closer to financial inclusion,” Dominguez said at the 20th anniversary celebration of Maybank Philippines held recently at Shangri-La at the Fort in Taguig City.

Dominguez said the economy’s better-than-expected growth of 6.9 percent in the third quarter, fueled mainly by the expansion in the manufacturing sector, has encouraged the government all the more in accomplishing its goal of investment-led growth.

Shifting the source of growth from consumption to investments, Dominguez said, will enable the government to create more meaningful jobs for the country’s young population.

This shift to investment-led growth, however, would require a more “robust and innovative” financial sector to fund new investments, Dominguez said.

“I am confident an efficient institution such as Maybank will be an invaluable partner in helping us grow our enterprises,” Dominguez said.

“We cannot have a new economy with an ancient banking system. We look to innovative institutions such as Maybank to help us rapidly modernize our banking system, to introduce more technology and better practices in the industry. I trust you will be an effective partner in this regard,” he added.

The Maybank Group, which set up its offices in the Philippines in 1997, is the fourth largest bank in the Association of Southeast Asian Nations (Asean).

As early as 1978, Maybank pioneered the computerization of banking operations in Malaysia and was the first bank to introduce Internet banking 17 years ago with the launch of its Maybank2u program.

Dominguez congratulated MayBank “for its two fruitful decades in the country” and wished it “greater success in the decades to come as you help clear the road towards more intensive financial integration in the region.”

The finance chief said he is confident that Maybank, with its “sterling record in setting benchmarks for banking practices,” would play a key role in the government’s goal of achieving financial inclusion for all Filipinos through the bank’s digital banking roadmap.

“We need the keen experience of institutions like Maybank in getting more people enrolled in the banking sector, mobilizing capital effectively and allocating funds for investments adeptly,” Dominguez said.

Bangko Sentral ng Pilipinas (BSP) Department of Economic Statistics Director Rosabel Guerero said the major reason given by 92.3 percent of respondents in a BSP survey on most Filipinos status of not having a bank account was that they do not have enough money for savings.

Other respondents say they do not need a bank account; that banks are far from their homes; that they cannot manage to have an account; high bank service charges; very high minimum balance required to maintain an account and that respondents do not trust banks.

The survey also showed that those who do not have bank accounts are mostly self-employed individuals, employed by private households and other household’s farms, and those who have informal occupations.

The survey showed that only two percent of those who have bank accounts have credit cards.

Household-respondents from the National Capital Region (NCR) that have credits cards accounted for 3.9 percent of the total households with bank accounts while the share of those from areas outside of the national capital is 1.1 percent.

Among households who has a member who owns a credit card, 71.4 percent pay their monthly bills through banks while 18.9 percent pay in payment centers, 3.9 percent through direct cash payments, and 1.9 percent through salary deductions.

BSP said it continues to implement programs to convince more Filipinos to keep a bank account.

One of these measures is the approval of operations of more micro-banking offices (MBOs) in 604 unbanked municipalities, BSP data as of the end of 2013 showed.

BSP Deputy Governor Diwa Guinigundo, in the same briefing, said “bank branching must be encouraged so that their services will be felt by the majority of population.”

He explained that “banking services must be more accessible to everyone to have a more inclusive economic growth.”

“We need to strengthen efforts toward greater financial inclusion. We have already started this and we need to sustain this,” he added.

The BSP said it adopted last February a two-tier approach in lifting restrictions on establishment of new banks, with the first phase to take-effect until the end of this year.

BSP’s policy-making Monetary Board (MB) will also allow thrift banks to apply for license to convert into a universal or commercial bank (U/KB) by the end of this year.

By Jan. 1, 2018, all restrictions on bank branching, which took effect in 1999, or after the 1997 Asian financial crisis, will all be lifted, the BSP said.

“This initiative provides local businesses the avenue to explore opportunities in the banking sector amid the opening of the industry to foreign capital infusion,” the BSP stated.

The two-year transition phase would give interested investors “ample time to strategically position themselves in line with evolving policy reforms and regional integration efforts,” according to the BSP.

In 1999, BSP implemented a moratorium on establishment of new banks in eight restricted areas in Metro Manila to encourage existing players to merge and consolidate to further strengthen the industry.

The restricted areas are the cities of Makati, Mandaluyong, Manila, Paranaque, Pasay, Pasig, San Juan and Quezon.

The moratorium does not cover unbanked areas as well as thrift and rural banks that are focused on microfinance.

Along with the gradual lifting of restrictions, the BSP said it would also implement a graduated matrix of application and licensing fees.

However, the central bank said this rule exempted applications for new banks with head offices in unbanked areas as well as applications for mergers and acquisition for distressed financial institutions.