Broadening the Philippines’ financial inclusion mission

BW FILE PHOTO

THE latest financial inclusion survey (FIS) of the Bangko Sentral ng Pilipinas (BSP) further signals how the fintech revolution has undeniably swept the country. The report affirms that the simplicity, convenience and accessibility offered by e-money services, digital lending and basic savings accounts position them as the most promising sectors.

Unbanked Filipino adults dropped to 34.3 million or 44% of the total adult population from 51.2 million in 2019, reflecting a reduction of 16.9 million individuals from the category. While favorable, examining data from the BSP indicates that work remains to be done to address unequal access to modern digital services.

Seventy-three percent of farmers, 48% of workers in private households, and 45% of self-employed individuals say they have no financial account. Women noticeably outranked men when it comes to account ownership, smartphone and internet access, online financial transactions, use of formal credit, fund transfer remittances, and financial literacy. Geographical and age-related gaps were also revealed in the report.

These details, along with the lack of documentary requirements and money being listed as topmost reasons for not having an account, explains the growing importance of digital-first services that demand fewer requirements to participate, allowing them to get past most geographical and economic barriers faster.

E-money accounts are now the most-owned, with account holders performing transactions most frequently at one to six times a week in 2021, a jump from twice a month usage in 2019. Seventy-eight percent of account holders used their accounts for payment-related transactions, higher than for savings (56%).

Credit also grew, which happened mostly because of borrowing from family and friends, and informal lenders, which both grew in 2021 at 47% (from 44% in 2019) and 14% (from 10%), respectively. Borrowing from formal sources meanwhile received the same (56%) while bank loans are still very low (4% compared with 3% in 2019). Filipinos’ growing appetite for credit illustrates a challenge and untapped opportunity for digital lending technologies to continue building trust and properly respond to consumers’ urgent needs for small payments, business capital, emergency funds, and the like.

The FIS considers dedicated attention to some groups of the population and generating more awareness of inclusive products and services as the main ways to gain greater financial inclusion and resilience in the country. This can be broadened by all stakeholders capitalizing on the accelerated financial digitalization that is being seen, the people’s desire to improve themselves when dealing with financial questions, and greater mainstreaming of innovative financial products from smartphone apps.

Continued government efforts are expected to further make a mark, with 83% of respondents in the FIS agreeing that BSP’s programs and policies helped increase access to financial services.

It is a no-brainer that those who wish to become or remain a meaningful player in the Philippine fintech scene are compelled to get even more creative in improving service without sacrificing simplicity, address specific pain points in various segments of the population, solve the challenges of informal financial services, and help people to master these new technologies, strengthen their financial well-being, and reach their personal goals faster and easier.

The local fintech industry’s vision of addressing critical issues is one that should also be done with collaboration between products and services — effectively becoming a more seamless digital ecosystem. Doing so truly works towards a financially and technologically resilient Philippines.

Kirill Kalashnikov is the regional director for APAC at Robocash Group, which operates in the Philippines through Digido Finance Corp.