Financial Inclusion Improves in the PH

In its latest report on the state of financial inclusion, the Bangko Sentral ng Pilipinas (BSP) says that access to and usage of formal financial products and services continues to improve in the country.

Out of 1,634 local government units or LGUs (cities and municipalities), the number of unbanked areas declined to 571 LGUs (34.9% of the total) in June 2017 from 609 LGUs (37.3%) in 2011. As of June 2017, there were 11,343 banking offices and 19,500 ATMs. Banking offices grew at an average annual rate of 4% from 2011 to 2016 while ATMs increased at a faster rate of 12% during the same period.

In addition to banks, there were over 61,000 non-bank financial service providers (FSPs). Growth was fastest among mobile money agents which are retail outlets where people can convert cash to electronic money and vice versa. Pawnshops, cooperatives, and microfinance NGOs had wider presence than banks and were the most common FSPs in unbanked areas. Only 10% of LGUs remained unserved if non-bank FSPs were taken into account.

In terms of usage, there were 44.4 million depositors and 55.3 million accounts with outstanding balance of P11 trillion as of June 2017. From 2011 to 2016, the number of depositors and deposit accounts increased at an average annual rate of 6% and 4%, respectively. The total amount of deposits grew at an average rate of 15% during the same period. Despite improvements in account ownership, the number of deposit accounts per 10,000 adults in the Philippines was still lower than most of our ASEAN peers except Cambodia, Laos, and Myanmar.

Building on these modest gains, the BSP has issued new policies which promise greater financial inclusion. One of them is the recently approved regulation allowing banks to put up “branch-lite” units to further expand the physical reach of banking services especially to unbanked and underserved LGUs. The BSP is also finalizing the policy framework that will encourage banks to offer a “basic deposit account” that will address the usual barriers in account opening such as high opening amount and maintaining balance, dormancy charges, and lack of identity documents.

There are other ongoing initiatives with potential to expand financial inclusion on a larger scale by harnessing the power of digital innovations. These include the National Retail Payment System (NRPS) project which aims to lessen the dependency on cash in carrying out financial transactions, and the current work with other government agencies and legislators to develop a national biometric-based ID system that can facilitate easier onboarding of banking clients. These are on top of the policies that the BSP issued in 2017 such as the regulations on cash agents, virtual currency exchanges, and technology-enabled Know Your Customer (KYC) rules to support digital financial inclusion.

To provide a more holistic picture of financial inclusion in the country, the BSP is conducting the second run of the Financial Inclusion Survey. This is a nationally representative survey of Filipino adults dedicated to collect financial inclusion data from the perspective of actual and potential users of financial products and services. Survey results will be released in the first quarter of 2018.

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