BSP takes steps to spur ‘financial inclusion’ in the Philippines

Financial inclusion, as an advocacy, had won for the Bangko Sentral ng Pilipinas (BSP) plaudits from international groups, but a large part of the country remains poor and with no access to the its financial system.

This much was acknowledged by BSP Governor Amando Tetangco Jr. in a speech before a recent business forum sponsored by the Financial Times, where he said efforts toward financial inclusion—or the ability of individuals or families to avail themselves of banking and other formal financial services—still needed to be stepped up amid the stark reality of a huge portion of the population not benefiting from the formal financial system.

A recent World Bank survey showed that only 20 million out of the total 100 million Filipinos earn enough to save money and only 10 million or 10 percent of the population own bank accounts.

Tetangco said the focus of the BSP in the last 10 years was the broadening and deepening of the reach of the financial system to get to the unserved and the underserved.

“Millions of our people still live in poverty. That the Philippines is an archipelago of 7,107 islands, with a population of 100 million, makes financial inclusion quite challenging for us, indeed,” he said.

Tetangco said the BSP linked up with 12 other government agencies to craft and implement the National Strategy for Financial Inclusion (NSFI), which was launched last July to address the financial-inclusion gap.

“With the NSFI as our road map, we focus on achieving financial inclusion that promotes inclusive growth, consolidate our efforts to avoid overlaps, and together set priorities to maximize use of our resources,” he added.

Tetangco said the NSFI’s objectives include the creation of financial products that are diverse, well-designed, suitable and relevant to different market segments; bringing providers and business models that are diverse, responsible, responsive and innovative; and molding the citizenry to become financially-learned and adequately protected.

For financial inclusion to take off, the BSP hopes to involve medium, small and micro enterprises (MSMEs); overseas Filipinos and their beneficiaries; the agriculture and agrarian reform sectors; indigenous peoples and cultural minorities; women; the youth; and persons with disabilities to be conscious of the financial system.

“These sectors are typically unserved or underserved by conventional financial service providers,” he said.

Tetangco said that for a quantum leap to be achieved in financial inclusion in the country, three actions needed to be done. “First is research and measurement; second is purposeful action and innovation informed by research; and third is convergence of objectives and actions across domestic, regional and international arenas,” he said.

He cited the National Baseline Survey on Financial Inclusion that was completed early this year, which indicated that only 43 percent of Filipino adults have savings, and that majority or 68 percent of those who save, keep their money at home.

“This data now challenges us to find more effective ways to encourage Filipinos to open bank accounts, and fully address the barriers that prevent them from doing so,” he said.

He also referred to a report from the BSP-supervised E-Money Issuers that showed 27 million e-money accounts have been opened since the e-money regulations in 2009 were released. “Yet increases in the volume and value of transactions are minimal,” he said.

“To drive up usage and make the system more efficient for consumers, the BSP is working with the industry to set up a National Retail Payment System,” he added. “We envision a digital, interoperable infrastructure and ecosystem for low value, high volume payment transactions.”

Eight countries in Asia Pacific are at varying stages of implementing their own NSFIs, while nine other nations are currently formulating theirs.

“Evidently, we all aim to facilitate domestic convergence and quantum leaps through a national strategy,” Tetangco said.

He noted crosscutting issues that might impact on financial inclusion objectives not only in the Philippines but also in the region.

“These issues include the cost of cross-border remittances, the potential impact of economic integration on small businesses, and international standards that may adversely affect institutions providing financial services in rural areas, to name a few. These all require concerted global attention and strategic convergence,” he said.

Nevertheless, Tetangco said a convergence in international financial services is beginning to happen.

Apec (Asia-Pacific Economic Cooperation) and the Asean (Association of Southeast Asian Nations) have committed to promote financial inclusion.

“Financial inclusion is already being discussed in international bodies such as the G20, the United Nations, the World Bank and the IMF, as well as standard setters like the Basel Committee on Banking Supervision and the Financial Action Task Force. In addition 95 developing countries are now members of the Alliance for Financial Inclusion,” he said.

Tetangco said the challenge of financial inclusion remains daunting since there are 1.2 billion people who remain unserved in the region.