IN a report by the Economic Intelligence Unit (EIU), titled “Global Microscope 2014,” the Philippines ranked third in terms of providing an enabling environment for financial inclusion of the “unbanked.” Interestingly, we are in the forefront among 55 countries that the EIU surveyed.
What does financial inclusion mean to us and to those who benefit from it? The Center for Financial Inclusion (CFI) at Accion defines financial inclusion as follows: “A state in which all people who can use them have access to a suite of quality financial services, provided at affordable prices, in a convenient manner, and with dignity for the clients. Financial services are delivered by a range of providers, most of them private, to a financially capable clientele.” It addresses the needs of those who have limited or no access to financial services, the bottom of the pyramid. Hopefully, achieving financial inclusion will encourage economic development and improve the lives of the greater majority of the country. The CFI estimates that there are about 2.5 billion people who are financially excluded. Its web site explains that the “CFI contributes to full inclusion by collaborating with sector participants to tackle challenges beyond the scope of any one actor, using a toolkit that moves from thought leadership to action.”
In the 2014 Global Microscope report, the EIU, the Multilateral Investment Fund, the Inter-American Development Bank, the Direccion de Promocion de PYME y Microempressas, CFI at Accion and the Citi Microfinance have looked at 12 indicators and subindicators to determine the financial inclusion index of 55 countries.
I congratulate the Bangko Sentral ng Pilipinas (BSP) under the leadership of Governor Amando M. Tetangco Jr. for taking a proactive and progressive stance in helping the marginalized sectors gain financial access. Clearly, this is a pro-poor action that should be emulated. In the first half of 2014, the BSP created the Inclusive Finance Steering Committee to craft a national strategy. This is only one of the three committees that the BSP governor chairs and demonstrates the importance Tetangco places on this program.
Since the development of the National Strategy for Microfinance in 1997 as a path to reduce poverty, the Philippines now ranks among the world’s leaders in providing a conducive environment for the underserved to gain more access to financial services. We were the first country in the world to establish an office dedicated to financial inclusion. With a score of 79 out of 100, we are trailing just behind Peru and Columbia who scored 87 and 85, respectively.
It is also worth noting that we are among the few countries that have a “multiyear development plan includes a financial-inclusion strategy with specific commitments, many of which have been implemented, including financial-education initiatives.” The Philippines and India also lead the region is microinsurance. In the regulation of electronic payments, the Philippines and Bangladesh lead the East and the Southeast region with us allowing telecommunications companies’ participation. We also take the lead in the regulation of deposit-taking activities. The report notes, “Through the BSP’s microfinance strategy, the private sector plays a greater role in the provision of financial services, resulting in a wider range of products, including micro-deposits, microenterprise loans and micro-insurance.” Many accomplishments have been realized in 2014 with the establishment of general consumer-protection framework expected to be fully functional by 2016 and the Credit Information Corp. to be fully operational.
Over the years, the microfinance sector has grown significantly. However, the locus of activities has been in the highly urbanized and populous areas. There is a strong need to improve financial inclusion in the rural areas (where a greater majority of the low income famers and small entrepreneurs are) where access to financial services have been limited to informal individuals and organizations who have taken the opportunity to provide credit to the population. In Mindanao, for example, microfinance operations are practically nonexistent. Regulation posses another challenge, especially for the informal lenders.
The report further notes, “There is still much to be done, as only 26.6 percent of the adult population (over age 15) has a deposit account, according to the 2011 World Bank Global Financial Inclusion (Global Findex) database. Archipelago barriers post a significant challenge to increasing access to financial services to low-income and underserved populations. The BSP continues to promote an enabling environment for financial inclusion through the issuance of various regulations and circulars, which seek to encourage new entrants of financial-services providers and products that serve the poor, while also ensuring the safe provision of such services.” There are currently 186 banks with microfinance operations servicing more than a million customers with a portfolio of a little over P8 billion.
While we recognize that much work has to be done in spreading the geographic coverage and scope of financial inclusion, the initiatives that the BSP governor has taken are clearly in the right direction. In closing, allow me to reiterate my full support and praise for what has been done. I am hopeful that we will achieve full financial inclusion by 2020. E-mail: rbo811@yahoo.com.
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The opinions expressed here are the views of the writer and do not necessarily reflect the views and opinions of Finex.