Servicing the unbanked
DAVE A. CORPIN, 23, and Elaine L. Darunday, 34, did not own savings
accounts until this year. And yet the two live and work in Metro Manila,
where banks and bank branches are densely clustered.
Mr. Corpin, a customer service representative at the Abenson appliance
store, said his jobs before were temporary and the cash flows irregular.
Ms. Darunday, who works as a nanny in Makati City, simply did not think
of opening an account.
The two then stumbled on the Bank of the Philippine Islands' (BPI) Easy
Saver deposit product, which is geared towards Filipinos like them who
earn relatively low yet regular incomes, and have now started to set
aside a portion of their income each month as savings, saying these will
come in handy during emergencies.
For BPI, the Easy Saver deposit product represents another financial
innovation in the bank's 160 years of existence. Yet, it also helps
address two problems confronting the country today: a low savings rate
and the lack of access to formal financial services for many Filipinos
Low savings rate
Data from the Asian Development Bank (ABD) show that the country's gross
domestic savings rate -- defined as gross savings as percentage of gross
domestic product (GDP) -- stayed low at 18.7% in 2010 from 16.4% in 2000.
Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco, Jr.,
speaking during the launch of a savings product for children in early
August, said that as of March, the 36 million accounts in the country's
banks held P5 trillion in deposits. Yet around 23 million or nearly
two-thirds of these had balances of only P5,000 and below.
Savings are important in funding investments -- which are key to job
creation, long-term growth and poverty reduction.
The Philippines has lagged behind its neighbors in mobilizing savings.
China's gross domestic savings, based on ADB data, was 53% in 2010;
Singapore, 51.9%; Malaysia, 39.2%; Indonesia, 34.2%; Thailand, 33.4%;
and Vietnam, 27%.
Not surprisingly, the country's gross domestic capital formation of
20.5% of GDP in 2010, based on ADB data, was the lowest for this grouping.
The fact that many Filipinos don't have access to banks can explain why
the country's gross domestic savings rate is very low. According to the
BSP, only 26% of the Philippine adult population is "banked" or have
access to formal financial services. A total of 610 or 37% of the 1,634
municipalities nationwide still don't have banking offices.
The central bank cites the country's archipelagic makeup as one reason
for this. It is costly for banks to set up offices all over the country.
Thus, not surprisingly, 50% of deposits are in banks in Metro Manila.
People also feel intimidated by formal institutions, said Pia
Roman-Tayag of the BSP's Inclusive Finance Advocacy Staff.
Why is it important that the "unbanked" have access to formal financial
services? Bangkok-based Alliance for Financial Inclusion (AFI), which
counts developing countries' central banks as members, states on its
website: "It is well-documented that access to savings accounts,
insurance and other financial services is crucial to allow poor people
to invest in their homes and small businesses, weather the impact of
economic shocks, build up savings as financial cushions against
unexpected events and manage uneven cash flows and seasonal incomes."
The AFI, of which BSP Deputy Gov. Nestor A. Espenilla, Jr. is a "policy
champion" for mobile financial services and financial inclusion
strategy, says an estimated 2.5 billion people worldwide, or over half
the world's population, "do not have access to formal financial
services, representing a huge untapped potential for economic and social
development."
With 74% of the country's population unbanked, it is no wonder that
Filipinos, when they do save, keep their money at home. Mr. Corpin said
he did this, adding that his savings simply "slept." Ms. Darunday said
she also used to set aside money at home but this easily dissipated.
BPI gamble
To open an Easy Saver account, one needs to merely pay P50 for the ATM
(automated teller machine) card and make a P200 initial deposit. To
discourage withdrawals, depositors are charged P5 each time they
withdraw from an ATM or P100 if over the counter. There is no minimum
balance rule. If the deposits hit or exceed P1,000, these begin earning
interest.
Mita B. Gozar, vice-president for personal banking, said BPI came up
with the product in the course of thinking of ways to expand its market.
The key, the bank found out, was to change the notion that banks are
"upscale."
"We shifted our focus from deposit volume to the customer," Ms. Gozar
said. "We asked ourselves, 'who are we not serving or under-serving?' We
conducted a research and found that people save but some keep their
savings at home or join 'paluwagan' (informal savings or insurance
schemes) in the office."
BPI did away with oft-cited hurdles to opening savings accounts: a high
initial deposit and a high minimum monthly average daily balance.
(Another BPI savings product, Express Teller Savings, requires a minimum
deposit of P500 and a minimum monthly average daily balance of P3,000.
Deposits must reach P5,000 for these to earn interest.)
The Easy Saver product was pilot-tested in late 2010 and launched
nationwide in March. For a bank such as BPI -- the country's third
largest in terms of total assets and deposits -- it was a big gamble.
"We are the only universal bank in the country that offers such a
product," Ms. Gozar claimed.
The BSP's Ms. Roman-Tayag noted the BPI Easy Saver fits the central
bank's definition of microdeposits, which are not charged any dormancy
fees. "This move, together with other such innovative products by other
banks, promise to bring much-needed financial services to the currently
unbanked," she said.
Mobilizing savings
Mr. Corpin came to know of the Easy Saver product at work, after a
co-employee at Abenson urged him to open an account. BPI, which has a
branch at Walter Mart where the Abenson store that employs him is also
located, held a promo for the product in March.
Mr. Corpin said his Easy Saver deposits were "more secure", and he has
promised himself he would make withdrawals only during emergencies. "I
want to continue saving," he said.
Ms. Darunday said a house helper at the building where she lives and
works told her about Easy Saver. She said she and other nannies went to
BPI's branch at the Power Plant mall in Rockwell Center to open accounts.
Her employer had already told her she should start saving after she was
forced to borrow money to pay for the medical expenses of her
16-year-old son who met an accident. "He told me the savings will come
in handy during emergencies," she recalled. "I now set aside my 'extra'
income as savings. I don't spend it."
Maricris L. San Diego, BPI vice-president for deposits product
management, claimed that Easy Saver accounts deposits were strong,
"exceeding our expectations."
The central bank, for its part, has said that it would continue to work
on making the local financial system more inclusive.
In a speech to rural bankers in August, Mr. Tetangco said, "Financial
inclusion is dear to the BSP. We see it as the means to expand access to
financial services through multiple, innovative yet safe channels for
more Filipinos, including -- and especially -- the previously unbanked."
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