Financial inclusion
DEVELOPING COUNTRIES, including the Philippines, are taking the
necessary measures to incorporate financial inclusion in their economic
development efforts. In fact, the government's economic managers believe
extending the reach of the financial system to those who are "unbanked"
is one of the key elements in attaining "inclusive growth."
"The year 2011 was characterized by the mainstreaming of financial
inclusion in the domestic and international policy agendas, in light of
growing recognition of the importance of financial inclusion as a policy
objective," the Bangko Sentral ng Pilipinas (BSP) said in its yearend
report titled "BSP Microfinance Initiatives."
The 2010 Millennium Development Goals Summit defined financial inclusion
as "universal access, at reasonable cost, to a wide range of financial
services for everyone needing them, provided by a diversity of sound and
sustainable institutions" This includes the access of disadvantaged or
low-income sectors of the economy to financial services.
In a study, titled "Microfinance, Financial Inclusion and Financial
Development: An Empirical Investigation with an International
Perspective," Jovi Dacanay, Bienvenido Nito and Patricia Buensucesos
said: "Financial inclusion is important in building economies. A more
inclusive financial system is said to be beneficial because of the
number of good effects it has both on the microeconomic and
macroeconomic levels."
"[F]inancial inclusion brings about economic efficiency and
distributional equity as it extends deposit services to a larger number
of people and enables fruits of economic development to be shared by
everyone, respectively," the study said.
The Philippines, however, is still far from achieving universal access
to financial institutions. BSP Governor Amando M. Tetangco, Jr., in a
keynote speech for the session on financial stability and financial
inclusion of the 2012 Financial Sector Forum last Feb. 7, said only 26%
of the country's adult population use banking services while 37% of
municipalities still do not have banking offices.
Meanwhile, 8 out of 10 families are "unbanked" or not part of the formal
financial system, data from the BSP's Consumer Finance Survey showed.
BSP Deputy Governor Nestor A. Espenilla, Jr. said that in response to
the needs of the market: "[W]e have liberalized [the] branching policy
and allowed so-called 'micro banking offices (MBO)' which are really
light branches to cater to the unique needs of microfinance clients and
overseas Filipinos including their beneficiaries."
As of end-2011, 110 banks have sought permits for the establishment of
micro-banking offices. These cover 750 MBOs.
"We are encouraging banks to develop various e-banking platforms,
through strategic partnerships with other allied service providers like
telecommunication companies for mobile banking, to further expand access
to financial services in remote rural areas," the BSP official added.
These efforts are on top of the BSP's financial literacy campaigns and
the establishment of microfinance programs for livelihood projects.
Emmanuel A. Leyco, president of Credit Rating and Investors Services
Philippines, Inc., said tapping the "unbanked" would remain a challenge
as the cost of banking in the Philippines is expensive, while the number
of Filipinos with the ability to save are limited.
"To encourage more savings, maybe they can look at lowering the
transaction cost for the banking industry… [Also], you cannot expect the
lower income [bracket] to save … because they have nothing to save."
Annual earnings of families in the bottom 30% income group averaged at
P62,000 in 2009, data from the Family Income and Expenditure Survey
showed. Meanwhile, their average annual expenses stood at P64,000, which
means poor families spend more than what they earn. — Karen Joyce Q. Ang
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CARLOS ANI - International Microfinance Consultant - SEEDFINANCE Corporation Chairman
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