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2015/SFOM13/016 Session: 3

Financial Inclusion and Financial Integration

Purpose: Information Submitted by: Philippines

13th Senior Finance Officials’ Meeting Bagac, Philippines

11-12 June 2015

Financial Inclusion and Financial Integration

Pia Bernadette Roman TayagHead, Inclusive Finance Advocacy Staff

Bangko Sentral ng Pilipinas

APEC Senior Finance Officials Meeting11 June 2015

Bagac, Bataan

Gains in Financial Inclusion – Remains a Global, Regional and National Issue

Source: Demirguc-Kunt and Klapper (2012)

700 million adults became account holders20 % decrease in number of unbanked2 Billion adults are unbanked

Adults with an account at a formal

financial institution (%)

0-15

16-30

31-50

51-80

81+

No data

Financial Inclusion Global Milestones

UN Year of Microcredit (2005)

Publication of “Building Inclusive Financial Systems”

G20 Leaders Recognition of the importance of financial inclusion and consumer protection post-crisis 2009

Creation of the G20 Global Partnership for Financial Inclusion (GPFI)(2010)

First Standard Setting Bodies Meeting on Financial Inclusion (2012)

Maya Declaration (2011)

40 countries have set tangible financial inclusion commitments

World Bank Survey (2011)

90% of the 142 countries have some financial inclusion agenda

APEC Financial Inclusion Working Group (2011)

National Strategy for Financial Inclusion

Coordination

Trust building

Raising awareness

and understanding

Toward a common vision and clearly defined inclusive financial

system

• A financial system that is accessible and responsive to

the needs of the entire population toward a broad based and inclusive growth.

• This financial system also serves the traditionally

unserved or marginalized sectors of the population.

• This vision should be guided by a focus on the client.

Vision/ Goal

Empowered clients

Access

Quality

Welfare

Usage

The overall vision is a financial system that is accessible and responsive to the needs of the entire population toward a broad based and inclusive growth. In particular, to ensure that this financial

system also serves the traditionally unserved or marginalized sectors of the population. This vision should be

guided by a focus on the client.

NSFI Strategy Map

POLICY, REGULATION & SUPERVISION

FINANCIAL EDUCATION &

CONSUMER PROTECTION

ADVOCACY PROGRAMS

DATA AND MEASUREMENT

Financial inclusion towards broad-based and inclusive growth

What is financial inclusion?

• A state wherein there is effective access to a wide range of financial services for all Filipinos

Unserved and Underserved

•MSMEs

•Low income population

•Population in frontier areas

•Population unserved due to religious barriers

•Farmers, fisherfolk, agrarian reform beneficiaries

Financial Inclusion Toward Inclusive Growth

Household Level

•Allows HH to seize opportunities and manage shocks•Increase in output and productivity

•Able to mobilize broad based savings and invest in growth of productive sector•Deep and diversified financial system contributes to financial stability

EconomyFinancial System

•Economic Growth

•Reduced Inequality

•Broad based share in economic benefits

Oth

er Facto

rs

Oth

er Facto

rs

“A regionally responsive, development-oriented and inclusivefinancial system which provides for the evolving needs of its diverse

public” and supports inclusive growth (Philippine Development Plan 2011-2016)

Financial integration can boost the positive effects of financial inclusion at each level.

Access to markets, value chains by small enterprises Access to a

broader range of financial services

Shared financial service infrastructure – credit bureaus, registries

Initiatives for Financial Inclusion

Policy and Regulation

Financial Education and Consumer Protection

Advocacy

Enhanced Internal Capacity and Comprehensive Data Framework

Government acknowledge importance of financial incision in overall financial sector development

Private sector recognize potential in unserved and underserved areas

Enabling Policy and Regulatory Environment consistent with International Standards

Key Policies and Regulatory Issuances

Widened range of productsMicrodeposit

Microenterprise loanMicrofinance plus

Micro-agri loanHousing microfinance

Microinsurance

Expanded virtual reachE-money issuers

E-money network service providersTechnology-driven business models

Expanded physical networkLiberalized bank branchingMicro banking offices

Liberalized customer on-boardingUpdated anti-money laundering rules

Outsourcing rules

Enhanced consumer protection frameworkRevised rules for Truth in Lending Act

Market conduct regulationConsumer assistance mechanism

Tangible Gains

176 banks with MF operations serving more than 1.2 million clients with loans outstanding amounting to PHP 11.4 billion (USD 255 million)

• 71 banks with 2 million microdepositaccounts

• 39 banks distributing microinsurancecovering 19 million individuals*

* Highest microinsruance coverage among nine Asian countries, Munich Re Foundation

Access – Electronic Money Ecosystems

Products

Growth in account holders that are not yet necessarily banked

The Philippines ranked consistently has number one for policy and regulation for microfinance for five years in a row.

The Philippines was number one in Asia and top 3 in the world in terms of conducive environments for financial inclusion.

Philippine Country Context - Access

37%

of the 1,634 cities and municipalities do not have a banking office

archipelagic barriers pose a big challenge to financial access

*All figures are as of end-Dec 2012

15%of total population lived in unbanked cities and municipalities

For every 10,000 adults,

1 bank

2 ATMs

With at least one banking officeUnbanked

92%

5%

72%Eastern Visayas

ARMM

CAR

NCR

66%

0%

7%

CALABARZON

Central Luzon

% of unbanked cities and municipalities

Philippines1,634 municipalities92 million Filipinos

With 9,375 banking offices,37% of the cities and municipalities

(15% of the population)are unbanked

With the addition of over40,000 access points

(offsite ATMs, NBFIs, credit cooperatives, pawnshops, money changers, remittance agents,

e-money agents)only 13% of the cities and municipalities

(4% of the population)remain unserved

• Credit Surety Fund facilitating access to credit by the SMEs• 37 CSFs established in 27 provinces and 10 cities nationwide

• Cumulative loans approved reached PhP 1.5 Billion

• Kiddie Savings Program• 12 banks are participating in the program

• Awards programs highlighting excellent microentrepreneurs• Citi Microentrepreneurship Awards recognized 100 awardees since 2002

• BSP Stakeholders Awards inculding financial inclusion partners and champions

• BSP Economic and Financial Learning Program with carefully targeted audiences and key messages• 88% of provinces (71 or 81) have been reached covering more than 300,000

persons

• Approval of a Consumer Protection Framework

Tangible Gains – Financial Education, Consumer Protection and Advocacy

Nationwide Baseline Survey on Financial InclusionPreliminary Results

43% of Filipino adults save money, but 68% of them save at home

43%

32%

25%

RESPONDENT PUTS ASIDE ANY MONEY TO SAVE

Yes Before but not now No

32.7

0.8

7.5

2.6

68.3

BANK

NSSLA

COOP

GROUP SAVINGS

AT HOME

Financial institution used when saving money

47% of Filipino adults borrow money; 62% borrow from family

members, relatives and friends

47%

34%

19%

RESPONDENT BORROWS MONEY

Yes Before but not now No 61.9

12.0

10.5

10.1

9.9

6.1

4.4

2.4

1.1

0.7

FAMILY, RELATIVES AND FRIENDS

LENDING INVESTOR

COOPERATIVE

INFORMAL LENDERS

MICROFINANCE NGO

GOVERNMENT ENTITIES

BANK

FROM AN EMPLOYER

PAWNSHOP

INFORMAL SAVINGS

Financial institution used when saving money

Nationwide Baseline Survey on Financial InclusionPreliminary Results

49.2

48.4

4.1

18.4

23.5

23.2

51.6

43.9

58.6

26.7

71.0

29.3

Bank

ATM

NSSLA

Cooperative

Microfinance NGO

Lending investor/ Financing company

Pawnshop

Money changer

Remittance agent

E-money agent

Payment center

Insurance agent

Has experience in transacting with the access point

55.7

81.1

61.8

34.3

56.7

42.4

37.5

39.9

22.3

30.5

58.3

26.0

41.5

23.2

Check account balance

Pay bills (e.g., electricity, water)

Remit money (send/ receive)

Money transfer between bank accounts

Cash withdrawal

Depositing or cash in

Loan application

Loan approval

Apply for credit card/s

Cash advance against credit card

Pay loan dues or amortization

Insurance application

Paying insurance premium

Foreign exchange

Financial transactions in the past 6 months

Many Filipino adults have

experienced transacting with

payment centers, remittance

agents and pawnshops

Most common transactions are

payments (bills, loans) and

remittance

Nationwide Baseline Survey on Financial InclusionPreliminary Results

86% of Filipino adults believe that access to financial services is important

88% stated that access to financial services is beneficial to their family.

97.1

97.3

77.1

84.3

90.4

92

89.6

90.9

KEEPING MONEY ASIDE FOR A PURPOSE IS IMPORTANT FOR ME.

KEEPING MONEY ASIDE FOR A PURPOSE IS BENEFICIAL FOR MY FAMILY.

TO BE ABLE TO BORROW MONEY IS IMPORTANT TO ME.

TO BE ABLE TO BORROW MONEY IS BENEFICIAL FOR MY FAMILY.

TO BE ABLE TO SEND AND RECEIVE MONEY/PAYMENT IS IMPORTANT TO ME.

TO BE ABLE TO SEND AND RECEIVE MONEY/PAYMENT IS BENEFICIAL TO MY FAMILY.

INSURANCE IS IMPORTANT TO ME.

INSURANCE BENEFITS MY FAMILY.

Nationwide Baseline Survey on Financial InclusionPreliminary Results

National Retail Payment System

• Only 1% of payment transactions are electronic

• Current model is inefficient and costly (e.g., interoperabilityis limited, high cost of sending money)

National Retail Payment System

• Core of the work is in the creation of a national clearing mechanism for domestic retail payment

• The Goal is to create an efficient and inclusive retail payment system

Financial integration can boost the positive effects of financial inclusion at each level.

Access to markets, value chains by small enterprises Access to a

broader range of financial services

Shared financial service infrastructure – credit bureaus, registries

www.bsp.gov.ph